Is a non-borrowing spouse required to sign a Closing Disclosure (CD) on a refinance if the spouse has an ownership interest in the property securing the mortgage loan? I know we must give the spouse a copy of the CD, but I cannot find anything that states we must have them or the borrower sign the bottom. Additionally, our notice of right to cancel states that the customer has the right to cancel within three business days of the latest of three events. One of these events is “[t]he date you receive the Truth in Lending Disclosures.” Is this referencing the loan estimate (LE) or CD?

Sep 7, 2021

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We do not believe that the non-borrowing spouse would be required to sign a CD regardless of the circumstances of the transaction, as signatures on CDs are optional under Regulation Z. However, note that Fannie Mae and Freddie Mac recommend obtaining the borrowing spouse’s signature as a “best practice,” and some private secondary market investors still may require a non-borrowing spouse’s signature on the CD.

If your CD does not include a signature line for any signatures at all, the CD must include the following statement: “You do not have to accept this loan because you have received this form or signed a loan application.”

As a side note — depending on whether the refinance is rescindable, you may not be required to send the non-borrowing spouse the CD. Regulation Z requires that a CD be provided to each “consumer” who has a right to rescind the transaction. If you are refinancing credit that you have already extended and are not advancing any new money, the transaction would not be rescindable and you would not be required to send a CD to the non-borrowing spouse, even though they have an ownership interest in the property.

As for the “Truth in Lending Disclosures” referenced in your notice of right to cancel, we believe this is a reference to the CD, not the LE. Regulation Z states that a borrower “may exercise the right to rescind until midnight of the third business day following consummation, delivery of the notice required by paragraph (b) of this section, or delivery of all material disclosures, whichever occurs last.” The term “material disclosures” means “the required disclosures of the annual percentage rate, the finance charge, the amount financed, the total of payments, the payment schedule” and other disclosures for high-cost mortgages and prepayment penalties. The disclosure of the loan’s annual percentage rate, finance charge, etc. would be in the CD, not the estimated amounts in the LE.

For resources related to our guidance, please see:

Regulation Z, 12 CFR 1026.38(s)(1), Content of Closing Disclosure (“At the creditor’s option, under the heading ‘Confirm Receipt,’ a line for the signatures of the consumers in the transaction. . . .”)

Fannie Mae Selling Guide (August 4, 2021), page 64 (“[T]he final version of the Closing Disclosure does not have to be signed by the borrower and seller although lenders may obtain signatures, which Fannie Mae supports as a best practice . . .”)

Freddie Mac, Bulletin 2015-10 (June 30, 2015), page 2 (“The CFPB provides lenders with the discretion to determine whether they will require Borrowers to sign the new Loan Estimate or Closing Disclosure forms, and limits the purposes for which those signatures may be obtained. . . . Freddie Mac will not require signed Settlement/Closing Disclosure Statements or additional forms on and after the TRID Rule Effective Date. However, Seller/Servicers may wish to consider collecting (or continuing to collect) signatures and/or forms given their potential evidentiary value, consistent with current widespread industry practices.”)

CFPB Guide to the Loan Estimate and Closing Disclosure Forms (May 2018), page 112 (“The creditor, at its option, may include a line for the signatures of the consumers to Confirm Receipt. Although the creditor only lists persons to whom credit is extended as Borrowers on the first page of the Closing Disclosure, in rescindable transactions, the creditor may add signature lines for other consumers who have the right to rescind. . . . If the creditor does not include a statement line or the consumer’s signature, add a statement to the Other Disclosures concerning Loan Acceptance that states: ‘You do not have to accept this loan because you have received this form or signed a loan application.’”)

Regulation Z, 12 CFR 1026.38(s)(2), Content of Closing Disclosure (“If the creditor does not provide a line for the consumer’s signature, the statement required to be disclosed under § 1026.37(n)(2) under the heading ‘Other Disclosures’ required by paragraph (p) of this section.”)

Regulation Z, 12 CFR 1026.23(a)(1) (“In a credit transaction in which a security interest is or will be retained or acquired in a consumer’s principal dwelling, each consumer whose ownership interest is or will be subject to the security interest shall have the right to rescind the transaction, except for transactions described in paragraph (f) of this section.”)

Regulation Z, 12 CFR 1026.17(d) (“If there is more than one consumer, the disclosures may be made to any consumer who is primarily liable on the obligation. If the transaction is rescindable under § 1026.23, however, the disclosures shall be made to each consumer who has the right to rescind.”)

Regulation Z, 12 CFR 1026.23(f)(2) (“The right to rescind does not apply to. . . . A refinancing or consolidation by the same creditor of an extension of credit already secured by the consumer’s principal dwelling. The right of rescission shall apply, however, to the extent the new amount financed exceeds the unpaid principal balance, any earned unpaid finance charge on the existing debt, and amounts attributed solely to the costs of the refinancing or consolidation.”)

Regulation Z, 12 CFR 1026.23(a)(3) (“(i) The consumer may exercise the right to rescind until midnight of the third business day following consummation, delivery of the notice required by paragraph (b) of this section, or delivery of all material disclosures, whichever occurs last. If the required notice or material disclosures are not delivered, the right to rescind shall expire 3 years after consummation, upon transfer of all of the consumer’s interest in the property, or upon sale of the property, whichever occurs first. In the case of certain administrative proceedings, the rescission period shall be extended in accordance with section 125(f) of the Act.
(ii) For purposes of this paragraph (a)(3), the term ‘material disclosures’ means the required disclosures of the annual percentage rate, the finance charge, the amount financed, the total of payments, the payment schedule, and the disclosures and limitations referred to in §§ 1026.32(c) and (d) [high-cost mortgage disclosures] and 1026.43(g) [prepayment penalty disclosure].”)