What action is considered illegal regarding the submission of documents before receiving a Loan Estimate?

The action considered illegal regarding the submission of documents before receiving a Loan Estimate is requiring a borrower to submit W2's and tax returns. This is because the regulations set forth by the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA) mandate that a Loan Estimate must be provided to the borrower within three business days of receiving specific information about the borrower’s creditworthiness or a loan application.

The requirement of detailed personal financial documents such as W2s and tax returns can lead to the imposition of conditions that may create a barrier to obtaining the Loan Estimate. Effectively, this can hinder the borrower from getting an early understanding of the key terms and costs associated with the loan, which TILA and RESPA aim to protect against.

On the other hand, actions like requiring a borrower to sign a contract, obtaining a credit report for pre-approval, or requesting personal identification before delivering the Loan Estimate typically do not infringe upon the regulations outlined in these acts, as they can be part of the initial loan application process. Therefore, option B stands out as the illegal action in this context.