action taken - amazon web servicesfic-webinars.s3.amazonaws.com › bc360-05-handouts.pdf · if a...

1

Action Taken

PRE-APPLICATIONDo you Prequalify?

Do you have Preapprovals?

Which road do you take?

Be Consistent!

Copyright © FIC Conferences, Inc. www.ficconferences.com

1

2

3

2

During the Pre-Application Process - use caution gathering

information while asking questions in a non-

discriminatory manner

Discrimination & Fair Lending


Having difficulty determining when

disclosures must be provided to the

consumer?


If a lender or mortgage broker provides a written estimate of terms or costs

BEFORE providing the LE, it must include the following statement:

“Your actual rate, payment and costs could be higher. Get an Official Loan Estimate before choosing the Loan.”


Model H-26 – Effective 10-3-2015

Page 2

4

5

6

3

What begins as providing information & prequalifying…

Can turn into an evaluation of

creditworthiness and possibly an application

for credit


Page 2


Whether a prequalification

becomes an Application under ECOA depends on

how you respond…not what the consumer

says or asks

ECOA/Reg B & HMDA/Reg C“Application”…an oral or written request foran extension of credit made in accordance with the “procedures established” by a creditor for the type of credit requested


Page 2

7

8

9

4

The definition of “Application” found in Regulation Z is used to prompt the Loan Estimate and other disclosure requirements


Page 2

“Application” means submission of:• Consumer’s Name• Monthly Income• Social Security Number• Property Address• Estimate of the Property Value• Amount of Loan being sought


Under Regulation Z – TRID

Page 3

When consumer is toldthey DO NOT qualify…

(with or without a property)

When enough information is collectedto deny a loan, & the consumer is told they do

not qualify, regardless of the amount of information…a creditor has treated the

prequalification as an Application and it is subject to Adverse Action


Page 3

10

11

12

5

REMEMBERECOA/Reg B triggered by “Action Taken”Retention Requirements for 25 Months

Application (& any attachments) Notification of Action Taken Statement of Specific Reasons Any Consumer Statementalleging Violation


Lenders may offer aPREAPPROVAL PROGRAMfor Home Purchase Loans

(but they may be referring to it as Prequalifying)

Do you have aPreapproval Program?


Page 3

What is a Preapproval

Program?


13

14

15

6

Preapproval ProgramsA request for preapproval for a home purchase loan is an application if the request

is reviewed under a program in which the financial institution, after a comprehensive analysis of the creditworthiness of the applicant, issues a written commitment to the applicant valid for a designated period of time to extend a home purchase loan up to a specified amount. The written commitment may not be subject to conditions other than:

Conditions that require the identification of a suitable property;

Conditions that require that no material change has occurred in theapplicant’s financial condition or credit worthiness prior to closing; and

Limited conditions that are not related to the financial condition or creditworthiness of the applicant that the lender ordinarily attaches to a traditional home mortgage application (such as certification of a clear termite inspection).


ECOA & HMDA Definitions are the Same

Page 3

Preapproval Requestswith NO PROPERTY Identified

that are DENIED

HMDA Reporting is REQUIRED“Request for Preapproval” – Use Code 1

Preapproval was requested

“Type of Action” – Use Code 7

Preapproval Request Denied

ECOA/Reg B – “Adverse Action” REQUIRED


Page 4

Preapproval Requestswith NO PROPERTY Identified WITHDRAWN or INCOMPLETE

If incomplete or withdrawn & no credit decision has been made, & no property identified…

HMDA Reporting is NOT RequiredECOA/Reg B – “ Notice of Incompleteness”

may be incorporated in written commitment


Page 4

16

17

18

7

Model C-6 ECOA/Reg B“Notice of Incompleteness”

“After carefully reviewing your submission, it is missing information we will need in order to make

a credit decision. Please provide the requested information specified below, within [30 days] of

this correspondence. If you do not reply by (date), we regrettably will be unable to give any further

consideration to your request.”


Page 4

Preapproval Requestswith NO PROPERTY Identified

APPROVED but fails to originateHMDA Reporting Optional, but if reported:“Request for Preapproval” – Use Code 1

Preapproval was requested“Type of Action” – Use Code 8 (Mandatory Reporting 1-1-2018)

Preapproval request approved but not accepted

Do not use Code 2 – Application approved but not accepted

ECOA/Reg B – “ Notice of Incompleteness” may be incorporated in written commitment


Model C-6 ECOA/Reg BMay be Modified for Preapprovals

“Notice of Incompleteness”Lenders should use own language for Example:

“Your request for credit has been preapproved, however; after carefully reviewing your submission, it

is missing information we will need in order to continue. Please provide the requested information

specified below, within [30 days] of this correspondence. If you do not reply by (date), we

regrettably will be unable to give any further consideration to your request.


Page 5

19

20

21

8

(Lenders should use your own language)This preapproval of a home purchase loan is conditioned on the following:

1. Identification of a Suitable Property;2. No material change occurs or hasoccurred in your financial condition or creditworthiness prior to closing;3. Limited conditions that are not relatedto your financial condition or creditworthiness that we as a lender normally attach to a traditional mortgage loan application, such as a certification of clear termite inspection, etc.


Page 5

Preapproval Request Approved & then Property Identified


APPLICATIONS which have passed the Preapproval Stage must be reported under HMDA as Applications

If the request for preapproval is approved, a written commitment is issued & then the borrower identifies a property, the type of action taken on HMDA must be one of the choices for applications because the application has passed the preapproval stage

Page 5

Types of Action Takenfor Applications


1. Loans Originated2. Application Approved but not Accepted3. Application Denied4. Application Withdrawn5. File Closed for Incompleteness6. Loans Purchased by your Institution7. Preapproval Request Denied8. Preapproval Request Approved but Not Accepted

Page 5

22

23

24

9

Use Code 1“Loan Originated”

For a loan that is originated, including one resulting from a request for preapproval

For a counteroffer (you offer to the applicant to make the loan on different terms or in a different amount from the terms or amount

applied for), use Code 1 if the applicant accepts the counteroffer

www.ficconferences.comCopyright © FIC Conferences, Inc.

Page 5

Code 1“Loan Originated”

Lenders should report loans that the lender made the credit decision on and that closed in the same calendar year


Rescinded loans after closing may be coded as “loan originated” or coded as

“approved but not accepted”

Use Code 2“Application Approved but Not Accepted”

When the application is approved but the applicant (or the loan broker or correspondent) fails to respond to your notification of approval or your

commitment letter within the specified time. Do not use this code

for a preapproval request


Page 5

25

26

27

10

Code 2“Application Approved but Not Accepted”

Borrower has satisfied underwriting conditions but loan fails to originate/consummate

If borrower does not meet customary loan-closingconditions such as clear title requirements, survey, acceptable title insurance binder, clear termite inspection, a settlement statement showing adequate proceeds from the sale of previous home when applicant plans to use the funds for transaction


Page 5

Code 3“Application Denied”

Borrower supplies sufficient information for credit decision and lender either

denies or extends counteroffer

If counteroffer is made and applicant doesnot accept or fails to respond, lender reports the denial on the original terms


Page 5/6

C-4 Notice of Action Taken, Statement of Reasons & Counteroffer

DateDear Applicant: Thank you for your application

for ___________________________________________. We are unable to offer you credit on the terms that you requested for the following reason(s):__________________________________

We can, however, offer you credit on the following terms: _________________________________________________________


28

29

30

11

If this offer is acceptable to you, please notify us within [amount of time] at the following address: _____.

Our credit decision on your application was based in whole or in part on information obtained in a report from [name, address and [toll-free] telephone number of the consumer reporting agency]. You have a right under the Fair Credit Reporting Act to know the information contained in your credit file at the consumer reporting agency. The reporting agency played no part in our decision and is unable to supply specific reasons why we have denied credit to you. You also have a right to a free copy of your report from the reporting agency, if you request it no later than 60 days after you receive this notice. In addition, if you find that any information contained in the report you receive is inaccurate or incomplete, you have the right to dispute the matter with the reporting agency…


Conditional Approvals when Applicant does not meet conditions become

“Application Denied”

Conditional Approvals subject to Underwriting conditions for example:

(1) Lower debt to income and loan to value ratios; or

(2) Verification or confirmation, in whatever form the lender ordinarily requires, that the borrower meets underwriting conditions concerning the borrower’s creditworthiness

(3) Counter-offer: i.e., a demand for higher down payment


Page 5/6/7

Use Code 4“Application Withdrawn”Only when the Application is

expressly withdrawn by the applicant BEFORE a credit decision is made

Under ECOA/Reg B an Applicant may choose towithdraw an approved application, BUT it will not be coded as “Application Withdrawn” under HMDA because a credit decision has already been made


Page 5

31

32

33

12

Code 4“Application Withdrawn”

Do not use code 4 if a request for preapproval is withdrawn,

preapproval requests that are withdrawn are not reported under

HMDA


Page 5/6

Follow-up!Within 30 days after receiving an application that is incomplete regarding matters that an applicant can complete, notify by either:

Notice of Action Taken (ex: Model C-1) orDenied for Incompleteness

Notice of Incompleteness (ex: Model C-6)to inform applicant that failure to provide requested information will result in no further consideration being given to their application


Use Code 5“File Closed for Incompleteness”

If you sent a written Notice of Incompleteness and the applicant did

not respond to your request for additional information within the period

of time specified in your notice

Do not use this code for requests for preapproval that are incomplete, these preapproval requests are not reported


Page 5/6

34

35

36

13

Code 5“File Closed for Incompleteness”

If a credit decision has NOT been madeand the lender makes a condition involving submission of additional

information about creditworthinessthat is needed to make a credit

decision – & the applicant does not respond in the time allowed


Page 5/6

Code 6“Loan Purchased by your Institution”

Lenders should report only loans that it purchased during the

calendar year, but does not report loans it declined to purchase


Code 7“Preapproval Request Denied”

When NO PROPERTY has been identified and the request for preapproval has been denied


Page 5

37

38

39

14

Code 8“Preapproval Request Approved

but not Accepted”(Mandatory Reporting January 1, 2018)

When NO PROPERTY has been identified and the request for

preapproval has been approved but fails to originate/consummate


Page 5


ECOA/Regulation B

Page 8

1. to notify applicants of Action Taken2. report credit history in both names3. retain records of credit applications4. collect government monitoring info5. provide copies of appraisals/valuations


ECOA/Reg B requires Creditors:

Page 8

40

41

42

15

Prohibit Discrimination on the basis of:Sex, Marital Status, Race, Color,

Handicap, Familial Status, Religion, National Origin, Age, Receipt of Public Assistance Income, and for Good Faith

Exercise of Rights under Consumer Credit Protection Act


ECOA/Reg B & Fair Housing Act

Page 8

Creditor shall notify Applicant of Action Taken within…


30 Days after receiving a completed application concerning approval, counteroffer or denial of the application

30 Days after taking adverse action on an incomplete application, unless a notice of incompleteness is provided

30 Days after taking adverse action on an existing account

90 Days after notifying the applicant of a counter offer, if applicant does not expressly accept the credit offered

Page 8

Complete ApplicationLenders are required to provide notification

of action taken within 30 days of receipt of a “Complete Application”


An application for which the institution has received all the information it regularly obtains & considers in evaluating applications for the same type & amount of credit requested, including but not limited to credit reports, VOE’s, VOD’s, information requested from applicants on any approvals or reports by government agencies to guarantee, insure or provide security for the credit or collateral.

Page 8

43

44

45

16

Incomplete ApplicationsModel C-6 ECOA/Reg B

“Notice of Incompleteness”

“After carefully reviewing your submission, it is missing information we will need in order to make a credit

decision. Please provide the requested information specified below, within [30 days] of this correspondence. If you do not reply by (date), we regrettably will be unable

to give any further consideration to your request.”


Page 9


Withdrawn Applications

Page 9


Denied Applications

Noticeof

AdverseAction

Page 9

46

47

48

17


Counter Offers

Page 11

C-4 Notice of Action Taken, Statement of Reasons & Counteroffer

DateDear Applicant: Thank you for your application

for ___________________________________________. We are unable to offer you credit on the terms that you requested for the following reason(s):__________________________________

We can, however, offer you credit on the following terms: ___________________________________________________


Page 11

If this offer is acceptable to you, please notify us within [amount of time] at the following address: _____.

Our credit decision on your application was based in whole or in part on information obtained in a report from [name, address and [toll-free] telephone number of the consumer reporting agency]. You have a right under the Fair Credit Reporting Act to know the information contained in your credit file at the consumer reporting agency. The reporting agency played no part in our decision and is unable to supply specific reasons why we have denied credit to you. You also have a right to a free copy of your report from the reporting agency, if you request it no later than 60 days after you receive this notice. In addition, if you find that any information contained in the report you receive is inaccurate or incomplete, you have the right to dispute the matter with the reporting agency…


49

50

51

18

[We also obtained your credit score from the consumer reporting agency and used it in making our credit decision. Your credit score is a number that reflects the information in your consumer report. Your credit score can change, depending on how the information in your consumer report changes.

Your credit score:

Date:

Scores range from a low of ____ to a high of ____.

Key factors that adversely affected your credit score:

[Number of recent inquiries on consumer report, as a key factor]

[If you have any questions regarding your credit score, you should contact [entity that provided the credit score] at:

Address:

[Toll-free] Telephone number:____]


You should know that the Federal Equal Credit Opportunity Act prohibits creditors, such as ourselves, from discriminating against credit applicants on the basis of their race, color, religion, national origin, sex, marital status, age (provided the applicant has the capacity to enter into a binding contract), because they receive income from a public assistance program, or because they may have exercised their rights under the Consumer Credit Protection Act. If you believe there has been discrimination in handling your application you should contact the [name and address of the appropriate Federal enforcement agency listed in appendix A].

Sincerely,



What is Adverse Action?

Number of Reasons Given

Page 12

52

53

54

19

REMEMBERECOA/Reg B triggered by “Action Taken”Retention Requirements for 25 Months

Application (& any attachments) Notification of Action Taken Statement of Specific Reasons Any Consumer Statementalleging Violation


Page 11

QUIZOnce you have completed the Quiz for this “Boot Camp 360” Webcast Training, that is included in the workbook, the Answer Key along with your Certificate of Completion have also been provided for you records.If you have questions or need assistance please email [email protected]

55

56

57

action taken - amazon web servicesfic-webinars.s3.amazonaws.com › bc360-05-handouts.pdf · if a...

Documents