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#1120392 - 01/30/09 07:44 PM GFE Question - Loan Declined, Then Approved
swiggles Offline
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swiggles
Joined: Aug 2001
Posts: 7,351
Gosh, I hope someone can offer some advice. Surely, I'm not the only one with this problem, because surely other bank management comes up with hairbrained ideas too.

At my bank, home improvement applications (among others) are submitted to a central underwriting department for an initial credit decision. If the decision is a decline, the loan officer has certain specific criteria he or she can use to override that decision and approve the loan.

So here's what happens. The underwriting department denies the loan within three days and sends the denial (no GFE required). Subsequently (more than three days later), the lender overrides the decision and grants the loan. Now there's a violation for not sending the GFE within 3 days.

As a solution, the underwriting department and lenders have suggested that the first denied application be allowed to remain declined and the lender must resubmit the application with an override decision for approval. That might solve the GFE problem, but it seems to me that we'd have a HMDA problem in that the same application is submitted as declined and approved. Also, the applicant has received an adverse action notice and well as approval notification.

The only solution I see is for a GFE to be sent regardless of the expected outcome of the underwriting/override. Management does not want to do it this way.

Please provide some feedback. I'm at the end of my rope on this.
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Lending Compliance
#1120439 - 01/30/09 08:11 PM Re: GFE Question - Loan Declined, Then Approved swiggles
MT Pockets Offline
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Joined: Oct 2004
Posts: 238
Up North
If lenders can't get the denied appliations looked at within 3 days and managment still wants the lenders to be able to override the underwriting, then providing the GFE to all applicable applicants within 3 days would be the best solution. My bigger concern would be Reg B issues depending on who gets the override and how many are in a protected class. Either the application is approved or it is denied but not both without a change in the applicant's situation.
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#1120454 - 01/30/09 08:20 PM Re: GFE Question - Loan Declined, Then Approved MT Pockets
RR Joker Offline
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RR Joker
Joined: Nov 2002
Posts: 20,654
The Swamp
I would also be concerned with reputational risk. How confusing is that to the customer! A second-review for denied loans has it's place, but it should not change the decision but in very rare instances.
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#1120487 - 01/30/09 08:31 PM Re: GFE Question - Loan Declined, Then Approved RR Joker
swiggles Offline
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swiggles
Joined: Aug 2001
Posts: 7,351
We don't have very many overrides. And I'm tellin' 'ya...the override written procedures are so detailed and specific that they equate to rocket science IMO. The lenders can't override just 'cause the applicant is "a good customer" or "has a lot of money" or is "a good 'ol boy." The lender looks at extra criteria that the underwriting department doesn't have. The underwriting department just looks at bare bones (credit report - DTI - the usual stuff). No. I'm not totally comfortable with the override program, but so far have had no examiner criticism about it. Knock on wood.
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