I'm reviewing AANs on Real Estate secured loans, and am finding "pre-approvals" prior to the 30 day Reg B window and then eventually the loan has been declined sometimes two months later with the declination specific reason being credit issues, or appraisals dated a month prior to the AAN. So, my question is, does a pre-approval count as a 30 day approval for purposes of Reg B? If so, is there a time frame after the preapproval has been given, in which an AAN must be delivered, say perhaps 90 days?

How can you have a pre-approval when a customer has credit issues?

You have a very broken system.......

I agree. I can understand how an appraisal might cause a loan to be declined, maybe up to 30 days after the application, but I don't understand if the "pre-approval" can take the place of what Reg B calls an approval? In the situation I'm looking at now eventually it was discovered the customer's business income had shown a significant decline over the analyses period which would not be acceptable to FHA. But why would it take ten months to figure that out? This isn't 2001 when loans were backed up for months--but I digress--my main question: does a pre-approval have the same weight as an approval?

Aside from my broken system, anyone care to chime in and give me their opinion on whether a preapproval is the same as an approval per Reg B?

There are certainly others here who may have an opinion, but I will offer mine as I had a similar situation at my shop.

http://www.bankersonline.com/forum/ubbth...912#Post1840912

Unless you have defined what a "completed application" is, I would say that a "pre-approval" does not carry the same weight as a completed application. It sounds to me like you have a pre-qualification (did not go through a thorough and full underwriting).

My lenders went for a while without having clear guidelines on what we constituted to be an application. Once we established that, anything less was not an application subject to an AAN.

Hope this helped a bit.

Except that any time you say no you trigger an AAN, including if you say no to an inquiry.

But, does a preapproval stop the 30 day clock, and if so, is it ok to deny the loan months later?

If it is truly a pre-approval, the 30 day clock never started. Your 30 day clock only starts for an application as defined in Reg B.

(f) Application means an oral or written request for an extension of credit that is made in accordance with procedures used by a creditor for the type of credit requested. The term application does not include the use of an account or line of credit to obtain an amount of credit that is within a previously established credit limit. A completed application means an application in connection with which a creditor has received all the information that the creditor regularly obtains and considers in evaluating applications for the amount and type of credit requested (including, but not limited to, credit reports, any additional information requested from the applicant, and any approvals or reports by governmental agencies or other persons that are necessary to guarantee, insure, or provide security for the credit or collateral). The creditor shall exercise reasonable diligence in obtaining such information.

For a preapproval (or a prequal for that matter), you would have a 30 day clock if you decided to turn down the request.

Kahtleen: So, at the time it is decided to turn down the request, the clock starts?

Yes.

From Reg B:


§ 1002.9 Notifications.

(a) Notification of action taken, ECOA notice, and statement of specific reasons. (1) When notification is required. A creditor shall notify an applicant of action taken within:

(i) 30 days after receiving a completed application concerning the creditor's approval of, counteroffer to, or adverse action on the application;

(ii) 30 days after taking adverse action on an incomplete application, unless notice is provided in accordance with paragraph (c) of this section;

(iii) 30 days after taking adverse action on an existing account; or

(iv) 90 days after notifying the applicant of a counteroffer if the applicant does not expressly accept or use the credit offered.