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#1313680 - 12/28/09 03:44 PM bankruptcy - decline all applicants
Tryin-2-Comply Offline
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Joined: Apr 2003
Posts: 202
Hills of TN
If an institution has a credit underwriting policy which states that no new loans will be approved to consumers with a prior bankrucptcy - is this permissable as long as the bank follows the policy with strict underwriting oversight?

Are there any other consumer protection laws i should be concerned with?

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#1313735 - 12/28/09 04:45 PM Re: bankruptcy - decline all applicants Tryin-2-Comply
Truffle Royale Offline

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Ouch. Why that strict? Doesn't your FI believe in second chances? We follow FNMA guidelines which require four years from release.

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#1313783 - 12/28/09 05:10 PM Re: bankruptcy - decline all applicants Truffle Royale
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Joined: Apr 2003
Posts: 202
Hills of TN
We have always in the past - but our Chairman wants this changed.

From what i've read this is not prohibited - just cautioned to be careful due to REG B. We have an underwriting dept which would ensure this was followed.

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#1313807 - 12/28/09 05:32 PM Re: bankruptcy - decline all applicants Truffle Royale
Rocky P Offline
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Joined: Jun 2003
Posts: 7,424
Florida
D&C, we were doing a Q & A with a consumer loan department, and asked the question how long would you wait until someone in bankruptcy would be given a loan. We started with the newest underwriter and worked to the manager.

The newest said 7 years. The time grew progressively less with experience, until it was the manager's turn. He mentioned there were three elements involved.

o Was the bankruptcy the fault of the customer, or were they a victim? (Was it their mismanagement of funds, or an unforeseen emergency such as medical with no insurance.)
o Did the bank lose any money in the bankruptcy?
o Did they re-establish any credit?

If all three criteria were OK, he said 1 year was enough for him.

Also, because of the differences in experience and underwriting, we came up with a 2nd review worksheet to endure that all parties would receive the same consideration. The bankrupt person whose application went to the newest underwriter would have the same consideration as that going to the manager. Basically, underwriters have loan approval authority and loan denial recommendation authority.
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#1313870 - 12/28/09 06:25 PM Re: bankruptcy - decline all applicants Rocky P
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 46,844
Bloomington, IN
Be careful using bankruptcy as the only reason for denial.

From 202.1(b)...The purpose of this regulation is to promote the availability of credit to all creditworthy applicants without regard to . . . . or to the fact that the applicant has in good faith exercised any right under the Consumer Credit Protection Act.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#1313974 - 12/28/09 07:30 PM Re: bankruptcy - decline all applicants Dan Persfull
Tryin-2-Comply Offline
100 Club
Joined: Apr 2003
Posts: 202
Hills of TN
thanks for all the input.

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