We received an application for a $74,000 real estate loan and sent out early disclosures. Denied that request due to insufficient collateral value, customer has now asked us to do the loan for $62,000 which we approved. Do we need to send out new early disclosures?

Since you denied the loan, you are starting over. Act like this is a brand new request and give all new disclosures representing the $62,000 loan request.

New application as well?

Our auditors say yes. New request, new application.

I disagree. This is an accepted counteroffer under HMDA. Remember Origination good, Denial bad.

Reactivate the application. RESPA and Reg. Z require new disclosures, and the time between application and origination will appear long, but that can be explained in the file.

Al

I disagree with the disagreement. There was no counter offer, simply a denial. Then a new requests. You can't just say you gave a counter offer when you didn't.

I do agree the FI made no conter-offer per the information provided in the post, but the applicant did ask them to reconsider a lower amouunt.

On a reinstated application HMDA gives you the option of only reporting the origination or both the denial and origination. See page D-9 of the 2010 GIR.

I also feel you can make the changes, initial and date the changes on the original application,and documenting the file, rather than re-inventing the wheel.

We had a customer who applied for a home loan. They could not agree on the price, so he withdrew his application. We documented the withdrawl on the application. A few months later, he came back to us, they had agreed on the price. We reactivated the application and closed the loan. The auditors "strongly recommended" that we should get a new application and new disclosures. I disagreed.

You are allowed under the regulations to continue with the previous application. HMDA addresses handling in this way.

It is up to the bank and its established procedures.

Some start over; others continue with the original.