We are a community bank and we seem to be struggling with timing and timeframes here. I think part of our problem stems from the fact that our LO's have 3-4 secondary market investor rates to choose from at any one time, LOs are able to lock rates themselves, 60-75% of our business is repeat business, so the borrowers know the process, and our LOS system is cumbersome. The borrower seldom ever wishes to float the rate.

We see very little active shopping in our market as the borrower has either already done their shopping discreetly, they rely on the advertised rate, or they are simply acting on their existing relationship with their prior LO.

So the scenario we run into is: Borrower calls LO and says I see your rate, lock me in. LO locks in the rate (now IMO, we have enough for an application under RESPA since our investors require that info and more to lock a rate). Within 3 days of the lock, the LO or processor generates and mails the GFE and other early docs along with the Intent to Proceed form that we require. The LO may or maynot generate an actual app with on the day of lock but they do within the 3 days, so that is another wrinkle I end up with.

I have it in my head (and tell me if you think I am being too hard headed here) that we are going to lock a rate, that too should be our application, GFE and early doc date. If we are locking a rate, we should also be generating our GFE and other early docs on that date since how can a borrower lock or commit to a rate or program when they have not seen the GFE yet??

This is also causing wrinkles with the application date and how it relates to the file and the HMDA LAR later on.

Are other banks running into this? How are you working with this type of situation, or if you did, how did you move away from thses issues? Am I being to stubborn in my interp of the rules? Bank is adament to not go to a mandatory float system, nor a lock dock system. The recent uptick in refi's has only made the problem worse since the LOs are being hammered by borrowers.

I appreciate any feedback or suggestions, in this forum or in private. Thank you.

You said: "...we have enough for an application under RESPA since our investors require that info and more to lock a rate." So why doesn't the LO just grab a 1003 and put that info on it? Once you've got the six items you have an application for RESPA even, as Dan Persful likes to say, if it's written on a napkin. So if you've got the info on the day you lock the rate, imo, that's your application date.

Per RESPA you have three days from the date of application to generate the GFE/ETIL. So I do not agree with your self proclaimed 'hard headed stance' that "... (if) we are going to lock a rate, that too should be our application, GFE and early doc date." Sounds like your system is handling this part correctly.

As to 'how can a borrower lock or commit to a rate or program when they have not seen the GFE yet??' Until they indicate intent to proceed after receipt of the GFE/ETIL, the borrower isn't really locking or commiting, your bank is. If the borrower gets the GFE and finds a better deal elsewhere, they walk and your bank is stuck eating the par off fee and/or anything else. Your bank is electing to take the risk by doing business this way. As long as your bank understands the risk and is willing to continue to take it, there's not much you can do. fwiw, I think you're covered on RESPA and HMDA.

We are also a SCB and we have some lenders that operate the same way. They take the phone app, lock the rate and send the disclosures within the three days.
I agree with TR - The system works "as long as your bank understands the risk and is willing to continue to take it, there's not much you can do. fwiw, I think you're covered on RESPA and HMDA."

Hmmm... well this is why i am asking, since I am second guessing myself.

We all do seem to concur that through that you lock, you have an app?

Can you give your LOs a stack of 1003s to fill out when the borrower calls in to lock the rate? Mark it phone application, read the Section X info to them and BINGO! the application issue is resolved and you've got your HMDA info too. They hang up the phone and give the app to a processor to get the GFE/ETIL out within the next three days.

It's all electronic, and very easy for them to do so. Heck, 70% of the time since it is a refi, the customer's info is already in their database and can just copy the info into a new app.

This issue should be the least of their venting, but the one they hollar about the most.

Considering the market these days, I'm not surprised. Everyone's venting and hollering about every little thing and they're doing it internally for the same reason my poor husband gets it in the neck when he doesn't deserve it. Long hours and tons of stress while maintaining a smile to the customers like the guy in your avi is taking its toll on all of us. I'm starting to look for a virgin to appease the gods and get the dang interest rate back UP!!! Hang in there.

You mean that's not a picture of Jay?

Be my guest, be my guest, put my service to the test!

I only bring out that smile these days when I deal with the arts and crafts marketing department.

Your situation sounds exactly like ours.

Our investors actually don't require us to provide income information in order to lock the rate, so technically we could lock a rate without having a RESPA application. However, we've made it a policy that if the LO is locking then they have an application regardless of whether or not they've collected income. They have 3 days to disclose the GFE.

Typically our 1003 goes out with the disclosures as well, but I don't see it as an issue. The borrowers date it whatever date they sign it, but the LO has to date it the actual date of application - so in many cases the rate lock date. The actual date of application is the date used for HMDA - not the date the borrowers sign the application.

Like TR said, I don't see the issue with locking without disclosing, because the borrower is still free to go somewhere else without penalty.

Don't they ask for the DTI though?? Ours do, and IMO, you can't provide one unless you asked for the income, and thus we have all six pieces.

Yeah, I am coming around that I am being the hardass here... I have made several people very happy here in the office today as I share that and come around to loosening up.

Just make them stick to the trade off that they actually fill out a 1003 when they're on the phone with the borrower who's asking them to lock the rate. Then you won't be standing on your head to explain the sequence of events to an examiner who may or may not agree with those of us who've posted here. It's a win/win for everyone at your bank then.

btw, phone applications do not have to be signed by the borrowers. The LO just has to note on p1 that he asked them if they want joint credit and make sure he marks phone application on p3 and then signs and dates it. That date is your application date. The borrowers will sign the final application at closing confirming everything that's on it and you're good to go.

You know, DTI doesn't show on the lock confirmations so I always thought that they didn't ask for it. Maybe I'll have to double check to make sure they're just not printing it on the confirmation.

We have several lenders we use and some ask for income and/or DTI but some don't ask for either.

Remember - RESPA does not require a written application to trigger the GFE, it is triggered when you have an application or the information sufficient (six items) to complete an application.

Our examiners said in the first few days that they were here stated that it always scares them to enter a bank with a lot of colorful or trendy artwork because they are afraid of what kind of creative marketing or compliance or financing they are going to find when they get a layer or two deep in their exam process. I quickly put away the kids artwork when they left my office.

Okay. - Thread hijack ended.