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#145821 - 01/06/04 04:30 PM Income Verification
Anonymous
Unregistered

Is there any regulatory risk in waiving income verification requirements for loan applicants - e.g. if an existing customer, no need to show proof but proof required if a new applicant? Is this a Fair Lending issue?

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Lending Compliance
#145822 - 01/06/04 04:38 PM Re: Income Verification
Anonymous
Unregistered

Are you actually considering doing this? I can't fathom why the bank would want to take that kind of risk, is it so hard to bring in income verification to be copied?

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#145823 - 01/06/04 04:47 PM Re: Income Verification
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 46,765
Bloomington, IN
From a S&S view I have to agree with the 2nd Anon.

Your underwriting criteria can be different for "existing" customers and new customers as long as a protected class is not affected. You just need to make sure that all are treated the same.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#145824 - 01/06/04 05:04 PM Re: Income Verification
Anonymous
Unregistered

I was told that this will only be applicable to Auto Loans via Dealerships! Personally, with Dealers involved, I would think that that would be BIGGER reason to verify income!

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#145825 - 01/06/04 05:18 PM Re: Income Verification
Dan Persfull Offline
10K Club
Dan Persfull
Joined: Aug 2002
Posts: 46,765
Bloomington, IN
Quote:

I was told that this will only be applicable to Auto Loans via Dealerships!




I'm speaking strictly from a personable point of view, NO NO NO.

I can't speak objective on this, I don't believe in giving "dealers" any break at all when it comes to underwriting.

But again, your "dealer" program is a separate loan program, and as long as everyone is treated equally with no negative impact on protected classes you may establish a separate underwriting criteria for that loan program.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.

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#145826 - 01/06/04 05:45 PM Re: Income Verification
Rocky P Offline
Power Poster
Joined: Jun 2003
Posts: 7,398
Florida
In mortgage lending there are NINA loans - No Income No Asset verification! There are legitimate secondary market products which charge a higher rate. Underwriting guidelines generally require that while there is no verification, that the credit score be higher, no recent delinquencies, etc., no gifting of funds and the loan to value is lower than conventional products.

There are also stated income products (basically the same information), except that the underwriter can run ratios. U/W looks for income history (e.g. same job for 2 years or self employed 2 years same business & location) and continuation (social security awards letters are reviewed with amounts blacked out.) Higher rates are charges and credit scores must also be higher (usually 700+ FICO range).

It is significantly riskier, and most U/W would rather not underwrite those files. However - they are (pretty much) standard and accepted in the secondary market.
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#145827 - 01/06/04 06:13 PM Re: Income Verification
Anonymous
Unregistered

Anon # 2 here:
I agree that there are specific products where higher reward justifies higher risk, I had interpreted the original question as if Anon #1 was suggesting an across-the-board policy not to require VOI from current customers.
My bad.

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