I wasn't sure if this should go here or under Lending.

MLO took an application for a residential property in FL. File was sent to the Investor who returned it because they don't do whatever program it was for in FL. If they never looked at the file to make a credit determination did the Investor deny it or will it be a denial by our bank?

I've asked that department for more information or if there is a conversation log to see if there is a clear cut answer to this. I've never run across it before.

And shouldn't the lender know the programs they're discussing?

Technically, you may not have an application since the applicant asked for a product that you do not offer. If so, no AAN required, just call the customer and tell them.

However, a lot here depends on how much the MLO did on the file. If he pulled credit, delivered ETIL, etc.; then you may need to send a notice. Me? I would try to avoid the notice if at all possible, there is no way to say it in a nice way on that form, maybe a letter is better depending on the circumstances.

Anyone else?

I would be very very careful about using "we do not offer the product applied for". It appears to me the product is offered just not on the terms applied for, in the state of FL.

Thanks, I see I will have to get more details.

Dan, I agree with what you say; however there are some cases where you can use this.

If the customer asked for a VA loan in FL, you can say we do not offer VA loans in FL. No notice required. Actually had a presenter one time give an example of a applicant asking for a specific rate loan, i.e. 1% car loan, no AAN needed as bank does not offer 1% car loans. Interesting.

If the LO took app and processed with credit reports, etc., then I think you need to formally notify applicant that the product is not available. Since it has nothing to do with credit or other info on AAN, could you send a simple leter rather than the form?

This presenter was 100% wrong. The rate is a term of the product therefore the bank offered car loans just not with the rate of 1%. From the Commentary to 202.2


Paragraph 2(c)(2)(v)
1. Terms of credit versus type of credit offered. When an applicant applies for credit and the creditor does not offer the credit terms requested by the applicant (for example, the interest rate, length of maturity, collateral, or amount of downpayment), a denial of the application for that reason is adverse action (unless the creditor makes a counteroffer that is accepted by the applicant) and the applicant is entitled to notification under § 202.9.

Thanks Dan, I always thought that sounded wrong; that's why I never brought that info back to my lenders. Sorta filed it in my "really???" file and forgot about it till now. Thanks for setting the record straight on that.

What about the question about a letter versus the AAN? Could a lender ever send a letter instead of a formal notice?

I know this is off topic, sorry, just nice to know these things.

As long as the letter has the necessary disclosures, such as the contact information for the applicable regulator, it would be sufficient to meet the notification requirements.

PS. The reason I would use would be "Loan Program applied for is not available in the state of Florida."

I agree re interest rate and other terms. However, if a product is not available in a state, you do not have to adverse action that loan in my opinion. When I was lending in 50 states plus PR, we had products that were state specific (think Texas and home equity lines). It was not adverse action to say we did not have such a product in that state if an application got by the barriers at the gates.

I don't buy into that. You offer the product you just don't offer it on the terms or collateral being offered such as in a certain state.

A 30 year mortgage loan is a 30 year mortgage loan whether it's in TX on MI.

If you don't offer loans outside your market area do you not send an AAN for being outside the area, or do you tell them you don't offer the product in X County?

As I said earlier, be very very careful when using "type of product" not offered when in fact that product is offered by your FI.

You won't have a problem the way you choose to handle this but many banks have handled it differently successfully, with advice of regulatory counsel and review by regulatory agencies.

The MLO took the application knowing the Investor used to do Jumbo loans for people who own multiple properties in FL. Once the loan was submitted is when they found out the Investor stopped offering the program on properties in FL.

None of the other Investors offer the program. So do you still think we could go with "Loan Program applied for is not available in the state of Florida" as our reason for denial?

And do we report for HMDA based on the fact that the investor didn't even look at the file? Or did they deny it because THEY don't have the program?

I still contend the investor has the program applied for. They just no longer offer the "terms" applied for which would be making the loan in the state of FL.

It is a denial requiring an AAN and would be reported on the LAR as such.



Yes.

One last question. Would you say the Investor denied it because they don't offer the terms applied for or are we, the bank, denying it on these terms? Ultimately the question is who adverses the loan so we know if its on our LAR or not.

Whoever made the decision they could not, or would not make the loan applied for in the state of FL is the one to report it.

Thank you Dan!