I found out that our underwriters are placing an app into denied status (to avoid sending out the GFE) until they receive more information from the borrower. Because most of our 1st lien loans are HPML, they know they need to have documented proof of the borrower's ability to repay. They communicate to the branch that's it's being denied because more information/evidence is needed. The system will generate a denial notice on the 10th day, unless the underwriter takes it out of denial status. The missing information is not the 6 pieces of information that RESPA requires, so the application is complete per RESPA. Mostly it's taxes and insurance information, that could affect the DTI.
My concern is that the branches are not always relaying this information to the borrower(s), so without notifying the borrower(s), I don't believe the loan was denied within 3 days of the application (to turn off the GFE clock).
Anyone's thoughts...

You are heading for serious problems in you next exam because your underwriters are basically refusing to provide the GFE without requiring verification documents.

This is no difference IMO than the other thread where employees were falsifying dates to make it look like the disclosures were being given when required.

Falsifying records is falsifying records. Period.

Yes, this is shockingly out of compliance. That GFE (or denial prior to GFE) needs to go out the door before the end of the 3rd day.

So how does other banks satisfy the need to stay in compliance with Reg Z section 35 when RESPA does not allow evidence before the GFE is mailed? Is this just a timing thing?
We are finding the applicants gives us unreliable or sometimes no information, so our GFE is way off base.

Kathleen
Are you saying the denial within 3 days must be in writing?
Since RESPA doesn't define denial, we referred to Reg B that states that it can be verbal when it's due to requesting more information.

Our problem is that the notice isn't (always) getting to the applicants within the 3 days.

Re the 3 days, you need to mail within 3 days if written - it can't lay around if you want to meet RESPA requirements regardless of what B says. It must be mailed on the 3rd day..not sit in an out box or some queue.

You can call them but I always required a call to be within the 3 days to tie with RESPA.

Issue the GFE based on the information provided in the application. Then, if after verifying the information, it is found to be "way off base," you have a changed circumstance and can reissue the GFE. The GFE is not a contract, nor a commitment to lend.

Help me count the days...

Application received on Thursday
Feb. 10, 2011....

Loan is denied on Tuesday Feb 15, 2011...Do you being counting Thursday, Friday and then Monday....

or do you count Friday, Monday and Tuesday....

Granny, you're good. The GFE or denial must go out within three days of receipt of the application. You received it on Thursday and denied it on the third day.

Can't the denial be made verbally within the 3 days? We call the customer within the 3 days, but the written AA doesn't go out until the 10th day. If the customer provides more information before the 10th day for us to reconsider, the file is reopened and the AA notice isn't mailed.

I totally agree with Dan, as is appears they are trying to avoid sending out the GFE until all of the information is documented, though

Application received on Thursday
Feb. 10, 2011....

Loan is denied on Tuesday Feb 15, 2011...

So suffice to say....We received it on Thursday...Tuesday is the denial date.



I totally agree with Dan, as is appears they are trying to avoid sending out the GFE until all of the information is documented,

Well actually, it looks like the customer didn't have the income to support repayment. The loan officer didn't obtain information with regards to insurance, etc. The loan secretary wondered if she had to get all of that information to produce preliminaries....and what would she do to get it....pull a figure out of the sky....