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#1633650 - 11/30/11 05:09 PM Adverse Action
swiggles Offline
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I apologize if this has already been asked, but.....

If a loan is denied due to the co-applicant's credit, what should be indicated on the applicant's denial notice as the reason for denial?
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#1633753 - 11/30/11 06:55 PM Re: Adverse Action swiggles
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Is this a stupid question?
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#1633764 - 11/30/11 07:01 PM Re: Adverse Action swiggles
rlcarey Online
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You tell them why the loan was denied - regardless of who caused it. Only one notice is sent under Reg. B.
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#1633775 - 11/30/11 07:09 PM Re: Adverse Action rlcarey
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I can't make that make sense. We use a combined form Reg B, FCRA, Credit Score Notice and so the applicant recieves the notice which includes his credit score and the co-applicant receives the notice which includes her credit score. So, you tell the applicant that the application was denied based on information found in the credit report and then tell him that his credit score is 800?

Or do I indicate the Reg B reason and then NOT check the FCRA box on the applicant's form?......but still provide him with his credit score?

Or do I not have to provide him with a credit score notice at all since his credit score was not the reason for denial?
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#1633781 - 11/30/11 07:14 PM Re: Adverse Action swiggles
raitchjay Online
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OK
The way i would handle it: no credit score for the applicant who had the good credit score; 2 separate AANs with the same reason checked on both indicating the co-applicant's bad credit is the reason for the denial. The co-applicant would receive a credit score since their score contributed to the denial. Now let's see if Randy agrees.
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#1633785 - 11/30/11 07:17 PM Re: Adverse Action raitchjay
Kathleen O. Blanchard Offline

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I agree. They both can be told the reason (co-applicant credit) but the applicant is not told a credit score and you do not share the credit scores. The co-applicant is told their score.
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#1633786 - 11/30/11 07:17 PM Re: Adverse Action raitchjay
rlcarey Online
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I would agree.
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#1633801 - 11/30/11 07:23 PM Re: Adverse Action rlcarey
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MANY thank you's!!!!
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#1633810 - 11/30/11 07:32 PM Re: Adverse Action swiggles
deeb Offline
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Doesn't Dodd-Frank require us to provide the credit score and the score factors for each applicant?
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#1633815 - 11/30/11 07:36 PM Re: Adverse Action deeb
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I was thinking....not for adverse action.....just at application.
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#1633864 - 11/30/11 08:50 PM Re: Adverse Action swiggles
rlcarey Online
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That is correct.
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#1633899 - 11/30/11 09:28 PM Re: Adverse Action rlcarey
deeb Offline
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We are providing each applicant's score and factors for all non-originated loans, even if the score wasn't a reason.

I'm reading in the Federal Register for 12 CFR Part 202:

Section 1100F of the Dodd-Frank Act amends section 615(a)of the FCRA to require creditors to disclose on FCRA adverse action notices a credit score used in taking any adverse action and information relating to that score.


Would over-disclosure be a problem?
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#1633919 - 11/30/11 09:50 PM Re: Adverse Action deeb
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OK
I don't think it's correct per regulation to disclose a credit score when the score wasn't used in taking adverse action.
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#1633962 - 11/30/11 10:43 PM Re: Adverse Action raitchjay
rlcarey Online
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It is the same as checking the box saying a credit report was in whole or in part used to deny you credit. If that box is not checked, then you don't give them their score. Over disclosuure of either will result eventually in a regulatory finding in your examination report, if they ever figure it out. It grants the consumer rights regarding their credit report that they are not entitled too.
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#1634472 - 12/01/11 10:13 PM Re: Adverse Action rlcarey
swiggles Offline
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So based on all this info, do you think that examiners would be likely to cite:
  • Giving a reason for denial as "information gathered from a CRA about the co-appllicant"; or
  • automatically providing a credit score notice (but not checking the "FCRA Box") to everyone...
as violations?

Has anyone had or heard of any exam experiences with this?
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#1634510 - 12/02/11 11:58 AM Re: Adverse Action swiggles
rlcarey Online
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1. Citing a bank for not providing reasons on an AAN that do not meet the specificity rules of Reg. B is a common occurrence.

202.9(b)(2): Statement of specific reasons. The statement of reasons for adverse action required by paragraph (a)(2)(i) of this section must be specific and indicate the principal reason(s) for the adverse action. Statements that the adverse action was based on the creditor's internal standards or policies or that the applicant, joint applicant, or similar party failed to achieve a qualifying score on the creditor's credit scoring system are insufficient.

2. Haven't heard of it yet as this is pretty new, but banks have been cited for years for checking the box that the credit report contributed to the decision, when it didn't. I don't see this as much different from that.
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#1634537 - 12/02/11 01:44 PM Re: Adverse Action rlcarey
deeb Offline
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Randy,

Would this be a Reg B issue or a FCRA issue, assuming the AAN section for Reg B would be completed correctly.
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#1634564 - 12/02/11 02:21 PM Re: Adverse Action deeb
rlcarey Online
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FCRA
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#1636389 - 12/07/11 05:11 PM Re: Adverse Action rlcarey
swiggles Offline
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Can I add a question onto this thread?

If, for example, husband and wife apply.....his credit, stellar but her credit stinks and causes denial. We've determined above (in this thread) that both receive Reg B Adverse Action reasons that match and that he does not receive an FCRA notice or a credit score notice as part of his advisement but she does.

OK...what if she is given an AAN and is dropped off the application and they go forward with him as the only applicant? Wouldn't he STILL get an adverse action notice for the joint request?
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#1636691 - 12/07/11 09:47 PM Re: Adverse Action swiggles
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Anyone?
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#1636800 - 12/08/11 01:44 PM Re: Adverse Action swiggles
Dan Persfull Offline
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If he accepts the counteroffer (a loan without the wife) there is no adverse action against him therefore the AAN would not be required for him.
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#1636841 - 12/08/11 03:06 PM Re: Adverse Action Dan Persfull
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But we would still need to send an AAN to her?

Also, when this occurs, our mortgage department closes out the joint application file and starts a new one under just his name (new file number). Does that matter?

And finally, must we send a written counteroffer to him or just underwrite under his name only and give approval or written denial?

Thank you. Dan.

I have examiners in house for two weeks and so I'm struggling to answer just normal routine questions from employees!
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#1638451 - 12/13/11 06:57 PM Re: Adverse Action swiggles
Jewels1972 Offline
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We give AAN to the applicant with the negative credit and then to co-applicant we give the notice of credit denial which includes the counter-offer.
It's fine if you start a new file with just the co-applicant who accepted to counter-offer... but then you need to remember that if HMDA comes into play, the other loan would not be HMDA reportable as it was replaced with the counter-offer loan.

The counter offer is sent to him on his separate notice, as they both should receive their own notices now.

Hopefully this helps.
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#1639290 - 12/15/11 01:37 PM Re: Adverse Action Jewels1972
Dan Persfull Offline
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But we would still need to send an AAN to her? Yes.

Also, when this occurs, our mortgage department closes out the joint application file and starts a new one under just his name (new file number). Does that matter? No. That's an internal tracking mechanism and it's your option whether to start a new application file or amend the existing one.

And finally, must we send a written counteroffer to him or just underwrite under his name only and give approval or written denial? There is no requirement to give a written counter offer. If accepted and the loan is consummated no further notice is required. If they do not accept the counteroffer then you must within 90 days of providing the counteroffer provide the applicant with an AAN giving the reasons the original request was not approved as applied for. However, if you are re-underwriting in his name only and there is a possibility he may be denied once he reapplies then you have not given him a counteroffer. You have simply denied him credit and have invited him to reapply on different terms. In this case I would have to say you owe him an AAN because you have not offered (approved) him credit on different terms. All you have done is invited him to reapply.
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#1639352 - 12/15/11 03:08 PM Re: Adverse Action Dan Persfull
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As always, Dan, thanks....always appreciate your answers.

The above question came from our mortgage department, the manager of which tells me that it's confusing to the applicant to be told via phone of the decline of the co-applicant, he reapplies under his name only, and then subsequently receives a written denial for the first "joint" request.

I told the manager that the loan officer should communicate to the applicant that he will be receiving a decline in the mail but that the decline is for the original request. It's all about communication for heaven's sake!!!
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