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#1652538 - 01/18/12 11:59 PM prequal vs preapproval & req. disclosures
Chocaholic Offline
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Joined: Aug 2005
Posts: 443
Northwest
ok, we have been out of the mortgage business for so long I've forgotten everything I knew..and of course there have been all those reg. changes...

Management would like to roll-out a prequalification program for home loan purchases... based on information provided by the consumer then, the lender would provide a loan amount range or house sale price, that the customer may qualify for.... this information (loan amount range or selling price range) would be used as a shopping tool to ensure the houses they are looking at are in their ball-park. No credit report would be pulled, no property has been identified and it is based on information provided by interview with no attempts by lender to verify.

Therefore, even under new rules this is not an application, and is therefore not subject to RESPA or Reg. Z. and no early disclosures are required. CORRECT?

Given the same scenario even if we call it a pre-approval and issue something in writing (with all the typical disclaimers) it is still not an application subject to early disclosures even if we do order a credit report, process verifications of employment etc.and do not order appraisal & title (as no property identified) . CORRECT?

Are there any pitfalls,best practices, tracking sheets/logs or ??? that I should be considering. What about reg. B concerns, adverse action notices?

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#1653031 - 01/19/12 05:58 PM Re: prequal vs preapproval & req. disclosures Chocaholic
Dan Persfull Offline
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Dan Persfull
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Posts: 47,463
Bloomington, IN
The scenarios you describe would not meet the definition of a pre-approval program. They would be pre-qualifications and early disclosures would not apply.

They also would not be applications under Reg B unless you take adverse action. In that case they become applications for the notification requirements of 202.9.
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#1654386 - 01/23/12 05:32 PM Re: prequal vs preapproval & req. disclosures Dan Persfull
Chocaholic Offline
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Joined: Aug 2005
Posts: 443
Northwest
A clarification regarding adverse action would be appreciated. What would be a situation where an Adverse Action Notice would be required?

Is this an example: In the case of a pre-approval, where the information provided was verified and the customer would not qualify for any amount ..due to bankruptcy for example... If adverse action is required in this case, is it best practice to have a second look be applicable as well?

Are there any other typical scenarios? Thank you!

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#1654655 - 01/23/12 09:11 PM Re: prequal vs preapproval & req. disclosures Chocaholic
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 47,463
Bloomington, IN
If you take a pre-qual request and you deny it due to credit, debt to income, lack of down payment or any other reason you would deny a loan request would meet the definition of adverse action and would be subject to 202.9.

You may want to review the Commentary to 202.2 where it discusses the difference scenarios of what is an application vs what is an inquiry.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#1660965 - 02/06/12 03:43 PM Re: prequal vs preapproval & req. disclosures Chocaholic
SMQ, CRCM Offline
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Between the lines
What if you were to pull a credit report? Wouldn't this trigger the FCRA diclosure? Still no property so no GFE or ETIL disclsoures. Anything else?
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