I have a request from a customer (broker) to return all copies of the documents he provided to evaluate a loan which we declined. This would include tax returns, P&SA, etc. I'm not aware of this comimg up before. Usually we retain copies of everything used to support our decision for at least the 25/12 months.

reading 202.12:
(b) Preservation of records—(1) Applications. For 25 months (12 months for business credit, except as provided in paragraph (b)(5) of this section) after the date that a creditor notifies an applicant of action taken on an application or of incompleteness, the creditor shall retain in original form or a copy thereof:
(i) Any application that it receives, any information required to be obtained concerning characteristics of the applicant to monitor compliance with the Act and this regulation or other similar law, and any other written or recorded information used in evaluating the application and not returned to the applicant at the applicant’s request ;

Does this allow me to return everything on request? Is there a minimum amount of info I need to retain, or can I have the loan officer write a memo of the circumstances to keep with the AA notice and leave it at that?

From the Official Staff Interpretations to 202.12(b)

12(b) Preservation of records.
1. Copies. Copies of the original record include carbon copies, photocopies, microfilm or microfiche copies, or copies produced by any other accurate retrieval system, such as documents stored and reproduced by computer.........

You should retain copies of the pertinent information used in your decision. The returned to applicant section, IMO, pertains to original documents submitted by the applicant that you were suppose to make copies of for your files.

As for returning anything to the broker, I'm not sure if I would do that without the applicant's written authorization.

Brokers routinely request the files back. If there is a decline, they want to be able to shop the file to additional lenders. For the most part, the brokers were the ones assembling the information and providing it to a lender for evaluation and funding.

Like Dan mentioned, we retain an electronic (scanned) file and return the documents provided by the broker to the broker + the AAN if the loan were declined. Any documents that we create (wnderwriting worksheets, etc) are ours and are not returned.

Thanks to both of you, I agree that we should retain a copy for our records. However, the actual client does not want any copies of personal financial information to held by the bank if we are not going make the loan. The broker is requesting a cite that allows us to keep a copy, and the language of 202.12b appears to give them an out.

Jax is correct. Afterall, the Broker is the originating lender, thus it would be appropriate to return his originating documention, e.g., loan app. credit report, appraisal etc. Please clarify what is AAN. I'm pretty bad with initals and acronyms. Thanks!

AAN = Adverse Action Notice

I'm glad this subject came up. I have been thinking of a better way to store our business declines. Some of the files are HUGE and it costs our bank money to send banker boxes full of declines to an archive management company.

I thought about imaging them, but in some cases there is so much information it would take forever to scan the documents.

Does anyone retain the documents that prove up the denial reason and shred the rest?

Dolly, we scan all our mortgage files. Scanning takes a few minutes (feeding into a scanner, multi-purpose photocopy machine, etc.) A 200 page scanned file is about 5MB in .pdf format. While it seems like a lot, you could put 80+ files on a CD. (That's how we send files to our QC department for review - they get one CD instead of 5 boxes of paper.)

Because they're .pdf files (Adobe), most every computer can read them, you can print out a page, or a file if needed. With the price of storage going down, it's well worth it - there was an ad for a dell with a 500GB hard drive.

For disaster recovery, we have off-site redundancy which means we can re-create files as long as we can access a server.