Borrower applies for a 15 year mortgage (portfolio) and we give disclosures based on a 4% interest rate. Borrower never gives us an “intent to proceed” and after receiving early disclosures calls lender and states that another lender can give him the 3.25% that he wants. Originator asks the borrower if she can refer him to our secondary market department where they can give him the rate that he wants, however, they will also have higher closing costs and stricter underwriting. Borrower agrees. Secondary market originator tries to contact borrower but can not get in touch with him or at least he won’t respond back by phone. How should we treat the application? Withdrawn or denied (because we couldn’t give him the rate that he wanted)? Credit is good – underwriting not fully completed.

Anybody care to give me your opinion? Please...

Well it is not withdrawn...

Customer has to clearly withdraw the loan, not just say "I can get a better rate somewhere else."

If underwriting is not complete, you can't really call it denied either at this time. My opinion complete the underwriting process and let it work it self out naturally... or it will get closed for incompleteness if you can't finish your underwriting due to missing information... but either way you should work through the underwriting process.

Just my thoughts.

Cheers!

"Originator asks the borrower if she can refer him to our secondary market department where they can give him the rate that he wants"

Unless this option was disclosed and offered to the customer upfront, it sounds like you might have a steering problem if it is something they had to come back and ask for.

My understanding is that both types of loans were discussed originally and the borrower chose to go the in-house route because of lower closing costs, less documentation and a quicker loan closing. So I don't believe there is a steering issue here.

I don't understand why you would have to complete the underwriting process to deny the loan. If I pull credit and see that the borrower doesn't qualify based on credit, I'm not going to waste my time in verifying all of the other documentation just to deny the loan in the end, when I knew it was a clear-cut denial on day one.

I believe that this is a denial because we can't give the borrower what they requested. But the regulatory agency that we use stated that they didn't feel like it is a denial. That's why I was trying to see how others would view.

Thank you for your responses.