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#177293 - 04/06/04 05:10 PM Reg B - Preapproval
Anonymous
Unregistered

I need clarification. If you preapprove/prequalify a prospective borrower (determine how much "house" they qualify for), and they don't have a specific address, is this considered an application?

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#177294 - 04/06/04 05:13 PM Re: Reg B - Preapproval
Beagles22 Offline
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I believe it depends on you bank policy's definition of a complete application. We have in our loan policy that the application is not complete if we don't have a property address. If they later withdraw or they don't qualify on the pre-approval we treat it a a pre-qualification not a complete application.
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#177295 - 04/06/04 05:20 PM Re: Reg B - Preapproval
Dan Persfull Offline
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Dan Persfull
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Bloomington, IN
Quote:

If they later withdraw or they don't qualify on the pre-approval we treat it a a pre-qualification not a complete application.




I assume you send an AAN telling them why they don't qualify. If you made a decision based on the information you had, then IMO you have a complete application for Reg B purposes, otherwise how did you make your decision they did not qualify?

I forgot to paste this section from 202.9:

5. Prequalification and preapproval programs. Whether a creditor must provide a notice of action taken for a prequalification or preapproval request depends on the creditor's response to the request, as discussed in the commentary to section 202.2(f). For instance, a creditor may treat the request as an inquiry if the creditor provides general information such as loan terms and the maximum amount a consumer could borrow under various loan programs, explaining the process the consumer must follow to submit a mortgage application and the information the creditor will analyze in reaching a credit decision. On the other hand, a creditor has treated a request as an application, and is subject to the adverse action notice requirements of 202.9 if, after evaluating information, the creditor decides that it will not approve the request and communicates that decision to the consumer . For example, if in reviewing a request for prequalification, a creditor tells the consumer that it would not approve an application for a mortgage because of a bankruptcy in the consumer's record, the creditor has denied an application for credit
Last edited by dpersfull; 04/06/04 05:26 PM.
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#177296 - 04/06/04 05:22 PM Re: Reg B - Preapproval
TomS Offline
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USA
It depends on what you are communicating to the customer. If you are telling them in general terms how much they could afford to borrow based on their income and other factors, that would not be an application. On the other hand, if you are making a credit decision and informing the customer that you have approved them for a loan up to $X, you have an application. Whether you consider it complete or not, it is still an application. The FDIC has an excellent publication on their web site ("Prequalifications: Applications or Not?") that discusses when prequalifications turn into applications.
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#177297 - 04/06/04 05:23 PM Re: Reg B - Preapproval
Anonymous
Unregistered

Our policy requires an address along with other information to to be considered a completed application. So, if I understand what your saying, if our policy states what is considered an application, the new definition in reg B would not apply (i.e., preapproval? Otherwise it is considered a prequalification?

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#177298 - 04/06/04 05:38 PM Re: Reg B - Preapproval
Beagles22 Offline
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Yes we do send an AAN, I apologize. I was 1/2 in REG B mode and 1/2 in HMDA mode when I replied to that question.
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#177299 - 04/06/04 09:44 PM Re: Reg B - Preapproval
Andy_Z Offline
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If this is a preapproval program, consider too its interaction with HMDA now.
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