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#1892605 - 01/31/14 05:30 PM Applications Received Before 1/10/2014
Dani York, CRCM Offline
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Dani York, CRCM
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We have a pre-approval request that we received in Q4 2013 that we approved under our old program (3 year balloon non-HPML). No committment letter was issued, just a verbal of what the rate and terms would be. We changed our program to a 62 month HPML product that fits the temporary small creditor balloon QM (we are a small creditor). The applicant just found a house he wants to buy yesterday, and the LO wants to honor the original rate and terms quoted.

The only way I can see that we can honor even some of the original terms would be to make a non-QM non-HPML 62 month balloon.

My LO wanted me to check though on this question:

Do the ATR requirements apply to applicatino received prior to 1/10/2014 but originated after 1/10/2014? I say yes, as I don't see anything stating "For apps received prior to, you don't have to do this." PLease confirm this for me.

Thanks so much!
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#1892611 - 01/31/14 05:56 PM Re: Applications Received Before 1/10/2014 Dani York, CRCM
Norman Paperman Offline
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The ATR/QM rules only apply to applications received on or after 1.10.13.

IMHO, I believe that if you committed to a product/term prior to that date, you should not be subject to the new standards. Do a solid job of documenting your prior commitment.

Others may be able to provide insight as well, these are just my opinions.

http://www.consumerfinance.gov/regulatio...t-regulation-z/
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#1892616 - 01/31/14 06:03 PM Re: Applications Received Before 1/10/2014 Dani York, CRCM
dblack Offline
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I agree it only applies for applications received on or after 1/10/14. We have many balloons that will close after 1/10/14 but with app dates prior to the cut off.

In this situation it would depend on when your actual application date is.
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#1892619 - 01/31/14 06:08 PM Re: Applications Received Before 1/10/2014 Dani York, CRCM
Cracked Egg Offline
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I would agree that ATR/QM only applies to applications on/after 1/10/14.

However, I question that you had a completed applcation until now. You said he just found a house. Under Reg Z, you need the property address to have a completed applcation, dont you?

I've just started in compliance so I am still learning.
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#1892622 - 01/31/14 06:11 PM Re: Applications Received Before 1/10/2014 Dani York, CRCM
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I think that's RESPA you're referencing. I don't know of any similar definition in Reg. Z for "application" (in fact, i don't know that Reg. Z really ever defines an "application", but someone can correct me on that if i'm wrong).
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#1892628 - 01/31/14 06:17 PM Re: Applications Received Before 1/10/2014 Dani York, CRCM
dblack Offline
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That's the malfunction with this scenario.

Reg Z doesn't define an application, but refers to RESPA's definition for early disclosure purposes.
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#1892631 - 01/31/14 06:19 PM Re: Applications Received Before 1/10/2014 raitchjay
Norman Paperman Offline
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Originally Posted By: raitchjay
I think that's RESPA you're referencing. I don't know of any similar definition in Reg. Z for "application" (in fact, i don't know that Reg. Z really ever defines an "application", but someone can correct me on that if i'm wrong).


^^^^I agree with this. Practically speaking, you made a commitment to your customer prior to the effective date of the new rules. I think you're golden; so long as you document, document, document.
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#1892633 - 01/31/14 06:22 PM Re: Applications Received Before 1/10/2014 Dani York, CRCM
raitchjay Online
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Originally Posted By: dblack
That's the malfunction with this scenario.

Reg Z doesn't define an application, but refers to RESPA's definition for early disclosure purposes.



It doesn't directly reference the RESPA definition of an application that i'm aware of....just that " In a mortgage transaction subject to the Real Estate Settlement Procedures Act...", you must give early TIL disclosures. Dani...maybe you're going to have to look to your own bank's policy on what an "application"is for your bank?
Last edited by raitchjay; 01/31/14 06:24 PM. Reason: clarify what post i was addressing
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#1892638 - 01/31/14 06:26 PM Re: Applications Received Before 1/10/2014 Dani York, CRCM
dblack Offline
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From the commentary to 1026.19

3. Written application. Creditors may rely on RESPA and Regulation X (including any interpretations issued by the Bureau) in deciding whether a “written application” has been received. In general, Regulation X defines “application” to mean the submission of a borrower's financial information in anticipation of a credit decision relating to a federally related mortgage loan. See 12 CFR 1024.2(b). An application is received when it reaches the creditor in any of the ways applications are normally transmitted—by mail, hand delivery, or through an intermediary agent or broker. ( See comment 19(b)–3 for guidance in determining whether or not the transaction involves an intermediary agent or broker.) If an application reaches the creditor through an intermediary agent or broker, the application is received when it reaches the creditor, rather than when it reaches the agent or broker.
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#1892644 - 01/31/14 06:35 PM Re: Applications Received Before 1/10/2014 Dani York, CRCM
raitchjay Online
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OK
I stand corrected.
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#1892670 - 01/31/14 07:13 PM Re: Applications Received Before 1/10/2014 Dani York, CRCM
hgliii Offline
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As stated above, I think you need to look at the date your bank recognized it as an application. If that date is prior to January 10, 2014, then you should document and move forward.

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#1892712 - 01/31/14 07:57 PM Re: Applications Received Before 1/10/2014 Dani York, CRCM
Comply Wren Offline
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If you go to 12 CFR 1024.2(b), as referenced in the Reg Z commentary, the definition of written application includes the six pieces of information (including property address, estimated value, etc.) However, the hardest piece for me to get over is if you actually have a preapproval (which would be an application for Regulation B), or merely a prequalification, which would be an inquiry and not truly an application, since to me that would be the point at which you would identify it as an application since you are only requiring identification of a property to keep the transaction rolling along.

If you look to Reg B and its commentary related to when a request is an application (1002.2(f)-5.i), a preapproval indicates a thorough review of information and a written commitment. It states that absent a written commitment it is a prequalification request.

Personally, unless I had airtight documentation to justify the application prior to identification of the property, I would have a hard time making the case for it not being ATR applicable.

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#1892722 - 01/31/14 08:15 PM Re: Applications Received Before 1/10/2014 Dani York, CRCM
hgliii Offline
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You are combining 2 definitions of applications:
1. Reg "B" defines an application for credit worthiness, where no property is mentioned. Any credit application, auto, unsecured, etc.
2. RESPA/TIL which defines the requirements for a mortgage loan application. It states that a lender has received an application for a mortgage loan when it meets the 6 required items, which includes a property address, a loan amount and an estimated value of the Real Property. In addition the 3 other items are name, SS#, income.
The OP indicated you did not have 3 of the 6 items. It did not indicate the applicant had given the bank an "intent to proceed", which is also required to proceed with the application. If the GFE is given prior to these items then you are stuck with the origination cost on the GFE and TIL.

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#1892726 - 01/31/14 08:20 PM Re: Applications Received Before 1/10/2014 Dani York, CRCM
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Only going by what info we have, I would comply with ATR on this.

I think there is an argument to be made about using your institutions app date(since Reg Z doesn't define application and points to RESPA only for early disclosure purposes), but I just don't see where it is worth the risk. Especially if all it means is extending the term a couple of years.
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#1892728 - 01/31/14 08:23 PM Re: Applications Received Before 1/10/2014 hgliii
dblack Offline
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Originally Posted By: hgliii

2. RESPA/TIL which defines the requirements for a mortgage loan application. It states that a lender has received an application for a mortgage loan when it meets the 6 required items,


But, for TIL, that definition only applies for the timing requirements of early disclosures.

There is no general definition of application.

As I said above though, I would just comply with ATR and not try to fight it.
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#1892748 - 01/31/14 08:48 PM Re: Applications Received Before 1/10/2014 Dani York, CRCM
Dani York, CRCM Offline
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Thanks for all the input. I have a call in to the FDIC to see how they would look at it, but won't hear back until Monday.

As far as the details, the applicant gave us everything but a property address and estimate of value ('cuz there was no property yet) on 11/12/13. We pulled credit and analyzed all of the financials. He qualified so it was approved and the officer told him the terms and rate of our existing product. We had an application under Reg B, but not under RESPA. Then radio silence until yesterday when he calls and tells us he's found a house and wants to make an offer.

My head is spinning. I'll post what the FDIC comes back with next week.
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#1892757 - 01/31/14 09:05 PM Re: Applications Received Before 1/10/2014 Dani York, CRCM
Comply Wren Offline
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That's the direction I was trying to go. The original scenario had discussion of a preapproval and if there was an application prior to 1/10. I was just trying to say that given the original facts, I didn't think you could get to an application existing prior to 1/10 and ATR would apply.

However, this discussion is great in that it forces us to think about how the term "application" functions within the separate regulations. Since 1026.43 applies to a consumer credit transaction secured by a dwelling, I think if you have a true preapproval program, you can make the case that an application for preapproval received prior to 1/10 would not be subject to ATR. If you have a true preapproval program, you are issuing a written commitment for a specified amount that is based upon a full underwriting of the applicant, and is subject to identification of an acceptable property. You already know that the request is to be secured by a dwelling, it just hasn't been identified yet. Not identifying a property for purposes of RESPA to issue earlies doesn't mean that you do not have an application for dwelling secured credit. That is why I was so hung up on the lack of a written commitment.

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