We normally have a very routine approach with our secondary market partners with regard to adverse action and HMDA. Our research tells us that it is right and our examiners and auditors also have "blessed" the process. In general, if we make the decision to turn down an application for credit, we are responsible for sending the AA notice and reporting the application on our LAR.

When the secondary market partner makes the decision, they are responsible for sending the AA notice and reporting the transaction on their LAR.

BUT...

We have a new partner that is also a state agency. They are exempt from HMDA reporting. They also believe that we are responsible for sending the AA notice even when THEY make the decision to turn down a loan request.

I feel this is wrong because I look at the definition of creditor in 1002.2(l) and it says, "Creditor means a person who, in the ordinary course of business, regularly participates in a credit decision, including setting the terms of the credit. The term creditor includes a creditor's assignee, transferee, or subrogee who so participates. For purposes of §§1002.4(a) and (b), the term creditor also includes a person who, in the ordinary course of business, regularly refers applicants or prospective applicants to creditors, or selects or offers to select creditors to whom requests for credit may be made. A person is not a creditor regarding any violation of the Act or this part committed by another creditor unless the person knew or had reasonable notice of the act, policy, or practice that constituted the violation before becoming involved in the credit transaction. The term does not include a person whose only participation in a credit transaction involves honoring a credit card."

Based on the definition of creditor, we are not the creditor when the state agency turns the loan down. We don't make the decision and we're not empowered to set the terms. Therefore, by my logic, it shouldn't be our responsibility to send the AA notice.

My heartburn with sending the AA notice only comes about because of the responsibility of placing these transactions on our LAR. The "Getting it Right" instructions clearly say that we don't put it on our LAR if we don't make the decision, but I'm concerned that if we send the AA notice it makes it look like we admit to making the decision and therefore we should have it on our LAR. From a pragmatic standpoint - these are high LTV loans for low to moderate income applicants. We'll never get to put any originations on our LAR and I don't revel in the idea of putting extra denials on the LAR (because it skews our results).

I "think" I'm right in that the state agency should be sending the AA notice, but I'd like other opinions. As is always the case, some people feel that the "outsiders" always know more than us "insiders" and before I go to the mat on this, I'd like to be just a bit more confident.

Thanks in advance.

This is no different than if you were a car dealership and you were sending the customer's application to the bank that was going to buy the dealer paper. Whoever sends the AAN is totally based on the agreement between the dealer and the creditor.

Thank you. And if we don't have a written agreement?

And if we do and we owned responsibility for AA - do I ignore the Getting it Right and put it on our LAR even though they made the decision?

You need to read 1002.9(g). Who delivers an adverse action notice does not impact HMDA reporting.