For this scenario, the application was taken by telephone, fax or mail and this is an FDIC regulated bank:

The applicant marked “I do not wish to furnish this information” on the initial 1003, BUT GMI was marked on the final 1003. This is because the investors that the bank sells the loan to requires the GMI, regardless of whether or not the applicant did not wish to furnish.

So the lender is either marking the GMI on the final 1003 based on visual observation prior to closing, or by contacting them by phone and asking them for the information again, indicating that it is required to be furnished.

On their LAR, the Bank reports what was on the initial 1003, not the final.

Has anyone heard of this?

I always thought that if the applicant expressly said they did not want to furnish it, then how can you require it (unless it was taken face to face)? And, why does the investor require it?

I would have a conversation with the investor's compliance area.

Are they requiring that the bank obtain GMI when it meets face to face with the applicant post telephone/fax/mail application, either during the application phase or at closing? That is allowed, but not mandated.

If that is the case, the bank should also be reporting that information on its LAR.

Yes, they are requiring that it be collected during the application phase (post telephone/fax/mail app) or at closing.

It makes sense to me that the bank should also be reporting it, but apparently the FDIC has been using the initial application also and did not comment on their practice of not reporting the information.

That might mean the FDIC did not notice what was actually occurring in the actual process.

I understand that if an application is taken by mail...etc....and GMI is not provided, you can obtain the GMI at a face to face interview anytime during the application process...either directly from the applicant or by visual observance if they refuse.....the application would then be marked GMI obtained by face to face interview.....

So we can obtain the GMI at anytime during the loan process when meeting the customer face to face and then mark face to face interview for an application that was originally received by mail?

If an application is processed with no face to face interview.....is it at our option whether or not we want to make a GMI determination based on surname alone (no visual) or report not provided?

No, that is not an option.

Thanks, Dan....that was my take....

When I audit the LAR I have always looked at the original application not the final "cleaned up" one....if GMI is being collected after the completed application process and it is on a final "cleaned up" application...are we supposed to be reporting the GMI on the LAR...if so, I need to change how I audit....

The best advise I can give is collect the GMI at the time of application. If you don't collect it then because you don't see them, don't collect it later and report accordingly. This is an application requirement - which means at the time of the initial credit request. It's not meant to be collected on a future form you refer to as a "cleaned up application".

Thanks....that's what I was hoping to hear!

If the application is started by mail, fax, Internet or telephone where there is no face to face interview and the applicants do not provide the information then then you must report it as not provided.

If you do however meet with the applicant face to face anytime during the application process you are required to request the GMI information. You must give the applicants the option of providing the information and if they do not then you would report the GMI based on the visual observation.

3. Applicant data—application completed in person. When an applicant meets in person with a lender to complete an application that was begun by mail, internet, or telephone, the institution must request the monitoring information. If the meeting occurs after the application process is complete, for example, at closing, the institution is not required to obtain monitoring information.

While I do not personally agree with this line of thinking, we are being told by our regulator that the "is not required" means we can collect at closing, we just have to be consistent in doing so.

That line of thought is supported by this statement in the GIR, page D-10. I don't necessarily agree that you should collect at closing, but I've heard the same thing.

3.
Applicant data—application completed in person. When an applicant meets in person with a lender to complete an application that was begun by mail, internet, or telephone, the institution must request the monitoring information. If the meeting occurs after the application process is complete, for example, at closing, the institution is not required to obtain monitoring information.

"Is not required" seems to imply that you may.

Collecting GMI is supposed to be done at application, if they come in to complete the application that was mailed or taken by phone; then you should complete the GMI. If you have completed the application phase and moved to underwriting, you or no longer required to collect. Some would say that you should not collect once you have moved beyond application stage.

Since there is nearly no margin for error in the LAR, it can be argued that it is safer to not collect later in the process.

I seem to remember reading somewhere, long ago, that one of the regulators stated that it was "not appropriate" to collect the information at the closing table. But, of course, I can't put my hands on it now.

That is what I was wondering Matt.....in reading Regulation B and C....it stated "need not" not "should not" so I didn't know if it could be an option to make a determination by surname when not provided by a phone application...etc....

I was hoping I was reading too much into it....

I'm going to stick to if not provided during the application process...then don't make a determination and report not provided.....

Technically, until the note is signed the transaction is in the "application process". The deal could die up until that point.

A bank is allowed to try again at closing and if the customer does not wish to provide, to report based on visual observation or surname.

This is a decision for an institution to make, not all will make the same decision. Consistency is key. I have used this process in a special lending situation where we really, really really needed the data. We often, by explaining the importance, could get the info from the customer. But not always.

We work with a number of investors and none require us to fill in the GMI if an app is not taken face to face.
I suggest you contact the investor's compliance area and ask them to show you in the Reg or in their guidelines why they're asking for this.
More than once, someone on the front line at the investor misinterprets something which has almost caused a knee jerk change in procedure here.
Thankfully, following up with the investor has negated almost every instance.