Our stance at every bank I've worked at FRB or FDIC went with what the file status was at the time of the borrower changing their mind.
Exactly! The file status is what determines the action code, not what is communicated to the borrower or what the borrower says.

David, they just use the word 'issued'. To me that could be communicated or simply a file status. We do not give written commitments, but we have either approved, denied or neither one yet and that's how we drive our coding.

Sometimes we have actually done that within the 3 days of a GFE, particularly on refi's...but it's a rare day those are ever not closed out so W/D vs ANA would be a rarity.

David, something else I'd like for you to consider. Place emphasis on the word 'often'. It doesn't say 'must', it says we 'often' do this...even if we do, it still doesn't equate to a conditional commitment to the loan portion...just a means to definitively disqualify certain applications early on.

14) Q: The definition of application includes the social security number as one of six pieces of information. Foreign nationals do not have social security numbers. Is a Tax Identification Number (TIN) an acceptable substitution?
A: Before a loan originator issues a GFE, the loan originator will often evaluate the credit worthiness of a potential borrower by pulling an ―in-file‖ or a credit report. The social security number is typically the unique identifier used to pull a credit report. If the social security number is not the appropriate unique identifier necessary to determine a borrower‘s credit worthiness, another unique identifier may be substituted.

The word "often" does seem to shed a different light on this, but I think the context is about the credit report. IOW, this isn't saying you don't always have to evaluate everything you have (I think that's a requirement that is pretty clear from the long post I made quoting all of the places where "preliminary underwriting" and "final underwriting" are used in the FR). I think this is saying you don't HAVE to have the credit report to evaluate the credit worthiness. They are talking about the SSN and how it's used to get the credit report. Remember, the credit report is not required to call something an application. The SSN is SO you can get the credit report.

Let's look at this from a different perspective Joker & Truffle. I've notice many of your posts talk about not doing a full underwriting - or at least not having to do it. That made me think "maybe we're talking about different products". Consider this:

If you're thinking through the logic I have presented with a standard 5 year home equity loan in mind, I understand a lot more clearly your comments. For instance, if your bank offers this product with a minimum DTI and a maximum LTV and a minimum credit score, you're thinking "What's to evaluate and underwrite? They meet these conditions and it's a go, but we don't do full underwriting." My response to that is "you've built in an automatic underwriting with these minimums and maximums, so it's not very formal and is a slam dunk one way or the other."

But what if we're discussing someone applying for a 30 year, 2nd market loan where there's lots of different criteria? What if the borrower is unconventional? Step away from the "slam dunk" credit decisions. Does it make sense that the originator needs to conduct a preliminary underwriting, make sure the borrower fits the product, the lender can live by the fees and rates being offered on the GFE and P-TIL, etc., BEFORE those disclosures are given and a product is offered?

That's the angle I've been taking. Maybe that's why we're not seeing eye to eye on this.

no, it does not.
I've explained what we do numerous times and been supported by other posters here too.

Sorry, David, I've got my examiners' definitions and that's what I must live by. So I'm going to step aside and let anyone else that wants to continue this discussion with you go on without my mudding the waters any further.

Till next time we tackle another topic, kindest regards, TR

David, I continue to stand by my stance as well, as an active banker and as the person responsible for RESPA compliance. Regardless of whether it's a 5 year HE or a 30 year mortgage, all I need to 'underwrite' to produce a meaningful GFE is to see if the application is for a product that I have.

If I risk-price, then I would need to pull credit for one reason and that reason would be to establish a meaningful rate to disclose. (granted, if their score is 318, the loan will be denied at that point)

That's all I need to do to produce a meaningful GFE as required by HUD. Once the applicant expresses intent...it's full-steam ahead.

One more thought. People prequalify for loans all the time. They give a stated income, assets, etc...we will calculate a loan amount that they appear to qualify for based on what they state. That is basically the same thing you are saying has to be done before you produce a GFE. A prequalification is not a 'conditional commitment'.

To use the narrow definition that you are attempting to apply to commitments would pretty much mean every loan, whether consumer, business or whatever could never be withdrawn because it's not inconceivable that quick calcs would be made based on conversation, etc., in every instance during discussion phases of a contemplated application for a loan. Heck, I've been in this business for so long, I can pretty much glance at a deal and see if it appears like it will fly or not...it's still not a commitment by someone who is going to sign the line for the bank. I haven't been an LO (thank goodness) in a pile of years

Truffle: You have explained what you do, but you don't support your process by any regulatory reference, FAQ, commentary, etc. You continually just say your examiners buy off on it. Your "examiner definitions" aren't legal or of any authority. I hope you never get a different examining crew that has a different opinion. Examiner definitions don't make something right or my position wrong. You've also said you tell your loan officers to not review anything else given to them (you tell them to throw it in a drawer). Your examiners may not know you do this but it's clearly not what the regulation tells us to do.

I'm not angry at you and this isn't personal. I'm simply trying to support what I believe the regulation requires, what our clients (and the industry) is facing and what will definitely be a stronger position when TRID is here. I've supported everything with regulatory citations. That doesn't mean we have to agree. I enjoy a healthy debate (and I think you do too), so we can end this here. Thanks for your input.

I think the FR quotes I gave make it clear that a bank must do a preliminary underwriting to produce the correct GFE. I don't agree that's all you need to do in some cases (non-typical, unconventional requests).


First, prequalificaitons are exempt from RESPA. Second, you don't have a house, so you can't to LTV. You also have a lot of other variables that can't be answered, so I don't believe this is she same thing.


My position is that you'll have fewer withdrawals - not "never". I know Dan has stayed out of this discussion, but he and I talked on the phone and he basically tells me his bank does what I describe. They have very few withdrawals. I think he said they havde 1 withdrawal and about 14 ANA year-to-date, when we talked. I'll let Dan correct me if I'm wrong.

During the past few weeks, I've had around 10 private messages from BOL posters and a few phone calls saying things like "we agree" or "our examiners have the same opinion as you" but all of them say "we don't want to get involved in this heated debate." That doesn't make me right, but it does point out that this isn't my opinion only. I've appreciated that you and I have had a healthy discussion and I hate to hear that some don't want to dialogue because it wasn't always healthy.

Last, I've never used the word "commitment". In fact, I've said the GFE is NOT a commitment. What I have said is that prior to issuing the GFE, you make a decision - a conditional approval.

I think we've both stated all we can to support our positions on this, so maybe it's best to let this go. I'm happy to continue to dialogue if you'd like. Thanks Joker!

I see no difference in the terms commitment vs approval. They are the same end result, no?

If I approve your loan I have committed to it (conditionally or fully).

FWIW, we, too, have very few bona fide withdrawals. But it's not based on days/disclosures...it's based on whether a commitment to make a loan (conditionally or fully) has been authorized by the LO assigned to the deal.

I think it's a shame that anyone who agrees (one side or the other) isn't chiming in on this...but regardless...as long as I can defend my LAR that's all I worry about.

I agree to let it go as well. I have GOT to get my mind back to the evil thing called DIRT...I mean TRID! !

I don't usually mix it up with "the big guns" as I usually end up feeling stupid or getting my feelings hurt (though unintentional on "the big gun's" part....probably just me wearing feelings on the sleeve) .

However....for now, I have taken a middle of the road approach....which I will NOT outline here. And I will not publicize whose side I'm on. I love you guys and VERY OFTEN need your help on things. I appreciate this discussion and have read every word of it....

Some of us got tired and had no more time to argue.

David.....sent an email to you through BCC....please read.

I see a big difference between the two. I think of "commitment" as something I can't back out of. I think of "conditional approval" as something that has a green light but there's conditions that have to be met before we can say "yes" for sure.

§1024.7(g) states the GFE is not a loan commitment. But RESPA says (and I've shown through numerous quotes from the FR) that the originator is to do a preliminary underwriting of the information available prior to issuing a GFE. Why? My opinion is to issue a conditional approval.


I agree! Those that saw this as an argument were the ones arguing instead of having a healthy discussion for the betterment of all. I received numerous phone calls, private messages and emails from other BOL readers that encouraged me to continue to discuss this but said they wouldn't get involved because of some of the rude and argumentative comments made by others. That's sad to me.

Thanks Truffle. We'll leave this here (unless you want to post again). If nothing else, I hope we can get the regulators to issue a position/clarification on all of this - especially as it relates to TRID (rather than RESPA).

David, RE: Conditional Commitments/Approvals. As an example...Look at this conditional commitment from HUD and particularly general conditions 1 & 2 on page 2. Same concept...all semantics.

http://portal.hud.gov/hudportal/documents/huddoc?id=92800-5b.pdf

Definition:

Assurance of an action, or earmarking of funds, that becomes actual commitment only when one or more specified conditions are fulfilled.

USDA's conditional commitment:

http://forms.sc.egov.usda.gov/efcommon/eFileServices/eForms/RD1980-18.PDF

So yes...commitment and approval are the same thing and both can be conditional.

You know, David, I also received comments about this thread and about how rude you were to me. Whenever I meet posters in person the one comment I consistently receive is that my responses are always kind as well as informative. I try to live my life that way. I choose to have peace in my life and chose not to participate in the diatribes in this thread. You have confirmed my decision - I was not going to comment here again but this rude comment compelled me to do so. And now I go back to my peaceful existence sharing my knowledge and helping people in their daily struggles with banking regulations, hopefully not adding to their confusion. If I could block this thread from my links I would. As it is I try to ignore it and will continue to do so with even more effort from this point on.

Kathleen: First, I've always said and believed that when we read comments online, we miss at least 70% of the communication. All of the non-verbals are missing. Therefore, you can type something and I can read it as harsh or rude (and vice versa), but that isn't necessarily how you intended it.

Second, I'm not sure what I ever said to you here that was rude. I've repeatedly posted that I wanted this to be a healthy discussion - and thought I was doing so. I backed up my comments/opinions with regulatory references to support them, but I don't believe I ever said someone was stupid, called them a liar, etc. I was merely trying to support my understanding and have appreciated those that said they see things differently. Together, we all learn.

In the previous discussion (April), you made a strong comment and then said "I'm done" which slammed the door on all future dialogue. In fact, that string shut down. In this discussion Randy flat out called me a liar (about 1 sentence that he thought I was misinterpreting that required preliminary underwriting prior to issuing a GFE). I came back with over 20 quotes in the FR that state the originator must conduct preliminary underwriting. I didn't mean for that to be argumentative, but supportive of my position. Since then, he has not admitted that this is what the FR states or commented in any way. I see that as rude.

I didn't call you out as one that was being argumentative. You stated (in your 2nd post above) that you didn't have time to argue. We obviously disagree on this position. That's okay. But how does my supporting my position make me rude to you or argumentative?

Either way, I respect you as a professional in this industry. I'm sure you and I will see each other again and I'd like to be able to enjoy your company when we do. If I've offended you, please forgive me.

Interesting. I see your point. I still don't think these terms mean the same thing but understand why you do. And if they do, why you struggle with my position.

If they don't mean the same thing, I hope you can understand my position better.

Bottom line: We need clarification of these terms and this whole issue!

I have to say: i don't see anywhere where Randy called you a liar. I think many people can/do construe it to be rude to state that someone has called someone a "liar", when they have not. I know the post that you are referring to David, and Randy was stating IMHO that you were taking your interpretation of this whole thing and extrapolating it over to the Federal Register as if now the whole thing was a fait accompli, which he took exception to. He did not call you a liar. So, i don't think it's just the one side that is guilty of making this thread "rude"; i think that's why many have stayed away.

(Just stating my opinion; i of course do not speak for Randy.)

Thanks raitchjay. That's how I perceived it - which doesn't make it how Randy meant it. I appreciate you giving me your opinion. In fact, your last post backs up what I was saying to Kathleen - except I'm now the one misreading a comment.

Randy did say "You have not quoted that from the Federal Register" when in fact I had. He said "you have misinterpreted one single sentence in a 86 page Federal Register release" and "HUD did not and has never said that" but the fact is there are dozens of places in the 86 pages that refer to this and HUD has clearly said this is a requirement and I showed that by posting several. I felt it was rude and argumentative to command me to stop saying this ("so I really wish you would quit saying that" and "Please stick with the facts").

I took these statements as rude and argumentative, but you're right that he didn't use the term "liar". Fact is we can't control how someone perceives something but we can say "I'm sorry" and also admit when we're wrong.

If Randy does read this post: Please accept my apology if I offended you. That was never my intentions. As I told Kathleen, I respect you and your opinions and hope we can continue to dialogue on other topics.

David, I'm going to try one more time [because I'm stubborn that way, and it is an interesting and important topic]. In order to have anything close to a commitment or approval, conditional or otherwise, an underwriter must review documentation. Even in the smallest of shops and likely not in the largest of shops, this just isn't going to happen in the short disclosure window and most of us do not have formal pre-approval programs.

Now I really just can't conceive that HMDA would want us to code things as "approved, not accepted" for every loan that gets disclosures just because HUD/Bureau uses a 'term' called 'underwriting' which can mean any number of things. It would skew the facts. We might feel 'good' about the application on the surface, but we simply don't have an approval...not even conditional at this point, unless we've gone through a 'pre-approval' program as noted below. Then, conditional commitments need to be communicated so a borrower would even know what the conditions are.

Anyway, I saw this blurb from a mortgage company and thought it said things fairly well...

A mortgage pre-approval letter is a step above pre-qualification. A pre-approval involves verifying your credit, down payment, employment history, etc. Your loan application is submitted to an underwriter and a decision is made regarding your loan application. If your loan is pre-approved, you are then issued a pre-approval letter. Getting your loan pre-approval allows you to close very quickly when you do find a house. A pre-approval can help you negotiate a better price with the seller, since being pre-approved is very close to having cash in the bank to pay for the house!

XXX [removed name] is a lender. We have underwriters who are staffed in our corporate location. Once we have all necessary documentation from you, we will be able to have an Underwriter issue you a full loan approval, known as a Commitment Letter. This letter will put you ahead of the pack when it comes time for the Seller to review contracts. Let's say they have 10 contracts... it's almost a given that yours will be the only full commitment to lend, while the others are Pre Qualification Letters (garbage) and Pre Approval Letters (decent).

Kinda late to the party, but I'm frustrated enough with TRID to want to think about something else for a bit, so I'll chime in here.

I think there's a big difference between accepting an application and issuing a GFE (i.e. "OK, Mr. Borrower, looks like you've got the 6 pieces of info here that we need to get started with, so let me tell you about the terms we could offer if everything checks out.") and approving or commiting to a loan, conditional or otherwise (i.e. "Hey, Mr. Borrower, we've done all our calculations and you are approved for this loan as long as the appraisal and title work come back OK.")

For this bank and my previous bank both, anything the borrower changed their minds about up to the point of the bank either issuing loan docs or sending out a commitment letter gets stamped "withdrawn." If we've printed closing docs or issued some kind of formal approval/commitment (conditional or firm) and they say "never mind," I code it ANA. So far FRB and FDIC have both been OK with that.

Just my 2 cents. To all those who have gone before me: great discussion!

First, LOVE your "one more time" comment. I, too, think this is interesting and important.

Second, before I answer your question or give you my thoughts, please try to have an open mind and consider this comment (we wrote it in our position paper and I've said it here a few times):
"We acknowledge that lenders can have different procedures. However, your procedures cannot contradict a regulatory requirement. Procedures must conform to the regulation."

Go back and look at the long post I made on Aug 6th - #2032175 - where I quoted 12 places (and referenced many, many more) where it says an originator MUST underwrite a loan PRIOR to issuing a GFE. Specifically, "Every application under the new rule requires preliminary underwriting." and "Every application under the final rule that generates a GFE will require preliminary underwriting in order to come up with an early offer for the borrower." Both of these are on page 68278 of the 11/17/08 FR.

I understand it's a burden. You said "an underwriter must review documentation. Even in the smallest of shops and likely not in the largest of shops, this just isn't going to happen in the short disclosure window ..."
Doesn't the FR make it clear that you must do this?

Maybe we should stop here, but if you see this as a requirement and you do it, then it's not terminology - it's a process (preliminary underwriting) that leads to a decision (conditional approval). If you've done that, then HMDA makes it clear that "withdrawn" is no longer an acceptable action code.


First, it's nota commitment. They are conditions and I think they are generically communicated to the applicants. I've never known a loan officer that doesn't say something like "If everything checks out, this is the terms we can offer you" when they hand a GFE/P-TIL to the applicants. The "conditions" are all of the verifications that will need to occur to get to final underwriting. Do you ever tell an applicant what all of those conditions are? I doubt it. Why would you have to specifically tell the borrower "what the conditions are" under the position I've explained?


I read the blurb and like it. I also don't have any problems with it. However, we're not talking about pre qualifications and pre approvals (those aren't even subject to RESPA.

The blurb also goes on to talk about a Commitment Letter. Once again, I'm not talking about being committed (I"ve continually said issuing GFE is NOT a commitment). I'm talking about a conditional approval. I know we have two different definitions in our heads about what that means.

Give me your feedback on what I've posted and we can continue. Good stuff!

Welcome to the "party" Becca!
I'm a little confused by your first sentence. If you accept an applicant that meets the definition in RESPA, you MUST issue a GFE. You have 3 days. How can there be a difference?

When you said "let me tell you about the terms we could offer if everything checks out." that's exactly what I believe a "conditional approval" is. Read my last post in response to Joker. RESPA requires the originator to underwrite the information available prior to issuing a GFE. Isn't that clear from the FR? If so, then you are to offer a GFE with the terms you could offer based on the decisions made from the underwriting. You aren't "committing" to them (again, RESPA says so), but you are making a decisions to move forward with the process (a conditional approval).


I understand and it's how I would have said to do it several months ago. If you've been reading this string and saw the similar one in March/April, several of our clients have been criticized for this. In my research, I've learned this is going on nation-wide. I've heard about it at the ABA School where I teach and at the ABA Compliance Conference in June. I think it's an evolution that occurred with the issuance of TRID, but the more I've tried to defend my "old" way of thinking, the more I realized the "new" way of thinking is accurate. Hence, we wrote a position paper and published it in our July newsletter. I've heard from lots of examiners that say "we agree".

My hope is that the position paper will work it's way up the regulatory channels to DC and get them to put this to bed with some clarification. Whether I'm right or wrong doesn't matter. What I hope for is clarity on this issue and a stop to some examiners saying this is what is required and some examiners not having a problem with your current process.