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#2031356 - 08/03/15 05:35 PM Re: HMDA LAR Code for Withdrawn VS Approved, not accep Kathleen O. Blanchard
swiggles Offline
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"1. Why would a bank go to the time and expense of underwriting applications for which it has not received an intent to proceed? That could become exceedingly expensive and is certainly not prudent."

What is time-consuming and expensive about calculating DTI and LTV based upon the information the applicant has provided and information from the credit report? Most software systems do that automatically once the information has been entered. At that point, it's either "this looks good, let's go forward" (conditional approval) or "the numbers don't work, so at this point it a denial."

And then, David's comment.....which is currently my problem.

Quote:
If you don't believe issuing preliminary disclosures requires a decision, ask yourself “when do we make a decision and how do we document when that decision is made?” HMDA requires all information on the LAR to be supported. How would you support the date of “withdrawal” or “approved not accepted” consistently if you don’t have a way to clearly substantiate when that occurs?


In the real world of banking...and I have been in it for 38 years....getting lenders to completely and uniformly document files with complex stuff such as this, is all but impossible. To add to that....I scrub the LAR. And I am one of those "inexperienced" people. I have never been a lender, but I know that underwriting is quite complicated. It's up to me to verify whether the decision WD or ABNA is appropriate. Most of the time, I really have no idea.
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#2031365 - 08/03/15 06:01 PM Re: HMDA LAR Code for Withdrawn VS Approved, not accep Donna Avery, CRCM
Truffle Royale Offline

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swiggles, speaking for my world only, Kathleen's second point answers your question about her first point. Granted, we don't have LOs generating GFEs or underwriting loans.

As Randy said so well back on the first page of this thread:
Quote:
For a withdrawal, I look for a documented express withdrawal of the application by the applicant prior to loan approval.

For approved but not accepted, I follow the guidance in the HMDA FAQs, which includes an approval subject to customary loan-commitment or loan-closing conditions.
We have very few files that are not properly documented. Thankfully, quarterly scrubs bring them to light while they're still fresh and easy to fix.

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#2031376 - 08/03/15 06:30 PM Re: HMDA LAR Code for Withdrawn VS Approved, not accep Donna Avery, CRCM
RR Joker Offline
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Wow. Wouldn't it be just that simple to say all HMDA loans, if passed the 3 day test, will be originated or ANA. End of discussion. Forget RESPA loans...ALL HMDA loans would have to be treated the same way.

Forget that Reg C states:

Action taken date—approved but not accepted. For a loan approved by an institution but not accepted by the applicant, the institution reports any reasonable date, such as the approval date, the deadline for accepting the offer, or the date the file was closed. Although an institution need not choose the same approach for its entire HMDA sub mission, it should be generally consistent (such as by routinely using one approach within a particular division of the institution or for a category of loans).

This right here gives you the OPTION of using the date the file was closed.

Now, if you don't know whether or not the loan has been approved (underwritten fully or not) then you have a documentation (training) problem.

If you don't believe issuing preliminary disclosures requires a decision, ask yourself “when do we make a decision and how do we document when that decision is made?” HMDA requires all information on the LAR to be supported. How would you support the date of “withdrawal” or “approved not accepted” consistently if you don’t have a way to clearly substantiate when that occurs? Examiners could (and many have) cite your bank for incorrect action codes.

Please refer to Reg C above. Any reasonable means. Now...if my file is properly documented (and they are) no freaking examiner is going to get away with citing me over this issue.

ETA: Yes, you will briefly look over a RESPA application to make sure it appears, on the surface to pass...otherwise you would want to go ahead and deny and not waste further time and effort. But to suggest it's even conditionally approved is not at all accurate...neither is it conveyed or suggested to an applicant.
Last edited by RR Joker; 08/03/15 06:33 PM.
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#2031384 - 08/03/15 06:44 PM Re: HMDA LAR Code for Withdrawn VS Approved, not accep Truffle Royale
Kathleen O. Blanchard Offline

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Originally Posted By Truffle Royale
swiggles, speaking for my world only, Kathleen's second point answers your question about her first point. Granted, we don't have LOs generating GFEs or underwriting loans.

As Randy said so well back on the first page of this thread:
Quote:
For a withdrawal, I look for a documented express withdrawal of the application by the applicant prior to loan approval.

For approved but not accepted, I follow the guidance in the HMDA FAQs, which includes an approval subject to customary loan-commitment or loan-closing conditions.
We have very few files that are not properly documented. Thankfully, quarterly scrubs bring them to light while they're still fresh and easy to fix.


Yes.
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The HMDA Academy
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#2031385 - 08/03/15 06:44 PM Re: HMDA LAR Code for Withdrawn VS Approved, not accep RR Joker
Kathleen O. Blanchard Offline

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Originally Posted By RR Joker
Wow. Wouldn't it be just that simple to say all HMDA loans, if passed the 3 day test, will be originated or ANA. End of discussion. Forget RESPA loans...ALL HMDA loans would have to be treated the same way.

Forget that Reg C states:

Action taken date—approved but not accepted. For a loan approved by an institution but not accepted by the applicant, the institution reports any reasonable date, such as the approval date, the deadline for accepting the offer, or the date the file was closed. Although an institution need not choose the same approach for its entire HMDA sub mission, it should be generally consistent (such as by routinely using one approach within a particular division of the institution or for a category of loans).

This right here gives you the OPTION of using the date the file was closed.

Now, if you don't know whether or not the loan has been approved (underwritten fully or not) then you have a documentation (training) problem.

If you don't believe issuing preliminary disclosures requires a decision, ask yourself “when do we make a decision and how do we document when that decision is made?” HMDA requires all information on the LAR to be supported. How would you support the date of “withdrawal” or “approved not accepted” consistently if you don’t have a way to clearly substantiate when that occurs? Examiners could (and many have) cite your bank for incorrect action codes.

Please refer to Reg C above. Any reasonable means. Now...if my file is properly documented (and they are) no freaking examiner is going to get away with citing me over this issue.

ETA: Yes, you will briefly look over a RESPA application to make sure it appears, on the surface to pass...otherwise you would want to go ahead and deny and not waste further time and effort. But to suggest it's even conditionally approved is not at all accurate...neither is it conveyed or suggested to an applicant.

Yes.
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The HMDA Academy
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#2031386 - 08/03/15 06:49 PM Re: HMDA LAR Code for Withdrawn VS Approved, not accep Donna Avery, CRCM
Kathleen O. Blanchard Offline

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And let me give one example. Very high end private banking. An ap might "on the surface" seem not to pass. Further review could uncover all sorts of mitigating factors.

As I said what now seems to be months ago, the brush being used here is too broad. There is no one size fits all.

But to paint the industry one color because some banks can't document files is just too much to take.
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#2031420 - 08/03/15 08:27 PM Re: HMDA LAR Code for Withdrawn VS Approved, not accep Kathleen O. Blanchard
Truffle Royale Offline

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Originally Posted By Kathleen B

But to paint the industry one color because some banks can't document files is just too much to take.


Yes.
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#2031451 - 08/04/15 01:01 AM Re: HMDA LAR Code for Withdrawn VS Approved, not accep Donna Avery, CRCM
David Dickinson Offline
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KB wrote:
Quote:
I have a few comments and then I will retire (again) from this thread.

1. Why would a bank go to the time and expense of underwriting applications for which it has not received an intent to proceed? That could become exceedingly expensive and is certainly not prudent.

2. It is also not prudent to allow those processing an application just received, who are not experienced or authorized to make credit decisions, to determine if an application can go forward within the first three days. Even if there is a low score, there may very well be mitigating factors that an experienced person who will see the application further in the pipeline will notice and factor into the decision.

3. Documenting a file with memos/notes in the system is (or should be if a bank does not do so) standard to memorialize when a customer contacts the bank or when the bank contacts the customer. Calls or emails/letters from the customer withdrawing the application (or any such action) need to be documented...a note written, a copy in the file. The same is true for any communications out to the customer. To not do so is foolish. The bank/financial institution needs to do so to protect itself. Banks I have worked at over the years required this to be done. Properly documented, there will always be "proof" of what happened when. A bank without those processes in place is taking unwarranted risk.

1. Because the regulation requires it as I have quoted and supported numerous times.

2. Why would you allow someone who is "not experienced or authorized to make credit decisions" to issue a GFE that is binding and meaningful?

3. I agree. I'm not sure how this doesn't line up with anything I've said.

As I said in my post 2 above, you don't get to make the regulation fit your procedures. A lender’s procedures must conform to the regulation.
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#2031452 - 08/04/15 01:04 AM Re: HMDA LAR Code for Withdrawn VS Approved, not accep Donna Avery, CRCM
David Dickinson Offline
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Truffle said:
Quote:
Granted, we don't have LOs generating GFEs or underwriting loans.

So you let people that don't know loans issue GFE's? That's the problem that HUD was trying to tackle with the 2010 RESPA rules (and now the CFPB with the TRID rules). So you issue disclosures that really don't mean anything?
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#2031453 - 08/04/15 01:11 AM Re: HMDA LAR Code for Withdrawn VS Approved, not accep Donna Avery, CRCM
David Dickinson Offline
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Joker said:
Quote:
ETA: Yes, you will briefly look over a RESPA application to make sure it appears, on the surface to pass...otherwise you would want to go ahead and deny and not waste further time and effort. But to suggest it's even conditionally approved is not at all accurate...neither is it conveyed or suggested to an applicant.

I can't agree with the statement that it's not a conditional approval. You're not denying it because you decided to approve the application. But that's not a conditional approval? Then what is it?

Joker also said:
Quote:
Action taken date—approved but not accepted. For a loan approved by an institution but not accepted by the applicant, the institution reports any reasonable date, such as the approval date, the deadline for accepting the offer, or the date the file was closed. Although an institution need not choose the same approach for its entire HMDA sub mission, it should be generally consistent (such as by routinely using one approach within a particular division of the institution or for a category of loans).

Do you know when this was written? PRIOR to the 2010 RESPA rules. When RESPA 2010 was written, it lined up a lot of these things dates.
How can you say it's approved for RESPA (when you issue a GFE), but not approved for HMDA?
"The deadline for accepting the offer" lines up with RESPA's intent to proceed.
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#2031454 - 08/04/15 01:30 AM Re: HMDA LAR Code for Withdrawn VS Approved, not accep David Dickinson
Truffle Royale Offline

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Originally Posted By David Dickinson
Truffle said:
Quote:
Granted, we don't have LOs generating GFEs or underwriting loans.

So you let people that don't know loans issue GFE's? That's the problem that HUD was trying to tackle with the 2010 RESPA rules (and now the CFPB with the TRID rules). So you issue disclosures that really don't mean anything?
No and you don't get to take it to that extreme to support your argument, David.
I'll put my processors up against anyone you chose to give a meaningful GFE.
But they are not underwriters and in my shop, only underwriters have the ability to approve or deny an application.

Again, the brush is too big, David.
Further, the section you keep quoting about 'this approach' refers to a single application process, which does not include underwriting prior to GFE delivery.

And I, for one, would like to apologize to the original poster who has yet to get a good answer to their question. From the sounds of this, you'd best pick the side that works best in your organization and be ready to defend it because I'm sure examiners have gotten wind of this and will be looking for it.

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#2031468 - 08/04/15 01:34 PM Re: HMDA LAR Code for Withdrawn VS Approved, not accep Donna Avery, CRCM
swiggles Offline
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From the original poster.

I really have no idea.

The fact that examiners have never criticized, or really deeply scrutinized whether an application is approved but not accepted or withdrawn (maybe I'm just lucky).....because I don't think examiners have any guidelines either.....makes me want to just continue on the same road.....let the lender tell me what it is and go with it......meaning our entire LAR will consist of withdrawn applications. It is completely rare for an applicant to withdraw subsequent to the final underwriter placing a stamp of approval on the ap.

David....if you get a cfpb response, I would sure like to read it.
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#2031471 - 08/04/15 01:40 PM Re: HMDA LAR Code for Withdrawn VS Approved, not accep Donna Avery, CRCM
Kathleen O. Blanchard Offline

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No, people who don't know loans do not issue GFEs. The bank has (should have) set up a process to issue accurate estimates based upon the loan applied for. The bank also has (should have) a process that only authorized staff can deny an application.

If you have clients that can't document files, can issue accurate GFEs, allows anyone to deny (or conditionally approve) a loan, then I feel sorry for those banks.

These are all internal control issues, risk management issues. If management continues to reward staff that does not document loan files, then management gets what it deserves when the regulators have findings. Compliance or internal/external auditors should be checking these things (documentation to support coding) and reporting on errors and weaknesses. That should be followed by training that improves the processes.
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#2031481 - 08/04/15 02:01 PM Re: HMDA LAR Code for Withdrawn VS Approved, not accep David Dickinson
RR Joker Offline
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Originally Posted By David Dickinson
Joker said:
Quote:
ETA: Yes, you will briefly look over a RESPA application to make sure it appears, on the surface to pass...otherwise you would want to go ahead and deny and not waste further time and effort. But to suggest it's even conditionally approved is not at all accurate...neither is it conveyed or suggested to an applicant.

I can't agree with the statement that it's not a conditional approval. You're not denying it because you decided to approve the application. But that's not a conditional approval? Then what is it?

It is an application worth going forward with to determine worthiness.

Joker also said:
Quote:
Action taken date—approved but not accepted. For a loan approved by an institution but not accepted by the applicant, the institution reports any reasonable date, such as the approval date, the deadline for accepting the offer, or the date the file was closed. Although an institution need not choose the same approach for its entire HMDA sub mission, it should be generally consistent (such as by routinely using one approach within a particular division of the institution or for a category of loans).

Do you know when this was written? PRIOR to the 2010 RESPA rules. When RESPA 2010 was written, it lined up a lot of these things dates.
How can you say it's approved for RESPA (when you issue a GFE), but not approved for HMDA?
"The deadline for accepting the offer" lines up with RESPA's intent to proceed.

David, I'm sorry, but you are really off base here. It's not 'approved' for RESPA...The GIR is a guide for HMDA, I don't CARE what RESPA says...but I do believe you are stretching the RESPA intent to the extreme. We have specialized people (small bank) who prepare the disclosures on loans and specialized people who take the application. None of that means it's approved, conditionally or otherwise. It simply means it's worth going forward with. Once verifications are done, a LO or Loan Committee, depending, will make the decision whether or not the loan will be approved or not. Once that happens it will either become 1) denied 2) Approved-not accepted or 3) originated. Before that happens, it will be 'withdrawn' if the customer changes their mind. And in regard to "intent to proceed"...that has not one thing to do with a customer accepting a loan offer or a means to determining an 'action date'. Not one thing.

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#2031670 - 08/04/15 09:23 PM Re: HMDA LAR Code for Withdrawn VS Approved, not accep Truffle Royale
David Dickinson Offline
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Originally Posted By Truffle Royale
Originally Posted By David Dickinson
Truffle said:
Quote:
Granted, we don't have LOs generating GFEs or underwriting loans.

So you let people that don't know loans issue GFE's? That's the problem that HUD was trying to tackle with the 2010 RESPA rules (and now the CFPB with the TRID rules). So you issue disclosures that really don't mean anything?
No and you don't get to take it to that extreme to support your argument, David.
I'll put my processors up against anyone you chose to give a meaningful GFE.
But they are not underwriters and in my shop, only underwriters have the ability to approve or deny an application.

Truffle: I'm not trying to attack you or your people. You said "we don't have LOs generating GFEs or underwriting loans." That made it sound like you had non-lending specialist preparing the GFE's. That's all I was addressing. Whatever you want to call them, the people that prepare the GFE's are supposed to issue disclosures that are meaningful and binding on your institution. They must be accurate - which I believe requires some sort of underwriting - to ensure that what is offered fits the applicant and their request. This seems to be a mix of terminology as much as anything.

Quote:
Again, the brush is too big, David.
Further, the section you keep quoting about 'this approach' refers to a single application process, which does not include underwriting prior to GFE delivery.

Does HUD offer any other type of "approach"? The approach I describe (and outline in my long post) is the ONLY approach HUD provides to properly comply with their regulation.

I remember in a post a few months ago, where you said you don't allow lenders to evaluate any extra information brought in voluntarily by an applicant (you said you tell them to throw it in a drawer). That is clearly outside of the regulation as it says you MUST consider EVERYTHING available. You don't get that option just like you don't get the option of making the regulation fit your procedures. Your procedures must conform to the regulation.

Quote:
And I, for one, would like to apologize to the original poster who has yet to get a good answer to their question. From the sounds of this, you'd best pick the side that works best in your organization and be ready to defend it because I'm sure examiners have gotten wind of this and will be looking for it.

Most certainly the examiners have gotten wind of this. That's what caused me to research this extensively and write our position paper. The OP's question was answered in the first reply by NSFW. Swiggles then agreed and brought up the position paper that we wrote in our July newsletter - which opened up this discussion.
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#2031672 - 08/04/15 09:30 PM Re: HMDA LAR Code for Withdrawn VS Approved, not accep RR Joker
David Dickinson Offline
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Originally Posted By RR Joker
Originally Posted By David Dickinson
Joker said:
Quote:
ETA: Yes, you will briefly look over a RESPA application to make sure it appears, on the surface to pass...otherwise you would want to go ahead and deny and not waste further time and effort. But to suggest it's even conditionally approved is not at all accurate...neither is it conveyed or suggested to an applicant.

I can't agree with the statement that it's not a conditional approval. You're not denying it because you decided to approve the application. But that's not a conditional approval? Then what is it?

It is an application worth going forward with to determine worthiness.

So you issue disclosure saying "we can make this loan on these conditions/fees/rate", but you really don't know if that's true or mean it? You're not certain it's "worthy" at that point?

Quote:
Joker also said:
Quote:
Action taken date—approved but not accepted. For a loan approved by an institution but not accepted by the applicant, the institution reports any reasonable date, such as the approval date, the deadline for accepting the offer, or the date the file was closed. Although an institution need not choose the same approach for its entire HMDA sub mission, it should be generally consistent (such as by routinely using one approach within a particular division of the institution or for a category of loans).

Do you know when this was written? PRIOR to the 2010 RESPA rules. When RESPA 2010 was written, it lined up a lot of these things dates.
How can you say it's approved for RESPA (when you issue a GFE), but not approved for HMDA?
"The deadline for accepting the offer" lines up with RESPA's intent to proceed.

David, I'm sorry, but you are really off base here. It's not 'approved' for RESPA...The GIR is a guide for HMDA, I don't CARE what RESPA says...but I do believe you are stretching the RESPA intent to the extreme. We have specialized people (small bank) who prepare the disclosures on loans and specialized people who take the application. None of that means it's approved, conditionally or otherwise. It simply means it's worth going forward with. Once verifications are done, a LO or Loan Committee, depending, will make the decision whether or not the loan will be approved or not. Once that happens it will either become 1) denied 2) Approved-not accepted or 3) originated. Before that happens, it will be 'withdrawn' if the customer changes their mind. And in regard to "intent to proceed"...that has not one thing to do with a customer accepting a loan offer or a means to determining an 'action date'. Not one thing.

"Worth going forward" is not a legal term, a regulatory term and not a HMDA Action Code. I think you're making the regulation fit your procedure instead of your procedures fitting the regulatory requirements.

I agree (and have stated many times), future verifications can allow you to change your mind from "conditionally approved" to "denied" or making a counter-offer. But based on what you know, the bank is conditionally approving a loan when they issue early disclosures. Why else would they give the disclosures?
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#2031679 - 08/04/15 09:55 PM Re: HMDA LAR Code for Withdrawn VS Approved, not accep Donna Avery, CRCM
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Quote:
That made it sound like you had non-lending specialist preparing the GFE's.
Please, David. It did no such thing. But moving on...

David, when we talk GFEs, extra information is not required nor can it be requested. TRID changes much of that. Assuming that we're talking today's RESPA, not the 10/3 changes, I stand by my statement that we don't look at anything else that comes in nor are we required to. We're giving meaningful GFEs based on the loan product requested and the six pieces of information that trigger an application.

Again I say that the citation you use over and over states in part "...this approach provides the flexibility originators need to properly underwrite,..." but no where does it state that the originator MUST underwrite at this point. That's what we all are saying is our sticking point. If you're going to use RESPA to determine HMDA action codes, then show me where it says I MUST UNDERWRITE prior to delivering the GFE thereby making it impossible for every application I do disclosures on to be marked withdrawn. Frankly, as Randy outlined earlier, there's much more specifically defined in Reg C/HMDA to support my stance than I find in RESPA to support yours.

I'm confident I'm not making regulations fit my procedures at all so I will continue to mark withdrawn if the borrower contacts me to do so prior to an underwriting decision being made, even after disclosures are given. Of course, if the CFPB (not HUD anymore) comes forward with something dictating otherwise, I'll have to change.

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#2031685 - 08/04/15 10:44 PM Re: HMDA LAR Code for Withdrawn VS Approved, not accep Donna Avery, CRCM
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"If the applicant expressly withdraws before satisfying all underwriting or creditworthiness conditions and before the institution denies the application or closes the file for incompleteness, the institution reports the action taken as application withdrawn. If all underwriting and creditworthiness conditions have been met, and the conditions are solely customary commitment or closing conditions and the applicant expressly withdraws before the covered loan is originated, the institution would report the action taken as application approved but not accepted."

Randy has pointed out this FAQ a few times, but I haven't seen anything from David to dispute it. In no way does issuing disclosures qualify as "satisfying all underwriting and credit conditions". Isn't a satisfactory appraisal an underwriting condition? And you can't have that info prior to issuing disclosures.
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#2031701 - 08/05/15 03:10 AM Re: HMDA LAR Code for Withdrawn VS Approved, not accep Donna Avery, CRCM
David Dickinson Offline
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TMatt: What Randy has quoted is from a proposal. It's not here, nor is it final. If it comes - without change - we'll need to evaluate the position we've taken and may be able to use that information to debate with examiners. But you truly want me to argue a position based on a proposed comment?

Truffle: You said "I stand by my statement that we don't look at anything else that comes in nor are we required to. So please tell me what this statement from the 2008 Federal Register means:

None of the information collected by the originator prior to issuing the GFE may later become the basis for a ‘‘changed circumstance’’ upon which a loan originator may offer a revised GFE . . . [Federal Register 11-17-08].
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#2031703 - 08/05/15 03:26 AM Re: HMDA LAR Code for Withdrawn VS Approved, not accep Donna Avery, CRCM
Truffle Royale Offline

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We don't collect anything beyond the six items that make an application, David. If we did, we wouldn't use it as a basis for a 'changed circumstance'. In fact, I'd go so far as to say that the vast majority of any redisclosures we do are at the request of the borrower, not something we as the loan originator initiates.

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#2031727 - 08/05/15 12:38 PM Re: HMDA LAR Code for Withdrawn VS Approved, not accep David Dickinson
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Originally Posted By David Dickinson
TMatt: What Randy has quoted is from a proposal. It's not here, nor is it final. If it comes - without change - we'll need to evaluate the position we've taken and may be able to use that information to debate with examiners. But you truly want me to argue a position based on a proposed comment?


David, I suggest you read the FFIEC FAQs one more time. THe CFPB has said nothing more than what is and has already been there for years. What the CFPB did in their HMDA proposal was to expand on that definition.

Action Taken

Conditional approvals---customary loan-commitment or loan-closing conditions. The commentary indicates that an institution reports a "denial" if an institution approves a loan subject to underwriting conditions (other than customary loan-commitment or loan-closing conditions) and the applicant does not meet them. See comment 4(a)(8)-4. What are customary loan-commitment or loan-closing conditions?

Answer: Customary loan-commitment or loan-closing conditions include clear-title requirements, acceptable property survey, acceptable title insurance binder, clear termite inspection, and, where the applicant plans to use the proceeds from the sale of one home to purchase another, a settlement statement showing adequate proceeds from the sale. See comments 2(b)-3 and 4(a)(8)-4. An applicant's failure to meet one of those conditions, or an analogous condition, causes the application to be coded "approved but not accepted." Customary loan-commitment and loan-closing conditions do not include (1) conditions that constitute a counter-offer, such as a demand for a higher down-payment; (2) underwriting conditions concerning the borrower's creditworthiness, including satisfactory debt-to-income and loan-to-value ratios; or (3) verification or confirmation, in whatever form the lender ordinarily requires, that the borrower meets underwriting conditions concerning borrower creditworthiness.

http://www.ffiec.gov/hmda/faqreg.htm#action
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#2031733 - 08/05/15 01:02 PM Re: HMDA LAR Code for Withdrawn VS Approved, not accep Truffle Royale
#Just Jay Offline
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#Just Jay
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Posts: 14,390
Cheeseheadland
Originally Posted By Truffle Royale
We don't collect anything beyond the six items that make an application, David. If we did, we wouldn't use it as a basis for a 'changed circumstance'. In fact, I'd go so far as to say that the vast majority of any redisclosures we do are at the request of the borrower, not something we as the loan originator initiates.


^^^This^^^
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#2031755 - 08/05/15 01:45 PM Re: HMDA LAR Code for Withdrawn VS Approved, not accep Donna Avery, CRCM
David Dickinson Offline
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David Dickinson
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Central City, NE
Truffle: In an 4/30/15 post on this same topic I posted 4 questions. #3 was:
3. Sometimes applicants bring in verification documents (tax returns, W-2's, etc.) at the time of application. Do loan officers review these documents before preparing the GFE?

You responded:
3. absolutely not. I tell my LOs to stick it in a drawer until the GFE is delivered and intent received.

Here's a link to the discussion if you want to verify:
http://www.bankersonline.com/forum/ubbthreads.php?ubb=showflat&Number=2010268&page=2

In the post you made yesterday afternoon, you stated: "I stand by my statement that we don't look at anything else that comes in nor are we required to." and I'm trying to point out that you MUST look at everything you have avaialbe before issuing the GFE. The RESPA rules state "None of the information collected by the originator prior to issuing the GFE may later become the basis for a ‘‘changed circumstance’’ upon which a loan originator may offer a revised GFE . . ." [Federal Register 11-17-08].
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#2031756 - 08/05/15 01:51 PM Re: HMDA LAR Code for Withdrawn VS Approved, not accep rlcarey
David Dickinson Offline
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David Dickinson
Joined: Nov 2000
Posts: 18,762
Central City, NE
Originally Posted By rlcarey
Originally Posted By David Dickinson
TMatt: What Randy has quoted is from a proposal. It's not here, nor is it final. If it comes - without change - we'll need to evaluate the position we've taken and may be able to use that information to debate with examiners. But you truly want me to argue a position based on a proposed comment?


David, I suggest you read the FFIEC FAQs one more time. THe CFPB has said nothing more than what is and has already been there for years. What the CFPB did in their HMDA proposal was to expand on that definition.

Action Taken

Conditional approvals---customary loan-commitment or loan-closing conditions. The commentary indicates that an institution reports a "denial" if an institution approves a loan subject to underwriting conditions (other than customary loan-commitment or loan-closing conditions) and the applicant does not meet them. See comment 4(a)(8)-4. What are customary loan-commitment or loan-closing conditions?

Answer: Customary loan-commitment or loan-closing conditions include clear-title requirements, acceptable property survey, acceptable title insurance binder, clear termite inspection, and, where the applicant plans to use the proceeds from the sale of one home to purchase another, a settlement statement showing adequate proceeds from the sale. See comments 2(b)-3 and 4(a)(8)-4. An applicant's failure to meet one of those conditions, or an analogous condition, causes the application to be coded "approved but not accepted." Customary loan-commitment and loan-closing conditions do not include (1) conditions that constitute a counter-offer, such as a demand for a higher down-payment; (2) underwriting conditions concerning the borrower's creditworthiness, including satisfactory debt-to-income and loan-to-value ratios; or (3) verification or confirmation, in whatever form the lender ordinarily requires, that the borrower meets underwriting conditions concerning borrower creditworthiness.

http://www.ffiec.gov/hmda/faqreg.htm#action

Randy: First, my apologies for not responding to your questions previously. I hope you can understand that this whole discussion can be very time consuming. Here's my response concerning the FFIEC FAQs and how I interpret them:


This FAQ you quote, uses the term “underwriting conditions” but then separates them into two groups. Let’s separate the terminology used in this FAQ:

1. Loan-commitment / loan–closing conditions
These include things like clear title requirements, surveys, and inspections. They are “property conditions” that are not typically ordered before issuing a GFE/LE. If one of these specific conditions becomes a factor that does not allow the loan to be closed, this HMDA FAQ makes it clear to report the application as “approved not accepted”.

These do NOT include “creditworthiness conditions” (see below) as stated in the last sentence of the FAQ.

2. Creditworthiness conditions
These are applicant conditions and include things such as loan-to-value, debt-to-income, etc. Due to the applications requirements found in RESPA (6 required pieces of information) and the allowance to order a credit report, the lender can review and evaluate these conditions (although unverified) prior to issuing the GFE/LE. For example, RESPA requires the loan amount and an estimate of the value of the property; thus, a lender can determine a loan-to-value.

This FAQ says a lender has made a “conditional approval” subject to loan-commitment or loan-closing conditions. It also implies creditworthiness conditions (LTV, DTI) should have already been completed and therefore a credit decision (approval) was made. That’s also why the Commentary states you deny a request when a loan is approved and then the verification of creditworthiness conditions don’t match what was previously relied upon (via W-2, tax return, appraisal value, etc.). If the consumer’s creditworthiness doesn’t “check out”, the application is coded as a denial.

Now, let’s look at the second FAQ.

Conditional approvals---failure to satisfy creditworthiness conditions. How should a lender code "action taken" where the borrower does not satisfy conditions concerning creditworthiness?

Answer: If a credit decision has not been made and the borrower has expressly withdrawn, use the code for "application withdrawn." That code is not otherwise available. See Appendix A, I.B.1.d. If the condition involves submitting additional information about creditworthiness the lender needs to make a credit decision and the applicant has not responded to a request for the additional information in the time allowed, use the code for "file closed for incompleteness." See Appendix A, I.B.1.e. If the borrower has supplied the information the lender requires for a credit decision and the lender denies the application or extends a counter-offer that the borrower does not accept, use the code for "application denied." If the borrower has satisfied the underwriting conditions of the lender and the lender agrees to extend credit but the loan is not consummated, then use the code for "application approved but not accepted."

For example, if approval is conditioned on a satisfactory appraisal and, despite notice of the need for an appraisal, the applicant declines to obtain an appraisal or does not respond to the lender's notice, then the application should be coded "file closed for incompleteness." If, on the other hand, the applicant obtains an appraisal but the appraisal does not support the assumed loan-to-value ratio and the lender is therefore not willing to extend the loan amount sought, then the lender must use the code for "application denied."

The example given in the last paragraph is outdated (customers can't order their own appraisals anymore), but the point being made is the same. If the lender has not made a decision and the borrower withdraws, it is coded “application withdrawn”. But once a decision is made (even a conditional one) that action code (withdrawn) can’t be used. This FAQ clearly states a withdrawal cannot be made after a conditional approval has been made, regardless of the applicant’s actions. It can either be "denied", “closed for incompleteness”, the lender can issue a counter-offer, or it could be coded "approved, not accepted."
-----------------

I'll admit I haven't studied the comments you post from the HMDA proposal. Why? Because they are only proposed and even if accepted are at least 17 months away from being effective. I will agree with you that there are many things in the HMDA proposal that really aren't changed, but clarifications that I think can be used in today's interpretations. I'll look at those comments more in light of my position.
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#2031760 - 08/05/15 01:58 PM Re: HMDA LAR Code for Withdrawn VS Approved, not accep Donna Avery, CRCM
David Dickinson Offline
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David Dickinson
Joined: Nov 2000
Posts: 18,762
Central City, NE
I suggest that unless somebody has something new to add, maybe we should just table this topic. There's no doubt in my mind that we're all smart people and passionate about our industry. What I'm seeing lately is the same topics being brought up with the same responses. I feel like some of this has become personal and argumentative instead of just a healthy discussion. I'm not trying to run from anything but don't think I have anything more to add.

As I stated before, we have submitted our position paper to the CFPB. IF we get a response, I will let everyone know. I'm not optimistic we will however. We tried to get their input before writing the position paper and basically were told by the HMDA people "we're not RESPA or TRID experts" and we were told by the TRID experts "That's a HMDA question."
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