I have searched numerous previous threads, but cannot locate much help.
We are a community bank ($175 million)and do not have a formal pre-approval program per HMDA definition.

Management would like to increase consumer loans to business owners where their companies have been approved for a loan. Within the past month, our credit committee has begun approving an auto loan and typically some type of open or closed-end HE loan at the same time they approve the commercial credit, even though the business owner has not applied for these consumer-types of credit. At the closing the commercial lender will inform the business owner that they have been pre-qualified for consumer loans for 1-year and the business owner should contact them if they are interested. I assume this 1-year would time with the annual review of the business credit.

Management has asked me to review a prequalification letter that would include the types of consumer loans (auto, HE, etc.), plus a .25% discount off current rates and all closing costs will be waived subject. The pre-qual is good for 1-year and is subject to current rates and collateral analysis.

Any suggestions on where to begin would be greatly appreciated. If you believe the topic has been discussed before please include key words I should use in the search feature.

Thank you!

Unless you are an attorney your bank's counsel should be reviewing this document, not you.

plus a .25% discount off current rates and all closing costs will be waived subject.

Subject to what?

Thanks Dan for your reply. The word "subject" was a typo on my part as the sentence should have ended simply:... all closing costs will be waived.

Separate from the issue of how the commitment letter would read, Do you see many instances where banks are pre-qual/pre-approving "good" commercial borrowing customers, and offering discounts/better rates/waiving fees, for consumer loans to the owners/principals of the business?

"The pre-qual is good for 1-year and is subject to current rates and collateral analysis."

With credit, a lot can change in a few months. In RE transactions, I believe that credit must be reverified after 90 days to ensure that nothing has changed. One year is going out a very long time. IMHO the time frame should be shortened drastically.

You should also encourage that someone in finance or risk has run the numbers on profitability. Although rates are expected to increase, the bank is giving away .25% (and waiving all closing costs)- when many banks and CR Unions have auto loans less than 2%.

It looks like the bank is desperate for business, or where marketing is the tail wagging the dog.

Has a credit report been pulled on these individuals and is it part of this prequalification action? You should review the Fair Credit Reporting Act and permissible purpose. That is an issue when "approving" people for loans for which they did not apply.

A discussion with counsel knowledgeable in the FCRA would be money well spent.