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#2090242 - 07/27/16 07:15 PM Re: Military Lending Act (MLA) TaraTLR
mtngrrl Offline
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Thank you for the reference, CULady.

My operations area is going to flip a lid when they finally hear me that they will have to access DOD or pull a credit report ON the day they get an application. I hope ABA is successful in getting that piece modified/clarified...and soon!
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Lending to Servicemembers (SCRA, JWNDAA), War, Terrorism
#2090265 - 07/27/16 08:38 PM Re: Military Lending Act (MLA) TaraTLR
ItsJustMe Offline
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RR Sarah can you post the citation for what you just explained? We were wondering if we would have to check military status at time of application AND time of funding/obligation/consummation (whatever you want to call it) but it appears that we may be okay if the borrower closes on the loan within 30 days of application. That is good news. But a citation would be helpful for me to read. Thanks!

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#2090272 - 07/27/16 08:54 PM Re: Military Lending Act (MLA) ItsJustMe
RR Sarah Offline
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From 232.5:

(3) Determination and recordkeeping; one-time determination permitted. A creditor who makes a determination regarding the status of a consumer by using one or both of the methods set forth in paragraph (b)(2) of this section shall be deemed to be conclusive with respect to that transaction or account involving consumer credit between the creditor and that consumer, so long as that creditor timely creates and thereafter maintains a record of the information so obtained. A creditor may make the determination described in this paragraph (b), and keep the record of that information obtained at that time, solely at the time—

(i) A consumer initiates the transaction or 30 days prior to that time;

(ii) A consumer applies to establish the account or 30 days prior to that time



What this says to me, in a nutshell, is that you can rely on information you may have already obtained prior to the application as long as it isn't more than 30 days prior to the application. So if the consumer has an established relationship with the bank and you already have a credit report (or verification from DOD database) that is no older than 30 days, you can use that instead of pulling new information.

If my bank has a credit request from a consumer that is back to back (maybe within 90 days of each other), our bank policy would allow us to use a credit report that was pulled within the last 90 days. With a covered borrower under MLA, we would only be able to use that report if it was pulled within the past 30 days.
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#2090287 - 07/27/16 09:17 PM Re: Military Lending Act (MLA) RR Sarah
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I think the 30 day deal is clouding the issue maybe? Mandatory disclosures need to be given before the borrower becomes obligated so naturally, you're going to want to determine their status sometime before then. To me, the most obvious time, if we are going to rely on the credit report, would be when we pull the actual credit report. Sometimes that is the day they apply sometimes it is after that date. Someone correct me if I'm wrong but I haven't seen anywhere where it says we have to make that determination the DAY they apply (unless you are taking the application, approving the loan and disbursing funds on the same day).


§ 232.6 Mandatory loan disclosures.

(a) Required information. With respect to any extension of consumer credit (including any consumer credit originated or extended through the internet) to a covered borrower, a creditor shall provide to the covered borrower the following information before or at the time the borrower becomes obligated on the transaction or establishes an account for the consumer credit:
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#2090288 - 07/27/16 09:30 PM Re: Military Lending Act (MLA) TaraTLR
mtngrrl Offline
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Sarah, I was concerned with regard to the timeframe for establishing military status, which was cited above as:

solely at the time—

(i) A consumer initiates the transaction or 30 days prior to that time;

(ii) A consumer applies to establish the account or 30 days prior to that time

I was not reading this to say that we could determine military status AFTER the application. Then again, what does "initiates the transaction" mean? That's how I came to the conclusion we have to pull DOD status on the date of application--but I'd be happy to be wrong.
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#2090298 - 07/27/16 10:41 PM Re: Military Lending Act (MLA) TaraTLR
CULady Offline
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Mtngrrl - Just curious, if they weren't going to pull it at application, when were they going to pull it?
Last edited by CULady; 07/27/16 10:42 PM. Reason: Typo
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#2090299 - 07/27/16 10:44 PM Re: Military Lending Act (MLA) TaraTLR
mtngrrl Offline
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Within a day or so after the application is received by the loan officer. Based on our workflow, I don't believe the application always makes its way to the credit desk on the same day the application is received (to pull credit). Nor am I comfortable I'll be able to get the lenders to pull a DOD inquiry on the same day. So whether we do a DOD database inquiry or rely on the credit report, I still have a workflow issue.
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#2090303 - 07/27/16 11:26 PM Re: Military Lending Act (MLA) TaraTLR
CULady Offline
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(B) Historic lookback prohibited. At any time after a consumer has entered into a transaction or established an account involving an extension of credit, a creditor (including an assignee) may not, directly or indirectly, obtain any information from any database maintained by the Department to ascertain whether a consumer had been a covered borrower as of the date of that transaction or as of the date that account was established.

I think that if it took a day to go from a teller to a loan officer and then the covered borrower check was made, I believe you would still be covered. This suggests that a "lookback" can not be done "as of the date of that transaction or as of the date that account was established." As long as the loan account isn't opened first, then the check is made, I think you'd be okay.

Unfortunately, it isn't very clear on that. Anyone else want to weigh in on this interpretation?

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#2090336 - 07/28/16 01:19 PM Re: Military Lending Act (MLA) TaraTLR
ItsJustMe Offline
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I think CULady and RR Sarah are spot on. Perhaps what mtngrrl is tripped on with the comment about after the application is having to track open end lines and determining if the borrower is still in the military?

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#2090371 - 07/28/16 03:04 PM Re: Military Lending Act (MLA) TaraTLR
mtngrrl Offline
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I'm tripping on "at application". Anyone want to try to define "at"? Ugh.

I do believe we can verify within a day or two of receiving the app.
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#2090376 - 07/28/16 03:28 PM Re: Military Lending Act (MLA) CULady
Andy_Z Offline
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"established the account" is akin to consummation to me. And it serves no purpose to lookback as the horses are out of the barn so to speak. You can't go back and make disclosures at the point, it's too late.

Is this what you're asking?
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#2090381 - 07/28/16 03:35 PM Re: Military Lending Act (MLA) TaraTLR
mtngrrl Offline
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Andy, I'm concerned about the date on which we need to verify military status in order to take advantage of safe harbor. The requirement is to verify military status at the time:

(ii) A consumer applies to establish the account or 30 days prior to that time

Because there's a firm "30 day" statement, I'm assuming there's a specific date from which you would count back, i.e. the date the app is received. So I've been reading that for new applicants, we would need to determine status no later than the date the application was received.

Sorry if I'm beating a dead horse here, folks...just trying to get it right the first time!

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Last edited by mtngrrl; 07/28/16 03:36 PM.
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#2090388 - 07/28/16 03:42 PM Re: Military Lending Act (MLA) TaraTLR
ItsJustMe Offline
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mtngrrl... maybe explaining our process will help. When someone applies for a loan, we run a credit report at that point. Our CRA will indicate if someone is a covered borrower so we will know immediately at the time they are applying. However, they don't always "consummate" or close the loan the same day they apply. If they close the loan within 30 days of the date of application (which is when we relied on the credit report to determine "covered borrower"), we can rely on that same information without having to determine a second time whether the consumer is covered. It seems that if your process is to determine if a consumer is a covered borrower a couple of days after the date they apply for credit BUT before they become obligated to the loan, you should be covered. Did that help?

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#2090393 - 07/28/16 04:01 PM Re: Military Lending Act (MLA) TaraTLR
Andy_Z Offline
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What ^^^^ said. I believe this is designed that such that you get the app, do the check and proceed. But if the loan takes longer to close, >30 days, you need to refresh the MLA check.

I would also add that if there was any suspicion that the person was going to become a covered borrower between app and closing, the fact that the check was negative at app could be moot. Say He and She apply and the loan qualifies based on one persons income, but it is noted the other person is joining the military and reporting tomorrow so this loan will be POA when closed in a few days, you'd have issues. (Not the best example, but I hope you get the point.)
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#2090398 - 07/28/16 04:13 PM Re: Military Lending Act (MLA) TaraTLR
mtngrrl Offline
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Thank you all very much. Yes, I feel better, and I'll bury the poor horse now.
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#2090410 - 07/28/16 04:30 PM Re: Military Lending Act (MLA) mtngrrl
CULady Offline
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I hadn't even thought about the covered borrower check "expiring" after 30 days. ::HEAD:DESK:: I learn something new everyday from these forums!

Off to email loan operations to get that added to the super long list of procedural changes... crazy

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#2090419 - 07/28/16 05:01 PM Re: Military Lending Act (MLA) TaraTLR
ahou Offline
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Preamble pg 97

The creditor needs to undertake this covered-borrower check only once—namely, only at the time that
(i) a consumer initiates the transaction,
(ii) a consumer applies to establish the account, or
(iii) the creditor develops or processes, with respect to a consumer, a firm offer of credit [prescreen offer]that (among the specific criteria used by the creditor for the offer) includes the status of the consumer as a covered borrower.

The "30 day prior" reference is explained in the preamble as " In order to facilitate a creditor’s process for responding to a consumer’s inquiry about a loan—which could occur days or a few weeks before the consumer’s application for that loan—as well as to reduce the traffic on the MLA Database, § 232.5(b)(3)(i)-(ii) permit the creditor to make a determination and keep a record of the information so obtained 30 days prior to the date of the transaction or the date the consumer applies to establish an account."

The bank is prohibited from checking the status of a consumer in regard to a pre-existing transaction or loan.

Preamble pg 98
Prescreen Offers are the only situations in which the borrower check has a time limitation. (consumer has to respond within 60 days after the bank provides the offer to the consumer)
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#2090463 - 07/28/16 07:48 PM Re: Military Lending Act (MLA) ahou
CULady Offline
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Ah yes! It does cover that. Whew! I was wondering how I had missed that.

323.5(b)(3) Determination and recordkeeping; one-time determination permitted. A creditor who makes a determination regarding the status of a consumer by using one or both of the methods set forth in paragraph (b)(2) of this section shall be deemed to be conclusive with respect to that transaction or account involving consumer credit between the creditor and that consumer, so long as that creditor timely creates and thereafter maintains a record of the information so obtained.

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#2090581 - 07/29/16 03:28 PM Re: Military Lending Act (MLA) TaraTLR
parr04 Offline
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Will the credit report identify military dependents? Looks as if it would be very easy to miss someone who is a spouse, child, or in- laws.

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#2090583 - 07/29/16 03:33 PM Re: Military Lending Act (MLA) parr04
CULady Offline
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Covered in this thread.

Originally Posted By CULady
The DOD will have the records of the dependents. Pay is based on how many dependents you have and the DOD will have to have their name, DOB, SSN, etc. So if the DOD has that info, then it will be available on the credit report and the MLA website.

Again, our responsibility is to use on the of the two methods for safe harbor. If it's not there, due to military member omission, DOD mistake, etc, it's not really our problem AS LONG AS you retain the documentation to prove safe harbor.

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#2092554 - 08/10/16 07:16 PM Re: Military Lending Act (MLA) TaraTLR
Laurlee Offline
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It is rare for us to have an APR that exceeds 36%. We are considering providing the MAPR disclosure on all applicable transactions regardless if the borrower is a covered borrower or not. Has anyone else considered this?

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#2092556 - 08/10/16 07:19 PM Re: Military Lending Act (MLA) TaraTLR
raitchjay Offline
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Just because it's rare for you to have an APR that exceeds 36% (i think it's rare for all banks) does't mean you can't exceed 36% on the MAPR--they aren't calculated identically. A lot easier to get there on the MAPR.
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#2092561 - 08/10/16 07:49 PM Re: Military Lending Act (MLA) TaraTLR
Laurlee Offline
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I do agree to that statement.

The reason I'm considering disclosing the MAPR to all is because we do not always pull new credit reports for loans (e.g CD loans) and we will be charged an additional fee by the Credit Bureau for this check (which we do not pass along to the borrower). So I think we would save time and money by disclosing the MAPR to all applicants on all applicable transactions.

The risk I see with doing this is that we have to make sure our MAPR does not exceed 36% for anyone. However, we could build in our procedures to check the database if MAPR exceeds 36%.

Anyone else considering this approach?

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#2092562 - 08/10/16 07:50 PM Re: Military Lending Act (MLA) TaraTLR
raitchjay Offline
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Have you considered using the DOD database yourself, instead of relying on the credit bureaus? No charge to use it yourself, and it isn't hard. I would have a hard time getting behind the machine gun approach you're suggesting. JMO.
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#2092573 - 08/10/16 08:10 PM Re: Military Lending Act (MLA) Laurlee
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From a marketing standpoint why would you want to quote a higher than the APR rate to a borrower if it wasn't necessary?

Consider just adding credit insurance costs to the finance charge and see what that does to an APR. In an example I used when teaching at the TBA, was a $500 loan for 6 months has an APR going from 24.84% to 39.73%. Your results can vary based on the insurance costs, but you get the idea.
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