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#2118105 - 02/14/17 02:13 PM Re: Counteroffer & HMDA gunches
RR Joker Offline
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Actually, I agree! laugh! What I said was a bit 'tongue in cheek' because now I'm compelled to follow it closely! smirk
To be honest, I always thought 'accepts' means just that. Yes, I'm good with that...let's run with it. Then something changes. Maybe in the borrower's control, maybe not. It doesn't feel right to me to then revert back to 'denial'.
Last edited by RR Joker; 02/14/17 02:14 PM.
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#2118113 - 02/14/17 02:41 PM Re: Counteroffer & HMDA gunches
JSD Offline
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Still trying to think outside the box of what we all have been taught - if counteroffer not accepted it is a denial.

I think the biggest issue in this example is that the client accepted the counteroffer and was ready to close the deal.
It was the seller who backed out resulting in the loan not being originated not the client.

Ran this scenario by the FDIC Examiner and they agreed with the response from HMDA Help as the best answer.
Don't think this will be easy to teach lenders and clueless how a system could capture it to be reported as an ABNA.

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#2118116 - 02/14/17 02:48 PM Re: Counteroffer & HMDA gunches
RR Joker Offline
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Well, if a counter offer is NOT accepted, it would and should be a denial.

It's the rest that makes no sense to me to revert back just because something changed down the road to make the deal fall apart.
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#2118128 - 02/14/17 03:46 PM Re: Counteroffer & HMDA gunches
raitchjay Offline
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When the seller backed out, the borrower no longer wanted the loan (by definition)...to me, that's the bottom line. So they didn't "accept" the counteroffer for a loan made by the bank.
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#2118132 - 02/14/17 04:02 PM Re: Counteroffer & HMDA gunches
KTMiteComply Offline
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only if I want to....
We issue a counteroffer along with a Denial Notice...like for example the loan is 120,000 and we counteroffer for 115,000. The borrower states I accept the Counteroffer for 115,000, so we update the information in the system to reflect 115,000 and proceed on with the file. If the borrower comes back a couple weeks later and says hey I have found a better rate with XYZ Bank so I'm withdrawing my loan, then we Withdraw the loan b/c we have changed in the system all the amounts/terms that the counteroffer was made and notated they accepted. The updated information in our system is compliant with the policy for that particular product they have applied for, so we don't code it as "Denied".
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#2118135 - 02/14/17 04:06 PM Re: Counteroffer & HMDA gunches
raitchjay Offline
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I don't agree with that idea. You denied and counter offered. They tentatively 'accept' the counteroffer. Then they change their minds (for whatever reason, whether it's something in the counter offer or outside of it) and go to another lender. They did not (at least in my mind) "accept" your counteroffer, because they are now at a lender down the street getting a loan and not getting a loan with your bank. Maybe i've just had that hard-coded in my head too long.
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#2118142 - 02/14/17 04:21 PM Re: Counteroffer & HMDA KTMiteComply
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Which action taken do your report on the LAR?
Since a credit decision had been made, it should not be withdrawn.

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#2118145 - 02/14/17 04:26 PM Re: Counteroffer & HMDA JSD
KTMiteComply Offline
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only if I want to....
They report it as Withdrawn crazy But I've had these discussions and am in no authority making capacity...so... whistle

Glad to see this thread
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#2118146 - 02/14/17 04:27 PM Re: Counteroffer & HMDA gunches
rlcarey Offline
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The devil’s advocate in me has suddenly raised his ugly head again. I was looking at 1002.9 very carefully.

(a)(1)(iv) 90 days after notifying the applicant of a counteroffer if the applicant does not expressly accept or use the credit offered.

There is an “or” there and not an “and”. So they actually might be able to “accept” and not “use”. The only other use of this term in this section is in the commentary “Expressly withdrawn applications. When an applicant expressly withdraws a credit application”, which is nothing more than the borrower telling you verbally that they are no longer pursuing the application with you. If they can expressly withdraw – can they not expressly accept in the same manner?

I really want to find the original Federal Register on this as I am sure there was probably some discussion. The adverse action notification requirements in 12 CFR 202 did not appear in the original release of Regulation B on 10/22/75 or in the amendments of 12/17/76. In the 06/21/83 announcement from the Fed regarding their five year review of Regulation B which culminated in the significant rewrite of 1985, it indicated that 202.9 existed prior to the 1983 release.

So, the question becomes, when was 202.9 added in its current predecessor form? Anyone have any ideas? It might shed some light on the subject.
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#2118329 - 02/15/17 04:46 PM Re: Counteroffer & HMDA gunches
David Dickinson Offline
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I certainly see your point Randy and understand. I agree with your comparison to "expressly withdrawn." The difference, is once someone expressly withdraws, it's done. If they came back later and wanted to re-open the application, we know that we can start a new application or modify the existing request. Those are addressed in the regulations.

In the scenario discussed, they didn't USE the credit offered. That's a given. The question is what does "expressly accept" mean? Does it mean, "yes" but later a "no" can happen, or does it mean "initially accept" and then it doesn't matter what happens later? I can go either way, but for years, the interpretation has been different. If there's a change in interpretation, we need formal notification/guidance from the regulatory agencies on this.
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#2118423 - 02/15/17 10:53 PM Re: Counteroffer & HMDA gunches
Colorado Girl Offline
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It is the below excerpt from the Help response that really bothers me. It seems to say that things can change, multiple times even, and as long as the applicants 'expressly agree' to the changes along the way, all of the requests prior to that are hidden from the reported data.

"Often times loan applications are treated as continuous as they occur within the same calendar year so terms can changes as they are agreed upon by the applicant and institution. If the applicant is accepting new terms as they are offered by the bank those are then what gets reported. It is when they are counteroffered and the applicant expressly does not accept them that the original terms get reported for the loan or most recently agreed upon."

Wouldn't this effectively hide discriminatory practices? 'We cannot do that, but we might be able to do this. Would you like to proceed?' How hard would it be to say that the applicants said Yes, even if they didn't. Currently, if a denial is masked as a 'withdrawn', the data will show that something might be off if the amount of withdrawn applications is higher than an institutions peers. But if the changes occur prior to what is reported, how would the data show that they were turned down for what they requested? It makes sense to me that the accepted terms be reported when the request is originated - because the applicants needs were met. But if their needs aren't met, how will the data show where the turn downs really are? How will the data show when an institution is serving the housing needs of their communities? How will the data assist public officials in distributing public-sector investment so as to attract private investment to areas where it is needed? If those in need (LMI) are told no but offered something else to proceed, and they say they would like to pursue whatever can be offered, but what is offered doesn't actually meet their needs - how does approved but not accepted data pinpoint where help is needed?

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#2118444 - 02/16/17 02:06 PM Re: Counteroffer & HMDA gunches
RR Joker Offline
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You make a very good point, Colorado Girl.
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#2118609 - 02/16/17 10:23 PM Re: Counteroffer & HMDA gunches
Colorado Girl Offline
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I still see the same rules as we have now, and the same understanding that we're all talking about having forever. And they've added it to the new rules. The only action taken for a counteroffer is originated or denied. There isn't the option for approved but not accepted (unless it is the result of a rescinded transaction).

From the new rules:

Paragraph 4(a)(7).
1. Covered loan amount—counteroffer. If an applicant accepts a counteroffer for an amount different from the amount for which the applicant applied, the financial institution reports the *covered loan amount granted*. If an applicant does not accept a counteroffer or fails to respond, the institution reports the amount initially requested.

9. Action taken—counteroffers. If a financial institution makes a counteroffer to lend on terms different from the applicant’s initial request (for example, for a shorter loan maturity, with a different interest rate, or in a different amount) and the applicant does not accept the counteroffer or fails to respond, the institution reports the action taken as a denial on the original terms requested by the applicant. If the applicant accepts, the financial institution reports the *action taken as covered loan originated*.

13. Action taken—conditional approvals. If an institution issues an approval other than a commitment pursuant to a preapproval program as defined under § 1003.2(b)(2), and that approval is subject to the applicant meeting certain conditions, the institution reports the action taken as provided below dependent on whether the conditions are solely customary commitment
or closing conditions or if the conditions include any underwriting or creditworthiness conditions.

i. Action taken examples. If the approval is *conditioned on satisfying underwriting or creditworthiness conditions* and they are not met, the institution reports the action taken as a denial. If, however, the conditions involve submitting additional information about underwriting or creditworthiness that the institution needs to make the credit decision, and the institution has sent a written notice of incompleteness under Regulation B, 12 CFR 1002.9(c)(2), and the applicant did not respond within the period of time specified in the notice, the institution reports the action taken as file closed for incompleteness. See comment 4(a)(8)(i)-6. If the conditions are solely customary commitment or closing conditions and the conditions are not met, the institution reports the action taken as approved but not accepted. If all the conditions (underwriting, creditworthiness, or customary commitment or closing conditions) are satisfied and the institution agrees to extend credit but the covered loan is not originated, the institution reports the action taken as application approved but not accepted. 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 outstanding conditions are solely customary commitment or closing conditions and the applicant expressly withdraws before the covered loan is originated, the institution reports the action taken as application approved but not accepted.

ii. Customary commitment or closing conditions. Customary commitment or closing conditions include, for example: a clear-title requirement, an acceptable property survey, acceptable title insurance binder, clear termite inspection, a subordination agreement from another lienholder, 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.

***iii. Underwriting or creditworthiness conditions. Underwriting or creditworthiness conditions include, for example: **conditions that constitute a counter-offer**, such as a demand for a higher down-payment; satisfactory debt-to-income or loan-to-value ratios, a determination of need for private mortgage insurance, or a satisfactory appraisal requirement; or verification or confirmation, in whatever form the institution requires, that the applicant meets underwriting conditions concerning applicant creditworthiness, including documentation or verification of income or assets.

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#2118629 - 02/16/17 11:07 PM Re: Counteroffer & HMDA gunches
David Dickinson Offline
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Look at this:

9. Action taken—counteroffers. If a financial institution makes a counteroffer to lend on terms different from the applicant's initial request (for example, for a shorter loan maturity, with a different interest rate, or in a different amount) and the applicant does not accept the counteroffer or fails to respond, the institution reports the action taken as a denial on the original terms requested by the applicant. If the applicant accepts, the financial institution reports the action taken as covered loan originated.

The last part of that clearly says the the counter offer not only has to be INITIALLY accepted, but results in a COVERED LOAN. If the applicant says "yes" but then doesn't close, it's not an accepted counter-offer. Therefore, (reading the first part of this), the applicant did not accept and we're told to report it as a denial.

Isn't this clear and contradict what HMDA Help has told some recently?
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#2118706 - 02/17/17 04:52 PM Re: Counteroffer & HMDA gunches
Dan Persfull Offline
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David, I would agree and I would also emphasize:

the financial institution reports the action taken as covered loan originated

To me that is saying the loan has to be originated to be accepted.
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#2118716 - 02/17/17 05:20 PM Re: Counteroffer & HMDA gunches
David Dickinson Offline
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That's exactly what I'm trying to point out Dan. "Originated" is in the instructions. Anything else is not an accepted counter-offer, according to this.

Those of you that got the reply from HMDAHelp that seemed to contradict this - would you please reply to them with a copy and paste of what I quoted (or what Colorado Girl posted) and see what they have to say? Thanks.
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#2118796 - 02/17/17 08:41 PM Re: Counteroffer & HMDA gunches
RR Joker Offline
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Now see I can read/interpret that completely differently from you guys. To me...there is a big black hole in that directive.

If the applicant does not accept or fails to respond - denied.
If applicant accepts - report origination

Okay...so...where is the instruction for applicant accepted the new terms, but something else happens and it did not originate.

I'm sorry, it's still just not black and white!
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#2118886 - 02/20/17 05:05 PM Re: Counteroffer & HMDA gunches
David Dickinson Offline
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Quote:
where is the instruction for applicant accepted the new terms, but something else happens and it did not originate.

If a loan wasn't originated, then you can't report it as an "originated" loan. That's our point.

You're right that the regulation doesn't address where an applicant initially accepted and then backs out, but you didn't originated and it's clear that you can't report it that way. Therefore, you fall back to denied because they didn't really accept it. They may have initially accepted the counter-offer, but they didn't follow through.

Anything else is not an accepted counter-offer, according to 4(a)(7) #9.

If we are to believe what HMDA Help said, then it contradicts the regulation.
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#2119029 - 02/21/17 09:19 PM Re: Counteroffer & HMDA gunches
RR Joker Offline
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I get what the 'point' is. I'm saying they left a hole. When you say "but they didn't follow through" that simply does not cover all possibilities of the loan ultimately not originating. Because of that fact, arbitrarily reverting back to 'denied' doesn't seem quite kosher to me.
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#2127654 - 04/24/17 03:35 PM Re: Counteroffer & HMDA gunches
RR Joker Offline
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Sure am glad to see they covered the hole in the new clarifications. smirk
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#2127655 - 04/24/17 03:42 PM Re: Counteroffer & HMDA gunches
raitchjay Offline
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OK
I haven't been able to read it yet....what "clarification" did they make (or not make)?
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#2127657 - 04/24/17 03:46 PM Re: Counteroffer & HMDA gunches
RR Joker Offline
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That the counteroffer accepted terms takes the PLACE of the original request. So then, you will report actin taken in relation to the terms of the counteroffer, not the original request.
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#2127658 - 04/24/17 03:49 PM Re: Counteroffer & HMDA gunches
raitchjay Offline
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OK
Whether the loan consummates or not?
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#2127659 - 04/24/17 03:52 PM Re: Counteroffer & HMDA gunches
RR Joker Offline
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Yes.
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#2127841 - 04/25/17 03:12 PM Re: Counteroffer & HMDA gunches
hmdagal Offline
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The tricky thing is that there is no indication what they'll be looking for to confirm that the applicant(s) accepted the counter offer.

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