I've been searching across various forums trying to find something on the topic but have had no luck this far and reviewing Reg B directly hasn't really led to a definitive answer either. I thought this would be an easy one to find something on.

Anyhow, I am wondering how to treat (for purposes of Reg B and HMDA) a mortgage application that was connected to an address where the purchase contract falls through for whatever reason and the borrower(s) then decide that they still want the loan and will be shopping for other properties. Currently how it is being treated here is that the current application is treated as withdrawn (if no credit decision has been made) or approved but not accepted then another application is started in our LOS for the "new loan". I have a bit of trouble thinking that could be right because to be withdrawn, the applicant(s) have to "expressly withdraw" but they really aren't, they still want a loan just on a different property. The other questionable part is on the HMDA side and maybe what might require this be reported as withdrawn and a "new application" started????

Hi Cliff,

It is my understanding that if a borrower or agent for the borrower is communicating that the contract for the subject property was voided prior to the file going to UW, you would treat it as a withdrawal and use the contract release as documentation that supports it. The reg. states an expressed withdrawal is required but this can come in many forms (voided release, email from borrower/agent, if done verbally a memo to the file that specifies the date, reason for withdraw, and the method of communication).

If the loan has been sent to UW at the time of the contract release, the file should be coded as either approved not accepted or closed for incompleteness.

Once the old file is closed, a new application with a new subject property is fine.

Hope this helps.

I can certainly understand doing things that way but that just seems to be a matter of interpretation/policy as to consider those items as an expression of withdrawal. On the other hand, it is much easier from a process/system standpoint to interpret to the opposite and not have to create a new loan. That's really what I'd prefer to do as it is a lot less work.

You can choose to skirt the requirements but if the initial loan is not closed out properly prior to starting a new app you will run into issues when it comes to your HMDA reporting. If the contract on the subject property is no more, it is your bank's duty to accurately report the HMDA data associated with the file. You can't treat a withdrawn/ANA/CFI file as a changed circumstance and continue on under the same loan number.

It appears the way your bank currently handles these files is correct. Just make sure they are including supporting documentation in the file.

3. Application date—reinstated application. If, within the same calendar year, an applicant asks an institution to reinstate a counteroffer that the applicant previously did not accept (or asks the institution to reconsider an application that was denied, withdrawn, or closed for incompleteness), the institution may treat that request as the continuation of the earlier transaction or as a new transaction. If the institution treats the request for reinstatement or reconsideration as a new transaction, it reports the date of the request as the application date.

Hi Rlcarey,

Can you cite this in the reg, please?

While I understand the concept or reinstating an app under the circumstances mentioned in your comment, I don't see how this relates to the treatment of a file that was withdraw/denied/CFI due to a change of the subject property.

Unless they were able to enter back into the contract for the initial subject property.

If the borrower informed the bank that the contract on the property fell through then the file should be treated as a withdrawal, denial, or ANA depending on where in the UW process the loan is. If the borrower comes back in 6 months and wants to try again on a new property, you start a new app and start the process over.

This is how we handle these files at my FI and IMO it's a lot cleaner of a process when it comes to HMDA reporting.

"Can you cite this in the reg, please?

While I understand the concept or reinstating an app under the circumstances mentioned in your comment, I don't see how this relates to the treatment of a file that was withdraw/denied/CFI due to a change of the subject property."

HMDA, Getting it Right OSC - Appendix D - (4)(a)(1)3 page d-7

Thanks Rocky!

I would not recommend closing for incompleteness unless you sent out a NOI and it is expiring. We would treat these as withdrawn, or approved, not accepted applications depending on where it was in the underwriting process.

How could you not treat a new subsequent purchase as a separate application? Are you really going to say that for HMDA, ECOA, and TRID you went for 30 days, the purchase fell out, so you left it open for three more months while they searched for a new property? The file is dispositioned as it pertains to that property. You cant account for ECOA credit decision timeliness, HMDA actions, and fee changes with TRID if you leave it open (and consider a new property a changed circumstance).

Best of luck making that argument... Doing a "lot less work" instead of doing it the right way is a recipe for disaster.

agree - if it was the same property you "could" consider it as a reinstated app... but I would argue against considering a different property the same application.

Hi Darth....I meant CFI as in deny- 7/ Incomplete Credit App, not CFI w/ an NOI. I agree with all points you have made....it seems like a cleaner process to scrap the initial app and start from scratch if/when the borrowers decide to come back.

I was answering the HMDA question and the statement of the fact by ComplyWithMee that you can't continue under the same loan number. My comment was merely to indicate that was an erroneous statement from a HMDA persepctive. I never indicated that it was a proper way to treat it under any other regulation or that it made that much sense operationally. I'm not even sure what loan numbers have to do with HMDA reporting, although they are typically used for originated loans.

As far as substituting a property during a loan application, depending on the timing, I don't really see a problem with it. I have seen my share of it.

Not arguing Randy!!! Just trying to share my opinion on the matter with Cliff. I understand where you were coming from on a HMDA perspective, but didn't know people substituted properties when considering it a reinstated app. Not something we would do but to each their own. We do not permit reinstated apps.

This isn't six month's though, this is today and I still have reservations about whether it would be a withdrawal since they have no intention of not pursuing a loan with us. It has never seen Underwriting which for us would be typical of these cases where they have a property, lose it, then start searching for another so no support for ANA. I can see how denial could be used but I'm not sure what the denial reason might be but I'm sure it could be supported. That said, what actually says that is what needs to be done? I really don't see any requirement to treat this situation this way.



It's only new if you initiate action and essentially close it out. If you don't treat it that way, it is still the same request, the only difference being the property address. I can certainly understand making it policy to tie an application specifically to a property address but I don't know of any requirement to do so from a regulatory perspective, i.e. HMDA app definition doesn't specify an application is specific to the property address, and ECOA is much the same. TRID is the only one that even specifically refers to property address within the definition but even there, that isn't saying that each individual application is tied directly to a property address just simply that having a property address is one of the items that helps establish that you have an application. As for meeting ECOA credit decision timeliness, depending on where it's at in the process, issuing a counteroffer or notice of incompleteness and riding it out from there. If we needed to take further action in the future, we certainly could but for the time being, that would satisfy ECOA. For HMDA, we'd only report if we actually ended up taking action from the counteroffer or NOI I just mentioned. Not that we'd let it sit forever obviously but give it some time to mature before taking any action. For TRID, I'd site the following from 1026.19(e)(3)(iv)(A)(2) in regards to valid change of circumstance events - "Information specific to the consumer or transaction that the creditor relied upon when providing the disclosures required under paragraph (e)(1)(i) of this section and that was inaccurate or changed after the disclosures were provided". Also 1026.19(e)(3)(iv)(C) - "The consumer requests revisions to the credit terms or the settlement that cause an estimated charge to increase."

It seems like this is considered so cut and dry but its far from that IMHO. From my perspective, the property address is really just a characteristic of the overall request for credit, much like loan term, product, rate, etc. Would you take similar action on one of those characteristics changing as you are with property address? For example, switching from a 30 year to a 15 year mortgage at the consumer's request. I would not be looking at such a request at that point and be thinking that now I need to take action and report on HMDA and then start a new application for these changed terms. Why is the property address any different?

If it was six months, three months, heck probably any amount of time passing from us initiating an action then our stance would be the same. I've never really taken the time to consider though how that might work out if it was allowed (I too didn't know that this was even allowable) but I can't see it even happening often and have never personally come across it.

Where in HMDA can you see that it is ok to not take an action on the initial loan request of Property A.

I can't find this at all. Can you cite the passage in the FFIEC HMDA Getting it Right. I am stumped. I actually have a situation that they want to change the loan totally. Meaning, it came in with a full blown TRID (6 pieces) as a purchase of a second home and are ok with changing it to a cash out refinance on an the borrowers primary.

In any situation, in my 25 years of lending, we have always said that a loan goes with a property and switching it out is not acceptable for HMDA or ECOA.

I am looking for reference to the HMDA reg that say it is ok to not report the initial loan due to a property change. I just cant find it.

Thanks

Claire, I'd look at that as more than just an address change and definitely treat as an entirely different request of credit.

Sorry, I missed the part in your other post about it changing from a purchase to a refinance before redirecting you to this thread. I'd say the discussion in this thread is much more relevant to purchase TBDs where a purchase contract falls-out or at least the credit request is what it was before, just a difference of address.