I am having issues finding my answer in the reg... We have a loan that a counter offer is being made on after initial disclosures have been sent to the borrower and the situation has changed. As we make the counter offer, can lender credits be changed after the initial disclosures were given if we plan to also change loan programs?

The original request was denied but you approved them under different terms. Once they accepted the new terms approved that would constitute a valid changed circumstance for re-disclosure of the new terms. Provided of course the disclosure is provided within 3 business days of the changed circumstance.

I lean towards agreeing with Dan on this, but if your Lender Credits are decreasing you may have an issue with your LOS recognizing a tolerance violation.

Agree with Dan - Acceptance of the counter offer is your trigger for the changed circumstance.

There's no valid COC though that allows a lender to reduce Lender Credits unless the locking of a previously unlocked loan results in a change to interest rate dependent charges.

The more I think of the issues related to a program change, I really think lenders should deny the application associated with the previous program and start a new application with the program that the file changed into.

I really think lenders should deny the application associated with the previous program

That's what a counteroffer is. They are denying the original request and approving an alternative loan under new terms.

Most lenders, as far as I know, wouldn't change the actual file # though in the LOS, which will create problems in such instances as far as recognizing tolerance cures for lender credits. Similarly, they wouldn't actually issue an AAN to the borrower, they would just continue based on the accepted counteroffer.

Not really a TRID topic, so I don't think I'm supposed to get into it too much on this thread, but my (recently developed) take is a program change goes beyond "new terms."

Most lenders, as far as I know, wouldn't change the actual file # though in the LOS, which will create problems in such instances as far as recognizing tolerance cures for lender credits.

That's a processing issue.

Similarly, they wouldn't actually issue an AAN to the borrower

An accepted counteroffer does not require an AAN, nor does the counteroffer have to be in writing.

I wouldn't want my LOs to change the file #. There's no new application involved. Only a new application would trigger a new file number in our LOS. A file should read like a book. Chapter 1 is the application. Chapter 2 was the denial and counteroffer, etc. It is my understanding that closing out an application and starting over just to be able to avoid cures that may result from changes in lender credits is frowned upon.

No LOS has the 'magic crystal ball' and sometimes a tolerance error that really isn't will be 'recognized' by a LOS. However, I've not seem an occasion where human documentation couldn't remedy that situation should it arise. Having said that, you have to really really know your software at times in order to correct its 'misinterpretation',

It is my understanding that closing out an application and starting over just to be able to avoid cures that may result from changes in lender credits is frowned upon.

I would agree but in this case the applicant doesn't qualify under the terms applied for and a counteroffer was given and apparently accepted. That is not IMO an attempt to avoid cures.

@Truffle. More of an ECOA/HMDA thing, and I know some have got mad for talking about issues outside the topic of the thread, but it wouldn't be to get around a tolerance cure. As Dan stated, the new loan would be a valid COC; however, I also believe there is a strong case to be made for the fact that a program change shouldn't really be a counteroffer as far as new terms, etc. I believe it goes beyond that definition, as from a HMDA standpoint you are denying an application of one "type" of loan and the new loan is a different "type." A counteroffer is an offer to the applicant on different terms or in different amounts than what was applied for. Terms is mentioned as having to do with a different maturity, interest rate, etc.

A counteroffer is a counteroffer - I am not sure where you are getting this. If I apply for a FNMA loan and the bank counteroffers me a portfolio loan because I don't meet FNMA guidelines and I take it - it is a done deal. One application and one closed loan for Reg. B and HMDA. If you have some regulatory support, I sure would like to see it.

As with other things in the Regulatory world, it is just an interpretation of the Regulation that I have developed. Just like I developed an interpretation regarding how to code accepted counteroffers that were subsequently not able to originate. I concluded "Approved not Accepted" as the right code; however, just reading the Regulation/Getting it Right Guide in a vacuum led many others to conclude "Withdrawn" as the correct code in such a scenario. My understanding of the matter has been communicated as the correct method by other examining agencies and is supposed to be clarified by the CFPB in upcoming revisions.

In this case, my interpretation of the Regulation/Guide is that an investor program change is outside the scope of a "counteroffer," as it goes beyond providing the borrower new "terms" or new amounts. It is an entirely different loan program. What if the customer applied for a home improvement loan and offered to secure it with a Certificate of Deposit, and then the lender said, "we can't do that, but if you want to buy a new home, then we can do that for you?" Is that really a "counteroffer" on new "terms?"

Anyways, no need for a big discussion on this, unless anybody just wants to philosophize further on it. I have no additional support or evidence to uphold my position. From what I have read on the matter, it just does not seem that the phrase "terms" includes a whole new loan program (Conv./VA/FHA/RD) or a whole new loan category (Purchase/Refinance/Home Improvement). Terms represent things like going from a 30 yr. fixed to a 5/1 ARM or 10% down to 20% down, etc.