Really need some help here:

Our FI relies on the lowest middle credit score of a tri-merge report pulled for each borrower on the loan. What do I report if the credit score relied on belonged to the third or fourth borrower? (we originate just enough multiple borrower loans for this to be a problem)

Will we still be reporting just data from the first two borrowers for HMDA? If so, would I report 8888 (NA) on the LAR for the first borrower and second borrower? The commentary states to report NA only if 1) purchased loan, 2)non natural person, 3)no score relied upon, or 4) No credit decision made.

It seems like reporting NA for both would not be correct, but what other choice is there?

Thank you

I'm just curious about your process. What is that you are relying on that number for...approval purposes, or pricing purposes? We don't risk base price, per se, but we could consider a score in our decision, based on policy guidelines.

If I had Borrower A with a score of 550 and Borrower B with a score of 750, I would think I'd be relying on both in some manner, as far as decisioning is concerned. In other words, I might offset the 550 with the better 750 and approve the loan, so I relied on each, right?

I'd be interested in more commentary to this credit score relied on piece!

But if you only have Borrower A and Borrower B, wouldn't you report 550 for A and 750 for B?

I would, yes! And in the scenario described by the OP, I would report the scores of the first two as they were 'used', even in a positive manner, by the institution. They 'relied' on those scores even to the extent they 'used' the third score for pricing purposes [I assume]


ETA: I MAY HAVE TO CHANGE THIS THEORY. IT APPEARS THAT PERHAPS THE BUREAU DID NOT INTEND FOR THAT DATA POINT TO NECESSARILY RELATE TO THE BORROWER'S BEING REPORTED FOR DEMOG INFO. THAT PERHAPS IT'S A STAND ALONE ENTRY.]

Yeah, my theory on that changed completely this morning! Based on the revisions, we treat the credit score like income and separate it from the applicants. Report what you used for the credit decision and don't try to relate it to Applicants 1, 2, 3, etc.

Demographics tie to the first 2 applicants.

Credit score(s) tie to what underwriting relied on in making the credit decision.

Yippee...

This has been my take to the question posed by the OP.

We have 3 applicants:
1. Primary Applicant, score 750
2. 1st Co-Applicant, score 710
3. 2nd Co-Applicant, score 680

The third applicant had the lowest score. They base their decision on the lowest score. You would report the applicant score and the first co-applicant "NA" if I am interpreting correctly. We rely on the 2nd co-applicants score. So no credit score would be reported on the LAR. Anyone feel differently?

Wouldn't you report 680 and NA since you only relied on the 2nd co-applicant's score?

I would love more discussion here as well...I agree with HMS Pippii. Report 680 and NA. 680 was the scored relied on in making credit decision.

3. Credit score—multiple applicants or borrowers.
In a transaction involving two or more applicants or borrowers for which the financial institution obtains or creates a single credit score, and relies on that credit score in making the credit decision for the transaction, the institution complies with § 1003.4(a)(15) by reporting that credit score for either the applicant or first co-applicant.

Agree. It is not Borrower driven, per se...it's which scores, if any were considered/used driven.

Looks like we can get the score we used and which credit bureau from the risk-based pricing notice based on what I just looked at. It shows the mid-score from the tri-merge which is what we use and it showed the credit bureau name next to it. All 3 scores and credit bureaus showed up on the negative info notice.

Can it be this simple?

That is the process we have in place HMS Pippii. We have automated it to a certain extent to capture and the verification document will be the RBPN.

But in the FIG (Filing Instruction Guide), the fields are titled "Credit Score of Applicant or Borrower" and "Credit Score of Co-applicant or Co-Borrower" which leads one to believe it is borrower driven?

But if you have four applicants/co-borrowers, you would report the primary two scores, if any, that were used/had an impact in your decision. That may not match the first two people on the paperwork tree.

That is where my initial interpretation came from #12. Definitely confusing but perhaps that is just in how we are reading it. It appears the score may not be tied to the individual being reported. For example, you used the score of the third applicant and only report on the first two applicants. The score would just be listed with the first applicant even though it is not tied to that individual.

@ lamello 2001, we had this same question on a different post, and the conclusion was that you would report credit score NA and NA because the LAR doesn't allow you to report for beyond the 1st two applicants.

It's rare, but yes I understand this and we do have this happen too.

Agree with RR Joker - we have to report the score(s) we used in approving/denying the application. That means NA/NA wouldn't work if we relied on applicants 3 and 4 because we'd have a credit we used. The way FIG labeled it appears to have been prior to the revision that says to rely on the credit scores used.

My reading and understanding is that your 1st score field is for the 1st applicant, and the 2nd score field is for the 1st co-applicant (applicant #2)...and that there are no fields for a 2nd co-applicant (3rd applicant) or beyond.
Is that not how you are understanding it HMS Pippii?

I'm reading the 2017 Amendments, and it says on page 198:
Paragraph 4(a)(15)
3. Credit Score - Multiple Applicants or Borrowers.
...a financial institution complies...by reporting a credit score for the applicant that it relied on in making the credit decision, if any, and a credit score for the first co-applicant that it relied on in making the credit decision, if any."
(This also matches what I am seeing online now for 4(a)(15), OI-3

The fact that they specifically say "for the FIRST co-applicant" makes me believe that they are limiting it there. If you have a SECOND co-applicant (applicant #3) or beyond, then their score is not reported, even if it was relied upon.

The way I read that is you use the first applicant you used a score on, and if you used more than one, you report only one more for one of the other applicants you actually relied on. You stop there. So, the term first co-applicant would apply in that sense because you only report up to two used.

I don't believe that in this circumstance you could use 8888 for both applicant and co-applicant because you ultimately did use a credit score in your decision. The CFPB states clearly when you can do that (purchased loan, etc.). Beyond that the other thing you could do is report the applicant who's credit score you used, in other words report co-applicant number 3 on the LAR instead of Co-Applicant #2. That may not be easy with an LOS system.

The commentary (below) almost makes it sound like you could put the credit score under applicant or co-applicant but it doesn't actually spell it out so I'm nervous with going with option 3:

Credit score—multiple applicants or borrowers. In a transaction involving two or
more applicants or borrowers for which the financial institution obtains or creates a single credit
score, and relies on that credit score in making the credit decision for the transaction, the
institution complies with § 1003.4(a)(15) by reporting that credit score for either the applicant or
first co-applicant.

Credit score—multiple applicants or borrowers. In a transaction involving two or
more applicants or borrowers for which the financial institution obtains or creates a single credit
score, and relies on that credit score in making the credit decision for the transaction, the
institution complies with § 1003.4(a)(15) by reporting that credit score for either the applicant or
first co-applicant.


Has anyone wondered or inquired what they mean by a single credit score for 2 or more applicants?

Dan, wouldn't that be the case for banks that use the low middle score as the basis of loan approval?

I don't know.

Take the following scenario into consideration.

The FI has 4 applicants and they get 4 individual credit scores but for underwriting a single score is generated through their risk rating module. So the FI created a single credit score for 2 or more applicants.

Part of my comment didn't post.

So in the above scenario the FI created and used a single credit score for 2 or more applicants so they would report that score either under the applicant or co-applicant's information per previous quoted cites.

Now if no risk module is used and if they used applicant number 4's credit score they did not create or obtain a single score for 2 or more applicants. So do they report applicant number 4's credit score? IMO, no but the way the regulation is written there certainly is a gray area and left to interpretation.

I just posed the question to the CFPB, let's see if we get an answer.

Here is the response from the CFPB which is exactly what it says in the SEG. And then they refer me to GIR.

Hello,

Thank you for contacting the Consumer Financial Protection Bureau with your question regarding the Bureau’s regulations. Please note that the Office of Regulations provides only informal responses to questions concerning the interpretation of specific regulatory provisions of the rules under the interpretive authority of the Bureau and that our response does not constitute an official interpretation or legal advice.

Comment 4(a)(15)-3 to Regulation C, 12 CFR § 1003.4(a)(15)(i), effective January 1, 2018, explains that in a transaction involving two or more applicants or borrowers for whom the financial institution obtains or creates a single credit score and relies on that credit score in making the credit decision for the transaction, the institution complies with Regulation C by reporting that credit score for the applicant and reporting that the requirement is not applicable for the first co-applicant or, at the financial institution’s discretion, by reporting that credit score for the first co-applicant and reporting that the requirement is not applicable for the applicant. Otherwise, a financial institution complies with § 1003.4(a)(15) by reporting a credit score for the applicant that it relied on in making the credit decision, if any, and a credit score for the first co-applicant that it relied on in making the credit decision, if any.

To illustrate, Comment 4(a)(15)-3 provides examples. •Assume a transaction involves one applicant and one co-applicant and that the financial institution obtains or creates two credit scores for the applicant and two credit scores for the co-applicant. Assume further that the financial institution relies on a single credit score that is the lowest, highest, most recent, or average of all of the credit scores obtained or created to make the credit decision for the transaction. The financial institution complies with § 1003.4(a)(15) by reporting that credit score and information about the scoring model used for the applicant and reporting that the requirement is not applicable for the first co-applicant or, at the financial institution’s discretion, by reporting the data for the first co-applicant and reporting that the requirement is not applicable for the applicant.
•Alternatively, assume a transaction involves one applicant and one co-applicant and that the financial institution obtains or creates three credit scores for the applicant and three credit scores for the co-applicant. Assume further that the financial institution relies on the middle credit score for the applicant and the middle credit score for the co-applicant to make the credit decision for the transaction. The financial institution complies with § 1003.4(a)(15) by reporting both the middle score for the applicant and the middle score for the co-applicant.

For general information about the credit score data point, see section 5.22 of the HMDA Small Entity Compliance Guide

You may want to see the FFIEC A Guide to HMDA Reporting, Getting It Right page 73, Appendix E https://www.ffiec.gov/hmda/pdf/2013guide.pdf


The Bureau has published a number of additional resources to help you comply with the Home Mortgage Disclosure Act rule. These resources, including a compliance guide, key dates timeline, institutional coverage charts, and webinars are available on the Bureau’s website. Here, you will also find a link to a webpage dedicated to resources for HMDA filers.

If after reviewing these materials you have a question regarding how to interpret a specific section of a Bureau regulation, you may submit it to us using the form located on our website at https://reginquiries.consumerfinance.gov.

Thanks,

CFPB Office of Regulations

Thank you. I see their responses are still as useless as they have ever been.

Please note that the Office of Regulations provides only informal responses to questions concerning the interpretation of specific regulatory provisions of the rules under the interpretive authority of the Bureau and that our response does not constitute an official interpretation or legal advice.

The Bureau wrote, implemented and enforces the rule. If you cannot give an official interpretation of your own rule then you should not have the authority to enforce it.