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#2155347 - 11/29/17 07:49 PM Property value on a denied loan
PCBDebbie, CRCM Offline
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Would we report property value on a file that was denied for DTI since we didn't use the value in our decision? What if an appraisal or other type of valuation was not completed?

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#2155365 - 11/29/17 08:36 PM Re: Property value on a denied loan PCBDebbie, CRCM
Banker K, CRCM Offline
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1003.4(a)(28) says to report the value of the property relied on in making the credit decision.

I think that you would report it (even if ESTIMATED value) IF you used it as part of your underwriting process (part of your decision), even if it wasn't detrimental (i.e. not a denial reason).
It just says to report NA if shut down is FCI (File Closed for Incompleteness) or EX-WD (expressly withdrawn)...or if you simply didn't rely on property value in making the decision (at all).

Unfortunately it doesn't have the clear caveat like the LTV does in 4(a)(24) OI #2, that says if you rely on the LTV in making the decision, even if it was not a dispositive factor, you report the LTV used.

My opinion is you would apply the same logic here.
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#2155679 - 12/01/17 02:37 PM Re: Property value on a denied loan PCBDebbie, CRCM
Dan Persfull Online
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Would we report property value on a file that was denied for DTI since we didn't use the value in our decision?


Page 70 of the Small Entity Guide.

The HMDA Rule does not require a Financial Institution to obtain a property valuation or to rely on a property value in making a credit decision. A Financial Institution reports that this data point is not applicable if it does not rely on property value when making the credit decision. Comment 4(a)(28)-4.
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#2155839 - 12/03/17 10:58 PM Re: Property value on a denied loan PCBDebbie, CRCM
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So, if we decline a loan based on property value, then we report it. If property value was a consideration but was not the reason for denial, then we don't report it?


Also is it just the value of the dwelling property reported or would it coincide with the properties used for the combined loan to value?
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#2155842 - 12/04/17 03:50 AM Re: Property value on a denied loan PCBDebbie, CRCM
David Dickinson Offline
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§1003.4(a)(28) states you must report the property value if it was relied up on to make the decision. The Commentary to §1003.4(a)(28) #4 says to report “N/A” if a credit decision was made without relying on a property value. So, if it was a consideration (whether the reasons for denial or not), I think you need to report it.
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#2155998 - 12/05/17 02:10 PM Re: Property value on a denied loan PCBDebbie, CRCM
Dan Persfull Online
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What David said...^^^^^

If the property value was used, even if it was not a reason for denial, it was used (relied on) in the credit decision and it should be reported.

I'll relate to the did we or did we not use a credit score when the credit score disclosure requirements came out. If you didn't use a credit score in the decision then why do you have one as part of your underwriting documentation (consumer report)?

Page 70 of the Small Entity Guide.

The HMDA Rule does not require a Financial Institution to obtain a property valuation or to rely on a property value in making a credit decision.


If you are not using it (the valuation to determine LTV) in the credit decision then why do you have it noted in your underwriting documentation.

In other words if you have the LTV in file be prepared to document and defend it was not relied on in the credit decision, either negatively or positively.
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#2156009 - 12/05/17 02:30 PM Re: Property value on a denied loan PCBDebbie, CRCM
Banker K, CRCM Offline
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...and if you have a TRID file, you will have an estimated value (at least) so especially apply Dan's reasoning to those transactions.
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#2156042 - 12/05/17 04:43 PM Re: Property value on a denied loan PCBDebbie, CRCM
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So are you saying that if we have a property value, we must automatically report it since in theory at some point we always consider property value or only if we actually reached a point where we calculated an LTV for consideration?

Scenario 1 - we get a TRID application that includes property value. The application is denied based on the credit report information. Didn't yet review anything for property value or calculate LTV because the stated amount on the TRID document is an estimate.

versus

Scenario 2 - We get a TRID application that includes property value. Credit report information is fine so we proceed with underwriting. We order an appraisal. Our Credit Analysis department preforms an analysis of income and LTV based on information in the appraisal when received and verifying financial information provided by the applicant. LTV is fine but the applicant doesn't ATR. We decline the loan.

Scenario 1 - do we have to report a property value just because we have an estimated property value?

Scenario 2 - I agree that we used property value and LTV in our decision making, even if it was not the factor for the denial. Property value and LTV would be reported.


Also, this is probably a stupid question, but should the property value reported be the property value (or combined property value) used in the LTV (CLTV) calculation?
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#2156048 - 12/05/17 05:17 PM Re: Property value on a denied loan PCBDebbie, CRCM
Dan Persfull Online
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1. Refer to 1003 Paragraph 4(a)(28) . . .if the institution relies on an appraisal or other valuation for the property in calculating the loan-to-value . . .

2. Yes.
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#2156056 - 12/05/17 06:02 PM Re: Property value on a denied loan Dan Persfull
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Do you think perhaps that, other than withdrawn applications or ones closed for incompleteness, NA would mostly be applicable on preapprovals since the property value would not be relied upon in making those credit decisions?

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#2156098 - 12/05/17 09:09 PM Re: Property value on a denied loan PCBDebbie, CRCM
cgorham Offline
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We don't report preapprovals because we do not have a preapproval program that meets all of the HMDA requirements for reporting, but on our prequals we do still consider a theoretical value as part of our decision. If you evaluate the preapproval assuming a specific purchase price or appraised value, then I would think you report that amount, but I'd be interested to hear if others disagree.

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#2156109 - 12/05/17 09:41 PM Re: Property value on a denied loan PCBDebbie, CRCM
Dan Persfull Online
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NA would mostly be applicable on preapprovals since the property value would not be relied upon in making those credit decisions

Agreed if the preapproval request is reportable.


If you evaluate the preapproval assuming a specific purchase price or appraised value, then I would think you report that amount

Disagree. Without an identified property you are only making an assumption of what the purchase price may be and what the applicant may qualify for based on that purchase price.
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#2156189 - 12/06/17 03:14 PM Re: Property value on a denied loan PCBDebbie, CRCM
cgorham Offline
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I guess that my concern is that, if we are going to report the estimated value on a denial where an appraisal has not been obtained, a preapproval feels very similar. We would have to have some type of estimated value to enter into an AUS or UW worksheet for a credit decision. Even if that is the max value we will lend on, we are still producing the credit decision based on that value. So it seems to me we would be relying on that value when making a credit decision.

It might be a case of poor wording. The data point reads "The value of the property securing the covered loan or, in the case of an application, proposed to secure the covered loan relied on in making the credit decision."

If you read that as: In the case of an application, you look at the proposed property and report the value relied upon for it - then I say it is probably NA because we have no proposed property.

But if you read it as saying: In the case of an application, you look at the value proposed for any property that might secure the loan - then I lean towards reporting the max value supplied by the consumer.

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#2156209 - 12/06/17 03:49 PM Re: Property value on a denied loan PCBDebbie, CRCM
Dan Persfull Online
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denial where an appraisal has not been obtained, a preapproval feels very similar.

How is denying a loan request where you have an identified property similar to a preapproval request where you do not have an identified property?

One of the primary conditions for an approved preapproval request is the identification of a suitable property, therefore without that identification how can you be relying on its value?
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#2156222 - 12/06/17 04:38 PM Re: Property value on a denied loan PCBDebbie, CRCM
cgorham Offline
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How is denying a loan request where you have an identified property similar to a preapproval request where you do not have an identified property?

Because in both situations you are using a value provided by the consumer. On the denial you are relying on their estimated value they provide at application. On a preapproval, you are relying on the target purchase price they provide in the preapproval request.

One of the primary conditions for an approved preapproval request is the identification of a suitable property, therefore without that identification how can you be relying on its value?

I read the reg as saying "the value of the property" proposed. That doesn't necessarily require a property to be identified, it just requires a value to be identified and relied upon regardless of what property it will be tied to.
Maybe it is just us, but we never make any type of credit decision without relying on a value. Some value (estimated value, appraised value, or sales price) has to be entered into our LOS and the AUS for a credit decision to be redered. By doing this, I have a hard time saying we do not rely on that value as part of our credit decision. The nature of a preapproval is that you are approving them up to a certain sales price (which I would call the a value because the commentary explains that the sales price can be the value). If your credit decision is that you will lend up to that specific property value, then I think you are relying on that value when you make the credit decision.

If they never wanted a value on a preappoval, then you would think they would have put an edit in for the value if the street address was NA, but that might be too much to ask. Again, all just my opinion. I don't have to come up with an official procedure because we don't do full HMDA preapprovals.

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#2156260 - 12/06/17 06:08 PM Re: Property value on a denied loan PCBDebbie, CRCM
Everest Offline
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We have been trying to put some guidance around this data field also. For our HMDA loans there will always be either be an estimated/proposed value or an appraised value in the loan file. And the file will have been run through an AUS using one of these values. The file will always reflect a LTV, whether estimated or actual. The loan may not have gone through a full underwriting review though before an action is taken. We do not have a preapproval program to add to this mixture.


CFPB states: For an Application that did not result in a Covered Loan (other than an Application that was withdrawn before a credit decision was made or that was closed for incompleteness), a Financial Institution reports the value of the property proposed to secure the Covered Loan.

So do I understand this correctly?
• Denied files – report either the estimated or appraised value (whichever is in the loan file)
• Approved but not Accepted files – report either the estimated or appraised value
• Files Closed for Incompleteness – report NA – even though there is an estimated or an appraised value in the file
• Withdrawn files - report NA – even though there is an estimated or an appraised value in the file

We are interpreting comment 4(a)(28)-4 to mean if our approval procedures did not include obtaining a value at all. Not a file to file commentary.

I think we are running to an issue when it is constantly stating “relied on in credit decision” and they have no defined credit decision. Is this final credit decision? AUS credit decision?

We send a notice for incompleteness requesting docs and sometimes the docs requested are in addition to docs we have already received and are willing to move forward with the loan. So we made a decision to move forward once, is that a credit decision? It was not deniable.
But if the borrower never sends in the docs and the file is Closed for Incompleteness would we really still report NA (no FINAL credit decision was made but an initial credit decision was made to keep moving forward with the loan)?

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#2156296 - 12/06/17 07:38 PM Re: Property value on a denied loan PCBDebbie, CRCM
Dan Persfull Online
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So do I understand this correctly?
• Denied files – report either the estimated or appraised value (whichever is in the loan file) - Yes, if it was used in the credit decision.
• Approved but not Accepted files – report either the estimated or appraised value - Yes, if it was used in the credit decision.
• Files Closed for Incompleteness – report NA – even though there is an estimated or an appraised value in the file - If a file was closed for incompleteness then there was no credit decision.
• Withdrawn files - report NA – even though there is an estimated or an appraised value in the file - If a file was withdrawn then there was no credit decision. Remember a request can only be coded as withdrawn if the applicant withdraws it before a credit decision is made.
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#2156317 - 12/06/17 08:44 PM Re: Property value on a denied loan PCBDebbie, CRCM
Everest Offline
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Thanks that was very helpful. One last question regarding denied loans.

We have a loan file that in which the appraised value that was included in the loan review. The appraised value was acceptable. However the applicants income was not acceptable. The loan was denied due to insufficient income to debt. The appraised value was considered in the loan review but was not part of the reason for the credit decision. Report value or not.

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#2156391 - 12/07/17 01:52 PM Re: Property value on a denied loan PCBDebbie, CRCM
Dan Persfull Online
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Bloomington, IN
The appraised value was considered in the loan review but was not part of the reason for the credit decision. Report value or not.

It was used in the decision therefore report it.
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#2156473 - 12/07/17 06:00 PM Re: Property value on a denied loan PCBDebbie, CRCM
David Dickinson Offline
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I agree.
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#2156580 - 12/08/17 03:53 PM Re: Property value on a denied loan David Dickinson
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So it seems that procedurally, from a conservative viewpoint unless further guidance is provided, and if the property value was even tangentially considered in the loan decision, the safest time in which to report NA under property value would be if the application was withdrawn, the application was closed for incompleteness, the loan was made under an abundance of caution, or the application was a covered pre-approval application. Would you agree?

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#2156582 - 12/08/17 03:59 PM Re: Property value on a denied loan PCBDebbie, CRCM
Dan Persfull Online
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Abundance of caution does not exempt the loan request from HMDA reporting requirements. If the value was considered in the loan decision it's reportable.
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#2156624 - 12/08/17 06:14 PM Re: Property value on a denied loan PCBDebbie, CRCM
David Dickinson Offline
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The regulation does say "relied upon". If you truly didn't rely upon the collateral, then I believe you don't report it in the value. However, that's a tough argument to make with most examiners.
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#2156637 - 12/08/17 06:42 PM Re: Property value on a denied loan PCBDebbie, CRCM
RVFlyboy Offline
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If you are going to make the "I didn't rely on the value because I was just taking the property as an abundance of caution" you better be darn sure you didn't order an appraisal or valuation on that property (or have one from a prior loan). If you ordered an appraisal or valuation, I think you'd be hard pressed to convince an examiner you didn't place some level of reliance on that value in making your credit decision.
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#2156640 - 12/08/17 06:51 PM Re: Property value on a denied loan David Dickinson
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I was using a strict construction of "relied on" and why I added abundance of caution to the list of NAs. It's possible that real estate taken as an abundance of caution could even be less than the loan amount, skewing the loan-to-value ratio.

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