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#216329 - 08/05/04 11:10 PM
Re: HMDA - PreApproval Programs - Action Taken
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100 Club
Joined: Apr 2003
Posts: 148
Colorado
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quote] if you have it available, you might want to refer to the 12/15/2000 proposed rule for the HMDA changes where the discussion of "requests for preapproval" indicates this covers only those requests that have no property selected. There are also all of the little references to identification of a property, but the clincher is Validity Edit 305, which checks that the MSA/state/county/census tract all equal NA if the action taken is 7 or 8 (the preapproval action codes).
Sorry to come back to this, I received this response from the HMDAHelpLine today:
The identification of a suitable property is irrelevant when determining use of code 1, preapproval requested or code 2, preapproval not requested. The reporting requirement for selecting the request for preapproval codes is based on the instructions on page A-3 of the 2004 HMDA Guide:
Request for Preapproval. Indicate whether the application or loan involved a request for a preapproval of a home purchase loan by entering the applicable code from the following:
Code 1,Preapproval requested; Code 2, Preapproval not requested; Code 3,Not applicable
a. Enter Code 2 if your institution has a covered preapproval program but the applicant does not request a preapproval. b. Enter Code 3 if your institution does not have a preapproval program as defined in section 203.2(b). c. Enter Code 3 for applications or loans for home improvement or refinancing, and for purchased loans.
In an earlier comment the HMDAHelpLine said whether you have a Code 1 or Code 2 is not dependent on whether the customer "requested" a preapproval. Doesn't leave us with much to work with. What Max and dpersful have shared makes sense, but it just doesn't agree with what I'm hearing from the HelpDesk. I know they are not infallible, but...  I'll check back with my FDIC regional folks one more time.....in the meanttime, going crazy
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#216330 - 08/06/04 01:36 AM
Re: HMDA - PreApproval Programs - Action Taken
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10K Club
Joined: Aug 2002
Posts: 47,532
Bloomington, IN
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Popeye, I have always contended that the identification , or non-identification of a property played no role is whether the applicant requests a pre-approval or not.
However, the software doesn't agree although HmdaHelp and my FDIC examiner agree.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.
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#216331 - 08/06/04 03:01 PM
Re: HMDA - PreApproval Programs - Action Taken
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Joined: Jul 2003
Posts: 17,400
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Can we boil out a bottom line here? The HMDA Data Entry System will not allow identification of a property on a preapproval because it will give you the validity error mentioned above. HMDA helpline appears to fluctuate daily with regards to preapprovals with/without specific property. So, given you have a preapproval program how would you code: 1. a preapproval request without a property
2. a preapproval request with a property
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#216332 - 08/12/04 04:40 PM
Re: HMDA - PreApproval Programs - Action Taken
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100 Club
Joined: Apr 2003
Posts: 148
Colorado
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Quote:
Can we boil out a bottom line here? The HMDA Data Entry System will not allow identification of a property on a preapproval because it will give you the validity error mentioned above. HMDA helpline appears to fluctuate daily with regards to preapprovals with/without specific property.
So, given you have a preapproval program how would you code:
1. a preapproval request without a property
2. a preapproval request with a property
We're all getting tired of this thread, and I'm still waiting to run this by my examiner again, but...in both your examples, I would report as a Code 1 - preapproval requested - if the bank has a qualified preapproval program. I don't believe there is another choice.
For Action Taken, if the preapproval has a property location I would report the appropriate Action Code 1 thru 6. However, if the preapproval is approved, does not have a property location and does not result in an originated loan, I think it's a Code 8. If the same deal (no property) is denied it's a Code 7. For both 7 and 8 codes the bank would not receive the validity edits because the property location fields would be NA.
What I THINK it all boils down to is...if a preapproval has a property location and does not result in a closed loan (for whatever reason) you would never use Action codes 7 or 8 - thus avoiding any validity edits.
Maybe I'm reading too much into this, but I based my answer on the FFIEC FAQ:
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Preapproval request approved and accepted, but loan not originated. How should a lender report a preapproval request it has approved where the borrower subsequently identified a property to the lender but a loan was not originated?
Answer: When a borrower who has received a written commitment in response to a preapproval request identifies a property to the lender but the loan fails to originate, in the "type of action" field the lender must record the reason for the failure of the loan to originate --- whether the reason is that the application was later withdrawn, was denied at a later stage, was determined later to be incomplete, or was approved but not accepted. Neither code '7' ("preapproval request denied") nor code '8' ("preapproval request approved but not accepted") should be used, as the application has passed the preapproval stage. In the "request for preapproval" field, code '1' (preapproval was requested) must be used. See Appendix A, I.A.8. & I.B.1.
For example: (1) an applicant submits a request for approval, (2) the request is granted in the form of a written commitment containing only the conditions specified in the regulation, (3) the applicant identifies a property, (4) the appraisal is less than the borrower anticipated and the lender is not willing to lend the amount stated in the commitment letter, and (5) the lender counteroffers with a lower loan amount but the borrower does not accept. In these circumstances, the lender would use code '3' in the "type of action" field ("application denied by financial institution") and code '1' in the "request for preapproval" field ("preapproval was requested").
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