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#2190982 - 08/29/18 01:31 PM TBD - HMDA reportable?
buckeyeben Offline
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Joined: Jan 2014
Posts: 33
All,
Second guessing myself on this -- we have a preapproval loan with a TBD address. File was submitted to UW and it was reviewed and approved with conditions. UW is saying since we did not have an address it is not HMDA reportable. I believe it is HMDA reportable and should be coded as Preapproval Request Approved but Not Accepted.

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#2190992 - 08/29/18 02:00 PM Re: TBD - HMDA reportable? buckeyeben
Adam Witmer Offline
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Posts: 2,643
Don't second guess yourself. Preapprovals should never have an address initially. If they did, they would be an application. Some loans are absolutely reportable even though they don't have an address, such as a denied pre-approvals - which will never have an address. You just list NA for the geocoding information.

Assuming your conditions were consistent with those in the reg for preapprovals, I agree that it would be reported as Preapproval Request Approved but Not Accepted.

" In addition to conditions involving the identification of a suitable property and verification that no material change has occurred in the applicant's financial condition or creditworthiness, the written commitment may be subject only to other conditions (unrelated to the financial condition or creditworthiness of the applicant) that the lender ordinarily attaches to a traditional home mortgage application approval. These conditions are limited to conditions such as requiring an acceptable title insurance binder or a certificate indicating clear termite inspection, and, in the case where the applicant plans to use the proceeds from the sale of the applicant's present home to purchase a new home, a settlement statement showing adequate proceeds from the sale of the present home."


Also:
3. Property address—not applicable. A financial institution complies with § 1003.4(a)(9)(i) by reporting that the requirement is not applicable if the property address of the property securing the covered loan is not known. For example, if the property did not have a property address at closing or if the applicant did not provide the property address of the property to the financial institution before the application was denied, withdrawn, or closed for incompleteness, the financial institution complies with § 1003.4(a)(9)(i) by reporting that the requirement is not applicable.
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Adam Witmer, CRCM

All statements are my opinion, not those of my employer, and should not be taken as legal advice.
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#2191604 - 09/04/18 09:20 PM Re: TBD - HMDA reportable? buckeyeben
WABComply Offline
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Not posting an answer but looking for clarification. 1003.2(b)(2) is the definition of preapproval program. The interpretations states 'If a financial institution does not regularly use the procedures specified in § 1003.2(b)(2), but instead considers requests for preapprovals on an ad hoc basis, the financial institution need not treat ad hoc requests as part of a preapproval program for purposes of Regulation C."

If this is the case and the Bank does not offer such program but did receive a preapproval request, the Bank would not report a loan as a Preapproval Request if there is no actual program, until it becomes as application, ie obtaining the subject property, unless the preapproval is denied. Am I understanding this correctly?

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#2191608 - 09/04/18 09:57 PM Re: TBD - HMDA reportable? buckeyeben
David Dickinson Offline
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Central City, NE
I agree. If you don't have a preapproval PROGRAM, you can't have a preapproval request. Instead, it's a prequalification.
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#2191627 - 09/05/18 01:49 PM Re: TBD - HMDA reportable? David Dickinson
WABComply Offline
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Thank you David.

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#2193274 - 09/20/18 09:04 PM Re: TBD - HMDA reportable? buckeyeben
Mel in WA Offline
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Joined: Mar 2013
Posts: 1,197
My bank has a preapproval program and will issue a Mortgage Loan Commitment (MLC) with property listed as "TBD" after underwriting is complete. The MLC clearly lists the conditions.

Based on the information below for Code 2, we were under the impression that all the conditions (including satisfactory appraisal) needed to be satisfied in order for the preapproval to be considered 'approved not accepted'. What typically happens is the applicant will either withdraw the file or if the conditions are not satisfied, it is closed for incompleteness, which means very few preapprovals are coded ANA. Should we be reporting all preapproval ANA regardless of the conditions listed on the MLC?

Code 2 – Application Approved but Not Accepted:
In all cases the applicant is approved (all underwriting and creditworthiness are satisfied).
The approval may only be subject to customary commitment or closing conditions. If ANY
outstanding underwriting or creditworthiness conditions exist the loan cannot be coded
as approved but not accepted. [Commentary to §1003.4(a)(8)(i) #3]

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#2193309 - 09/21/18 12:54 PM Re: TBD - HMDA reportable? buckeyeben
Adam Witmer Offline
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Mel, are the addresses for these apps still TBD?

If so, assuming you made a credit decision approving the preapproval request (as defined in 1003.2(b)(2)) and the application did not originate, you would report is as a preaproval request approved but not accepted (code 8) rather than code 2.

"8. Action taken—preapproval request approved but not accepted. A financial institution reports that the preapproval request was approved but not accepted if the application was a request for a preapproval under a preapproval program as defined in § 1003.2(b)(2) and the institution made a credit decision approving the preapproval request but the application did not result in a covered loan originated by the financial institution."

Keep in mind that the conditional approval rules don't apply to preapprovals when the address is TBD:

"13. Action taken—conditional approvals. If an institution issues an approval other than a commitment pursuant to a preapproval program as defined under § 1003.2(b)(2), and that approval is subject to the applicant meeting certain conditions, the institution reports the action taken as provided below dependent on whether the conditions are solely customary commitment or closing conditions or if the conditions include any underwriting or creditworthiness conditions."

Also, just a reminder that once you have an address, you are no longer in the application stage and would report accordingly - see this thread for a discussion on reporting preapprovals once an address is received: https://www.bankersonline.com/forum/ubbthreads.php/topics/2175748/re-conditional-approvals
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Adam Witmer, CRCM

All statements are my opinion, not those of my employer, and should not be taken as legal advice.
www.compliancecohort.com

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#2194585 - 10/03/18 06:27 PM Re: TBD - HMDA reportable? buckeyeben
Mel in WA Offline
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Joined: Mar 2013
Posts: 1,197
Adam -

Yes, all our preapprovals are TBD and list 'acceptable appraisal' as a condition. Because this is considered a creditworthiness/underwriting condition, it's not a truly approved. I've read it should then be reported as withdrawn??

Your response has me thinking about our preapproval program and wanted to ask this question. If we adjust our preapproval program to NOT satisfy the requirements of 1003.2(b)(2), would that make any requests "ad hoc" and therefore not HMDA reportable - see Commentary below. Have banks been adjusting or eliminating a formal preapproval program based on 1003.2(b)(2) because of the new HMDA reporting rules?

Commentary 1003.2(b)
3. Requests for preapproval. To be a preapproval program as defined in § 1003.2(b)(2), the written commitment issued under the program must result from a comprehensive review of the creditworthiness of the applicant, including such verification of income, resources, and other matters as is typically done by the institution as part of its normal credit evaluation program. In addition to conditions involving the identification of a suitable property and verification that no material change has occurred in the applicant's financial condition or creditworthiness, the written commitment may be subject only to other conditions (unrelated to the financial condition or creditworthiness of the applicant) that the lender ordinarily attaches to a traditional home mortgage application approval. These conditions are limited to conditions such as requiring an acceptable title insurance binder or a certificate indicating clear termite inspection, and, in the case where the applicant plans to use the proceeds from the sale of the applicant's present home to purchase a new home, a settlement statement showing adequate proceeds from the sale of the present home. Regardless of its name, a program that satisfies the definition of a preapproval program in § 1003.2(b)(2) is a preapproval program for purposes of Regulation C. Conversely, a program that a financial institution describes as a “preapproval program” that does not satisfy the requirements of § 1003.2(b)(2) is not a preapproval program for purposes of Regulation C. If a financial institution does not regularly use the procedures specified in § 1003.2(b)(2), but instead considers requests for preapprovals on an ad hoc basis, the financial institution need not treat ad hoc requests as part of a preapproval program for purposes of Regulation C. A financial institution should, however, be generally consistent in following uniform procedures for considering such ad hoc requests.

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#2194604 - 10/03/18 07:48 PM Re: TBD - HMDA reportable? buckeyeben
Luv2run Offline
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I would like to tag in on this topic and ask a question regarding pre approvals as well. We have 2 denied pre approvals to report on the LAR. Our system defaults to TBD for the property street address, but we collect a city and only lend in PA so it defaults to PA. So, technically, we know the county and state.....should we report the codes for county and state on the LAR?
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#2194661 - 10/04/18 01:18 PM Re: TBD - HMDA reportable? buckeyeben
Adam Witmer Offline
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Joined: Sep 2010
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Originally Posted By Luv2run
I would like to tag in on this topic and ask a question regarding pre approvals as well. We have 2 denied pre approvals to report on the LAR. Our system defaults to TBD for the property street address, but we collect a city and only lend in PA so it defaults to PA. So, technically, we know the county and state.....should we report the codes for county and state on the LAR?

I haven't really looked at this much before this question, but unless I missed something I believe you should report NA for all property location data fields if one data field withing the Property Location data point is reported NA. The preamble to the 2017 final rule states the following:

"A financial institution may have incomplete information about the location of a property when it takes final action on an application in certain situations. For example, an applicant may not identify a specific property or census tract, but may provide the financial institution with only the State and county where the applicant intends to purchase a home before the financial institution denies the application.

The Bureau proposed new comments 4(a)(9)(ii)(A)-1, 4(a)(9)(ii)(B)-2, and 4(a)(9)(ii)(C)-2 to clarify that, when reporting an application, the financial institution reports that the property location requirement is not applicable if the State, county, or census tract, respectively, was not known before the application was denied, withdrawn, or closed for incompleteness."


In addition, validity edit Q603 states the following:
"1) The County has a population of greater than 30,000 according to the most recent decennial census and was not reported NA; however Census Tract was reported NA."
_________________________
Adam Witmer, CRCM

All statements are my opinion, not those of my employer, and should not be taken as legal advice.
www.compliancecohort.com

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#2194667 - 10/04/18 02:15 PM Re: TBD - HMDA reportable? buckeyeben
Adam Witmer Offline
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Joined: Sep 2010
Posts: 2,643
Originally Posted By Mel in WA
Adam -

Yes, all our preapprovals are TBD and list 'acceptable appraisal' as a condition. Because this is considered a creditworthiness/underwriting condition, it's not a truly approved. I've read it should then be reported as withdrawn??

Well, the commentary says to report it as approved not accepted. Again, the scenarios of when to report a loan as withdrawn (instead of approved not accepted) found in comment 13 don't apply to requests for preapprovals. (See the citations I provided in post #2193309 above.)

Originally Posted By Mel in WA
Your response has me thinking about our preapproval program and wanted to ask this question. If we adjust our preapproval program to NOT satisfy the requirements of 1003.2(b)(2), would that make any requests "ad hoc" and therefore not HMDA reportable - see Commentary below. Have banks been adjusting or eliminating a formal preapproval program based on 1003.2(b)(2) because of the new HMDA reporting rules?

I have seen a number of banks offer a prequalification program rather than a preapproval program, but haven't seen many hang their hat on the ad hoc rule.
_________________________
Adam Witmer, CRCM

All statements are my opinion, not those of my employer, and should not be taken as legal advice.
www.compliancecohort.com

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#2194705 - 10/04/18 05:00 PM Re: TBD - HMDA reportable? buckeyeben
David Dickinson Offline
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Joined: Nov 2000
Posts: 18,762
Central City, NE
Most of our clients provide prequalifications, not preapprovals. I warn everyone about this "ad hoc" issue. What's it's really mean? How many is ad hoc and how many make it a program? There's too much vagueness here.

FWIW, I agree with Adam that you have an ANA - if they applicants are fully approved but no dwelling is identified.
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#2194977 - 10/09/18 05:16 PM Re: TBD - HMDA reportable? buckeyeben
Mel in WA Offline
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Joined: Mar 2013
Posts: 1,197
Just so I understand. You can never report a preapproval as "withdrawn" since it's not a complete application because a dwelling has not been identified?? In other words, a preapproval that does not become a completed application (origination) with an identified property is reported as either a ANA or decline.

Trying to simplify our preapproval that goes no where process...….

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#2194997 - 10/09/18 06:20 PM Re: TBD - HMDA reportable? Mel in WA
Adam Witmer Offline
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Joined: Sep 2010
Posts: 2,643
Originally Posted By Mel in WA
Just so I understand. You can never report a preapproval as "withdrawn" since it's not a complete application because a dwelling has not been identified??

Correct. There isn't an option for "preapproval withdrawn." The only options are "preapproval approved not accepted" and "preapproval denied."

From the FIG:
1. Loan originated
2. Application approved but not accepted
3. Application denied
4. Application withdrawn by applicant
5. File closed for incompleteness
6. Purchased loan
7. Preapproval request denied
8. Preapproval request approved but not accepted


Originally Posted By Mel in WA
In other words, a preapproval that does not become a completed application (origination) with an identified property is reported as either a ANA or decline.

I wouldn't use the example of (origination) as it wouldn't have to originate to move out of the preapproval status. Once a property is identified, then it becomes a full application.

Also, remember that the FIG says this:
3) If Action Taken equals 3, 4, 5, or 6, then Preapproval must equal 2.
4) If Preapproval equals 1, then Action Taken must equal 1, 2, 7, or 8.


In other words, if you list "preapproval not requested" (i.e. "2") then your action taken must be either 3. Application denied 4. Application withdrawn by applicant 5. File closed for incompleteness or 6. Purchased loan.

However, if you list "preapproval requested" (i.e. "1"), then your action must be either 1. Loan originated 2. Application approved but not accepted 7. Preapproval request denied 8. Preapproval request approved but not accepted.

So to answer your question, a preapproval will never be reported as withdrawn because 1) there isn't an option to report preapproval withdrawn and 2) the FIG won't' allow a withdrawn loan to be coded as preapproval requested. (This is a complex topic and there is a good discussion on this found here: https://www.bankersonline.com/forum/ubbthreads.php/topics/2175750/1)
_________________________
Adam Witmer, CRCM

All statements are my opinion, not those of my employer, and should not be taken as legal advice.
www.compliancecohort.com

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#2195040 - 10/09/18 08:23 PM Re: TBD - HMDA reportable? buckeyeben
Mel in WA Offline
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Joined: Mar 2013
Posts: 1,197
Wow Adam - Thanks for the reply. One thing that's not quite clear...….

I completely follow the logic of using code 1, code 7 or code 8 for a preapproval. However, if the preapproval field equals 1, what is the difference between using "Application approved but not accepted" (code 2) and "Preapproval request approved but not accepted" (code 8)? In other words, shouldn't you only use code 2 for a full application??

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#2195063 - 10/10/18 11:42 AM Re: TBD - HMDA reportable? buckeyeben
Adam Witmer Offline
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Joined: Sep 2010
Posts: 2,643
The difference is whether the property is still TBD (8 - preapproval request approved not accepted) or they had found a property before they withdrew (2 - approved not accepted). In both cases, you would code the preapproval requested field as 1 - preapproval requested.

The strange part with this is that the FIG doesn't allow you to enter the preapproval requested field as 1 (preapproval requested) when the application technically started as a preapproval request, but moved into a full application (with an address) and was eventually denied, withdrawn (before underwriting), or closed for incompleteness. TO ME, this really isn't logical as this means you would be reporting that a preapproval request was not requested for requests that get an address but result in a denial, withdraw, or file closed for incompleteness - even if a preapproval request was actually requested. (Again - see the thread I linked above for a deeper discussion on this.) But again, regulations are rarely "logical" so we just have to follow the guidance we have.
_________________________
Adam Witmer, CRCM

All statements are my opinion, not those of my employer, and should not be taken as legal advice.
www.compliancecohort.com

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