Skip to content
BOL Conferences
Thread Options
#2202996 - 01/15/19 03:44 PM counter-offers
BAY Offline
100 Club
Joined: Jan 2006
Posts: 147
This subject came up as we were looking at reporting counter-offers for HMDA....
I'm looking for some clarification on what constitutes a counter-offer. It is my understanding that a counter-offer occurs any time a Bank offers a client credit that is different from what the client originally requested. My Mortgage Department disagrees. Here is a scenario...
Appraisal came in low; Processor informs client about low appraisal and discusses what options are available such as accepting lower amount or not accepting lower amount (in which case we would issue a denial), or offering a different amount with MI option, etc… Based on what is presenting verbally, the Client decides what they want to do. Note, we do not have a formal combined adverse action / counter-offer....we provide information verbally and then take action within 90 days of providing the counter. So, if the client were to tell the processor that they wish to accept the lower amount….is this an example of a counter-offer….Compliance thinks that it is because the Bank offered the client terms that are different from what the client originally requested. The Mortgage LOB is contending that the client had options and because the client chose the lower amount that this is basically a client request for credit and not technically a counter- offer….. So they are treating this as though the client changed the loan amount. I am not in agreement and would like some examples on what constitutes a counter-offer.

Return to Top
Lending Compliance
#2202999 - 01/15/19 04:05 PM Re: counter-offers BAY
Truffle Royale Offline

10K Club
Joined: Jul 2003
Posts: 17,395
bank offers options, client accepts any one of the options = counter-offer.

(And be careful that your processor isn't acting as an MLO unless they have a number. MLO test )

Return to Top
#2203000 - 01/15/19 04:07 PM Re: counter-offers BAY
ComplyCycle Offline
Gold Star
ComplyCycle
Joined: Dec 2014
Posts: 454

Return to Top
#2203001 - 01/15/19 04:13 PM Re: counter-offers BAY
Adam Witmer Offline
Power Poster
Joined: Sep 2010
Posts: 2,658
There are a lot of moving parts with counter offers (especially for HMDA) depending on your scenarios and how they apply. That said, counteroffers really aren't clearly defined, but are referenced in both Regulation B and Regulation C (HMDA).

Here's how I view it: If the applicant doesn't qualify for the terms they requested, you (probably) have a counteroffer. Sure, they may have several options, but none of those are what they initially requested (and wanted), and therefore, you are technically giving them a counteroffer, even if your counter is very flexible in how it will look.

Here are just a few citations that support this:

From Regulation C:
"Paragraph 4(a)(7)
1. Covered loan amount—counteroffer. If an applicant accepts a counteroffer for an amount different from the amount for which the applicant applied, the financial institution reports the covered loan amount granted. If an applicant does not accept a counteroffer or fails to respond, the institution reports the amount initially requested."


"9. Action taken—counteroffers. If a financial institution makes a counteroffer to lend on terms different from the applicant's initial request (for example, for a shorter loan maturity, with a different interest rate, or in a different amount) and the applicant...."

"iii. Underwriting or creditworthiness conditions. Underwriting or creditworthiness conditions include, for example: conditions that constitute a counter-offer, such as a demand for a higher down-payment; satisfactory..."

And from Regulation B:
"(c) Adverse action. (1) The term means:

(i) A refusal to grant credit in substantially the amount or on substantially the terms requested in an application unless the creditor makes a counteroffer (to grant credit in a different amount or on other terms) and the applicant uses or expressly accepts the credit offered;"
_________________________
Adam Witmer, CRCM

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

Return to Top
#2203020 - 01/15/19 04:59 PM Re: counter-offers BAY
David Dickinson Offline
10K Club
David Dickinson
Joined: Nov 2000
Posts: 18,762
Central City, NE
I agree you have a counter-offer. The verbal negotiations are easily seen by the LO as a "client request" but what does it matter? As Adam pointed out, HMDA says to report the amount requested OR if you negotiate/counter and it is accepted, you report that amount. If it isn't accepted, the LO would deny the request and you would report the original amount.

[1. Covered loan amount—counteroffer. If an applicant accepts a counteroffer for an amount different from the amount for which the applicant applied, the financial institution reports the covered loan amount granted. If an applicant does not accept a counteroffer or fails to respond, the institution reports the amount initially requested."

Maybe I'm missing something.
_________________________
David Dickinson
http://www.bankerscompliance.com

Return to Top
#2203033 - 01/15/19 05:54 PM Re: counter-offers David Dickinson
Adam Witmer Offline
Power Poster
Joined: Sep 2010
Posts: 2,658
Originally Posted By David Dickinson
Maybe I'm missing something.

I don't think you are missing anything, David. I have seen this argument from lenders before as they (possibly unintentionally) don't want to acknowledge that they took adverse action.

For example, I saw a bank that had a procedure to call refinance customers up when their appraisal came in low and ask them how they wanted to proceed (as there were many hypothetical options for proceeding, as the OP's mortgage team pointed out). 99% of the time, the customer would say to forget it, and the bank would ask for that in writing, getting the "expressly withdrawn" documentation so they could avoid an adverse action notice under Reg B and report this as "withdrawn" for (old) HMDA. When the examiners discovered this, they cited the bank for both Reg B violations (for not sending adverse action notices) as well as Reg C violations for incorrectly coding the applications as withdrawn, when they were, in fact, denials.

BAY: For this reason, I would advocate for a combined denial/counter offer form. It makes things much cleaner in the long run and it sounds like you have a mess on your hands.
_________________________
Adam Witmer, CRCM

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

Return to Top

Moderator:  Andy_Z