I need to ask a question about Fair Lending. We generally hold an application open that does not have a property address for 80 days before sending an Incomplete Notice (per our policy the ToBeDetermined apps have to be closed out by 90 days). But this time we had a file that got to about 80 days and the Borrower kept telling the Loan Officer that they were getting a contract tomorrow....so the loan officer left the file open. So now the file has gone over our 90 day Policy and we all of a sudden have a Contract and all his information to proceed with the loan. The Loan Officer has to pull his credit again because the credit report has expired, but when we disclosed for the first time to him I have been told we can not charge him for both of the credit reports we have pulled because the loan file "should have been" closed out like all the other files and those Incomplete files we don't charge any of the other "customers" for the credit report we pulled on them if they are closed out Incomplete.

On one hand I totally get the thought process, however, IMO if the Borrower has chosen to proceed and we kept this file open, then why can't we charge him for both credit reports. Is it because we "should have" closed it out like we do all the others and technically started a New File with New Credit. If we HAD followed procedure and closed out this file we wouldn't have charged him for that original credit report.

I think I've just answered my question in my head and see why I'm confused, but since I've taken the time to type this silly question out, I'll go ahead and get ya'lls opinions!

Since the file was never closed and is now in processing, I don't see any reason why you can't charge the borrower for both credit reports.

Thanks so much for you response. I kept wondering why we couldn't charge for both credit reports but I've been told it's a fair lending issue....???

Just to cover some bases, does policy say credit reports are good for 90 days? Are all stale credit reports resubmitted?
Usually, if there is a policy, it is consistent, non discriminatory and enforced, it should not be an issue. Current credit reports are safety and soundness issues.

If for some reason, when it goes over 90 days, the bank only gets new credit reports for e,g, 1 group, and waives it for another group, that could be an issue. Or if there is no policy, but arbitrarily enforced, that could be an issue.

I guess I am confused by this statement.

We generally hold an application open that does not have a property address for 80 days before sending an Incomplete Notice (per our policy the ToBeDetermined apps have to be closed out by 90 days).

Do you or do you not have a prequal or preapproval program. If you do not and all you are pending is an address, you have to render a decision in 30 days for an incomplete application and not 80 days. If you do have a program, then you owe the applicant an approval or denial or incomplete notice in 30 days of application and not 80 days. You can't take an application and then just let it sit there without taking an action under Regulation B.

If you have a prequal or preapproval program and you have approved their application, you are done - no need to send them a notice of incompleteness. If they come back with the property address, then that triggers TRID and you issue the LE. Why are you not charging for the credit report at the time of the prequal/preapproval in case they never come back?

I agree with that Randy...I have no idea why they don't charge the credit report fee to all applicants. IMO we have always lost tons of money b/c of these procedures.

We do make an initial credit decision within 30 days of application or either an initial approval/denial based upon credit and what they stated (not verified usually at that point), however, if they don't have a property address and it's been initially approved, we allow the application to stay open giving the borrower time to find a property but we must close the file out before 90 days. Our general procedure is to send a NOI stating we need "X" items before we can proceed or the file will be closed for Incompleteness.

I know...I hear what you are already thinking, but this is the way it was set up years ago by Compliance of which I have no say and the only way it will change is if examiners make them change it...know what I mean.

My original concern is how we are losing money over all these files that don't originate because we don't charge for the credit report upfront, and NOW that we have one that has actually produced a property address to proceed and they are telling me because we don't collect for those withdrawn/denied/incomplete files, that we can't charge for both credit reports on this file we are looking to originate. I just don't get it how this is fair lending...I mean, it's a cost of continuing to do business. The Borrower didn't provide a property address before the credit report expired, so we are required to repull their credit in order to proceed.

Thanks for the input!

So the question is then, only if they proceed you charge them for the original credit report.

Seems to be counter productive.

Sorry Randy...I guess it's early...I don't follow?

Do you think it's a fair lending issue to charge for both credit reports on the borrower continuing on since we didn't on the others?

You penalize the people that come back to you and actually get a loan? I am not quite sure that it is a fair lending issue, but it is really counter intuitive to gathering new business. Charge them all or charge none of them for the initial credit report in my mind. It makes it simple. If you do charge those that come back and then once in while - ah we won't charge them for the second one on this customer, that is when you set yourself up for a fair lending issue.

The only way we ever collect monies for a credit report is at closing. So if a loan does not close we don't collect. Those that withdraw we don't collect or even attempt to collect, but if a borrower continues with us and we have to repull credit and he closes his loan, then IMO we should be able to charge him for all credit reports we were required to pull in order (in this instance b/c the original one had expired) to continue business.

Anyways...I guess I'm just beating a dead horse...

Thanks as always for your input Randy.

I agree with Randy that the concern is when you are consistent in charging the fee, and that is probably what your compliance department is getting at. You either need to do it every time or don't do it, so they are probably building a hard line to mitigate against potential fair lending risks.

If all originated loans are charged the credit report fee and all non-originated applications are not charged the fee, then I fail to see what the fair lending issue would be. Whether originated or non-originated - neither is a protected class.

We aren't saying it "is" a fair lending issue.