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#2240788 - 08/07/20 03:52 PM DI not collected but should have been
Oly78 Offline
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In doing a post-close compliance review, we discovered that the LO did not collect demographic information on a loan subject to HMDA. Since this is an error (it should have been collected), how do we report this? I assume we cannot complete the form based on visual observation if the applicants were never given the opportunity to provide (or decline to provide it) for themselves. So at this point, do we note the error in the file and move on? What do we indicate on the LAR? Thanks for your help!

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#2240834 - 08/10/20 04:17 PM Re: DI not collected but should have been Oly78
David Dickinson Offline
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It appears that you are stuck, but let's try to find a way out. How did the loan officer take the application?

If it was in person, then the loan officer should have (and still can) complete the DI based on visual observation.

If the application was not taken in person and the applicant didn't complete the "I do not wish" boxes, then you report the appropriate codes for "info not provided."

If you're saying the LO never gave the applicant and application with the DI collection form, then you're stuck. I wish there was a Code 99 for "we messed up and didn't get it", but there isn't. If this is your case, note the error. I would put "Info not provided" on the LAR, although that's technically not correct. However, I don't have a better solution.
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#2241220 - 08/18/20 09:22 PM Re: DI not collected but should have been Oly78
comply1 Offline
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Wanting to piggyback on the demographic reporting, but with another situation. Looking for opinions on reporting the initial demographic information collected at application vs reporting the demographic information from the final 1003 signed at closing. In a situation where there is a difference from the initial vs the final which one do you chose to report and why?

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#2241221 - 08/18/20 09:24 PM Re: DI not collected but should have been Oly78
rlcarey Online
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First question is that since the borrower usually completes the initial 1003 and the lender completes the final 1003 for signature - how the heck does it change?
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#2241246 - 08/19/20 02:27 PM Re: DI not collected but should have been Oly78
comply1 Offline
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That is a question I have been asking for over a year now since I have actively been participating in testing/monitoring of a specific LOBs HMDA transactions. The response I have received from multiple people from the LOB is that the majority of the loan applications are received via an online platform submitted directly from the borrower. A lot of times the borrower may not completely fill out the DMI on the online application and then at closing marks information (for example maybe they only provided sex, and then at closing provides the remaining ethnicity and race). Or another situation that has occurred has been they have provided all the information, but then at closing they change what they marked. I've asked the LOB if they have ever asked lenders as to why the borrowers may have changed the info so I could determine if maybe the online system is confusing and people are marking the wrong box by mistake and are realizing it at closing...but so far no one has been able to provide clear answers as to exactly why there is a change, or even provide relevant information to help identify potential root cause. So, since we have these changes between the initial and the final I am trying to gather information to provide the best way to report DMI when there is a difference.

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#2241249 - 08/19/20 02:44 PM Re: DI not collected but should have been Oly78
raitchjay Offline
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I see nothing in Reg. C that advises lenders to give applicants 2 cracks at the DI....i'd be revising your procedures.
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#2241250 - 08/19/20 02:45 PM Re: DI not collected but should have been Oly78
Skittles Offline
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Could the online system 'default' to certain information (non-hispanic, white, male) if not completed? It's been some time - but I have seen that before.
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#2241307 - 08/19/20 09:11 PM Re: DI not collected but should have been raitchjay
comply1 Offline
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We are not asking them the questions 2x, thus giving them a crack at the reporting twice. In both examples the DMI is provided by the borrower on the initial application and recorded as the borrower selected, but at closing the borrower on their own behalf marks/changes the final 1003 before they sign. In my example of they only provided sex in the online application, and then later provided the ethnicity and race; the initial DI would reflect the appropriate code for sex based upon what they selected and since they didn't provide anything for ethnicity and race the system will populate the form with "Information not provided by applicant" for each. At closing we have borrowers who will check a box(s) for ethnicity & race on the final 1003 on their own. Whether to report the initial recorded answers of Information not provided by applicant on ethnicity and race from the initial or go with their updated answers is what we are trying to determine "best practice". I can see the point to go ahead and report the final 1003 information that was updated by the borrower because that provides more information for reporting/analysis, but in order to do so would be a manual correction unfortunately in our situation. The LOS pushes information for HMDA reporting based upon the initial data collected, and there is no option for them to make a change. So, that is why I am hoping to gather opinions...to evaluate pros/cons.

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#2241308 - 08/19/20 09:15 PM Re: DI not collected but should have been Skittles
comply1 Offline
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Originally Posted by Skittles
Could the online system 'default' to certain information (non-hispanic, white, male) if not completed? It's been some time - but I have seen that before.


Not from what I can see. I have tested the online system, and all DMI fields were blank once I entered that phase of the process and I was free to select any option; I tested to make sure it wasn't limiting/restricting the applicant on selections and it wasn't. (Thank goodness!)

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#2241310 - 08/19/20 09:26 PM Re: DI not collected but should have been Oly78
raitchjay Offline
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How is that not letting them have a go at the DI twice? You give them an application AT application (ETA: whether it be online or paper) that they fill out.....then you give them ANOTHER application at closing where they are able to again answer DI questions.......what am i not understanding? That sure seems like they have 2 chances to report their DI. If you want the final application (i guess it's a secondary market thing?), then i would either as Randy said have the lender fill it out, or if you're determined to let the borrowers do it, instruct them to leave the DI section alone, since they already filled it out once. Perhaps i'm missing the boat, but that's how i see it.
Last edited by raitchjay; 08/19/20 09:31 PM.
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#2241311 - 08/19/20 09:40 PM Re: DI not collected but should have been Oly78
raitchjay Offline
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Everything in Appendix B references gathering the DI at the time of application. You may be calling the final form an "application", but that's just semantics in my mind. They can only apply once--and obviously they applied BEFORE you approved them for the loan. So despite the fact that they have an "application" in front of them, they are no longer "applying" for a loan when filling out the final "application".

Just trying to explain why i see this the way i do.

But i guess regardless.....i would be reporting the DI based on what the original (real) application had. Period. My opinion.
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#2241317 - 08/19/20 10:11 PM Re: DI not collected but should have been raitchjay
comply1 Offline
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Originally Posted by raitchjay
Everything in Appendix B references gathering the DI at the time of application. You may be calling the final form an "application", but that's just semantics in my mind. They can only apply once--and obviously they applied BEFORE you approved them for the loan. So despite the fact that they have an "application" in front of them, they are no longer "applying" for a loan when filling out the final "application".

Just trying to explain why i see this the way i do.

But i guess regardless.....i would be reporting the DI based on what the original (real) application had. Period. My opinion.


Thanks for your responses. I totally agree that you collect DMI at the time of application, and understand the logic and total sense it makes for our LOS to be pulling from the original application. The final 1003 has to be signed by the borrower, thus the paper is in front of them displaying the information for them to see/read...there is nothing I can change about that. Any file where the initial 1003 DMI data (which matches the LAR) is different than the final 1003 are being called out and questioned as to why we chose one over the other. I know we all just love the what should be simple processes that somehow evolve into something other than that.

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#2241341 - 08/20/20 03:33 PM Re: DI not collected but should have been Oly78
Truffle Royale Offline

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It would seem the simple solution to the problem is to instruct the LO/closer to tell the borrower not to change or add anything on the final 1003 signed at closing. As a closer I had to tell borrowers they couldn't change the note, mortgage, etc., so why not add the 1003 to that list for your closers?

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#2241350 - 08/20/20 04:27 PM Re: DI not collected but should have been Oly78
swiggles Offline
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The process turned complicated by investors and others insisting on a signed "final application" which is not required by anyone but them. I have never understood the necessity of it and what it adds to the file. Is it.....the borrowers acknowledging that the loan package they are preparing to sign is what they wanted?.....the loan documents prove that. If anyone knows a reason why this ridiculousness is necessary, please inform so that I can satisfy my years of wonderment.
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#2241376 - 08/20/20 06:11 PM Re: DI not collected but should have been Oly78
raitchjay Offline
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OK
Yeah, ask your investors what you should do when creating inconsistencies in your HMDA data to fulfill a task that they require you to do.
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#2241384 - 08/20/20 06:43 PM Re: DI not collected but should have been Oly78
rlcarey Online
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It is for the applicant's attestation that all of the financial information that the lender used to approve the loan is correct, as it may have changed considerably from the initial application.
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#2241421 - 08/21/20 12:23 PM Re: DI not collected but should have been Oly78
comply1 Offline
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Regarding why we can't just have the closer/loan officer tell the borrower they can't make a change....the majority of our loans are closed with an attorney, and of course a lot of different attorneys all across the country. Now granted we do provide a closing instruction form for the attorney with various items but honestly I believe 95% of them don't read it, and lenders are not always present (I would say very few are present at closings due to volume/logistics).

After reading everyone's responses it doesn't appear that anyone would have issues with always reporting the DMI from the initial application (which is our current process), regardless of if/why the final 1003 is hand marked with a different response, and our justification will be that we collected information from the borrower at initial application, and always report based upon that. (Unless of course we have a situation to where the information was not provided via phone/internet/mail application and the borrower comes in during the application process; then we would collect it then....but this would be a very rare and almost non existent occurrence in our structure)

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#2241422 - 08/21/20 01:00 PM Re: DI not collected but should have been comply1
InFairness, CRCM Offline
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I've seen 1003 DI change for a lot of reasons - some OK, some nefarious. Here are a few I've experienced:
  • Borrower thought demographics were considered in underwriting/pricing, so they gave fake info initially and corrected at closing
  • MLO filled in initially and borrower changed at closing
  • Borrower changed how they identify between initial app and closing
  • Lender was monkeying with GMI because of low minority application volumes
  • Simple error
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#2241424 - 08/21/20 01:20 PM Re: DI not collected but should have been InFairness, CRCM
swiggles Offline
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Quote
It is for the applicant's attestation that all of the financial information that the lender used to approve the loan is correct, as it may have changed considerably from the initial application.


But isn't the income already verified with financial records (tax returns, etc)? Why would the applicant need to attest to anything that is already verified?

.....just trying to understand. This is still an "investor" thing? We don't have investors. We broker applications.
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#2241428 - 08/21/20 01:36 PM Re: DI not collected but should have been swiggles
InFairness, CRCM Offline
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Investors want that final attestation because, no matter how good your verification processes, there's always a possibility that something will change between verification and close. For example, you verify employment 2 days before closing, and the day of closing the borrower gets a lay-off notice.
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#2241429 - 08/21/20 01:37 PM Re: DI not collected but should have been Oly78
rlcarey Online
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If you are not dealing with the secondary market, there isn't even a requirement to use a 1003 as an application, let alone an initial and final application. In the case of fraud, it always helps to have a document in which the applicant attests to all final information used to approve the loan. But you are correct, it is a secondary market thing.
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#2241464 - 08/21/20 04:54 PM Re: DI not collected but should have been InFairness, CRCM
comply1 Offline
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Originally Posted by InFairness, CRCM
I've seen 1003 DI change for a lot of reasons - some OK, some nefarious. Here are a few I've experienced:
  • Borrower thought demographics were considered in underwriting/pricing, so they gave fake info initially and corrected at closing
  • MLO filled in initially and borrower changed at closing
  • Borrower changed how they identify between initial app and closing
  • Lender was monkeying with GMI because of low minority application volumes
  • Simple error



Since you have seen these happen, how did you report the DMI for HMDA? Did you report the initial or the final/updated or did you choose a case by case basis?

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#2241468 - 08/21/20 06:04 PM Re: DI not collected but should have been Oly78
InFairness, CRCM Offline
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Except for the case where the lender was monkeying with GMI, we used the final 1003 data.
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#2242128 - 09/08/20 05:22 PM Re: DI not collected but should have been Oly78
Truffle Royale Offline

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^^^imho, that's wrong. HMDA/Reg C is supposed to be reported based on the information the borrower provides at time of applying, not what they or anyone else signs off on at the closing table. I certainly wouldn't volunteer that information to an examiner.

fwiw, we do sell all on secondary. During our most recent exam, I had to produce the original 1003 for review. The examiners would not accept the final 1003 as the basis for any information on my LAR.

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