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#2250246 - 03/09/21 02:54 PM Reuse of paper apps for business-purpose loan req.
Compliance101 Offline
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Joined: May 2015
Posts: 16
Good morning,

I am hoping to get some thoughts/insights around the reusing of paper applications submitted for business-purpose loans. Our institution uses an electronic loan origination system (LOS) but also requires business applicants to submit a paper application to initiate their loan request. Recently, during an adverse action review, our internal compliance team discovered several instances where these paper forms were being reused to initiate multiple loan requests within our LOS.

For example: In January, ABC Business applies for a $25,000 loan to purchase equipment. A paper application is filled out, signed, and dated by the applicant(s). This request is entered into the LOS by the loan officer and the paper application is attached to the loan file which is electronically saved within the LOS as well. This request is denied and adverse action is provided to the applicant(s).
Subsequently, in May, ABC Business again applies for a $25,000 loan to purchase equipment. The loan officer enters the request into the LOS and attaches to the loan file the same paper application that was completed and signed by the borrower in January.

While this generally just doesn’t feel like a very good practice to have in place, what regulatory concerns might we be raising here? Permissible purpose comes to mind initially, perhaps joint intent as well. How about tied specifically to adverse action? Any insights from the group are greatly appreciated!

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Lending Compliance
#2250247 - 03/09/21 03:15 PM Re: Reuse of paper apps for business-purpose loan req. Compliance101
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 46,287
Bloomington, IN
The reuse of the paper application is an internal control issue. At the very least though I would think the information should be attested to by the applicant that the information is still accurate.

Regardless if you allow the reuse of the paper application for business purpose loans for each loan request you have to determine joint intent and if the loan is to be secured by a 1-4 dwelling provide the required appraisal notice within 3 business days of the loan request..
The opinions expressed are mine and they are not to be taken as legal advice.

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