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#2254384 - 05/25/21 06:56 PM ext/modification procedures for account review
ADN Offline
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We are attempting to implement some procedures for extension of payments for when a consumer mortgage balloon note is coming due and the borrower does not have the funds to pay off in full. I need help determining what disclosures or requirements may apply. We are wanting to pull a soft pull credit report. Would any of the credit score disclosures apply to an account review?
Last edited by ADN; 05/25/21 07:03 PM.
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#2254385 - 05/25/21 06:59 PM Re: ext/modification procedures for account review ADN
rlcarey Offline
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rlcarey
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Galveston, TX
If we accessed a consumer credit report for account review, would a credit score disclosure be required to be delivered?

Under what permissible purpose would this review credit report be pulled?
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#2254387 - 05/25/21 07:10 PM Re: ext/modification procedures for account review ADN
ADN Offline
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I was thinking section604(a)(3)(f) would allow us if we were reviewing to see if they qualified for an extension.

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#2254390 - 05/25/21 07:45 PM Re: ext/modification procedures for account review ADN
rlcarey Offline
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rlcarey
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Galveston, TX
The FTC has basically said that there is no permissible review purpose on a closed end loan. You would have to contemplate an action on the existing loan and since it is a closed end contract, there really is no action allowed.

Even if you thought there was - what happens for anyone that would not qualify for an extension/refinance? Would you be sending adverse action notices to those customers? Sounds more like you are trying to prescreen for offering them an opportunity to extend/refinance, of which marketing is not an allowable permissible purpose.

I would be sending the borrower a letter reminding them that the balloon is coming due and ask them to contact you if they are interested in extending or refinance so that they can apply ahead of time.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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#2254399 - 05/25/21 08:12 PM Re: ext/modification procedures for account review ADN
ADN Offline
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Posts: 205
Yes we were thinking we would be required to give an adverse action if the extension/modification did not materialize.

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#2254400 - 05/25/21 08:14 PM Re: ext/modification procedures for account review ADN
rlcarey Offline
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rlcarey
Joined: Jul 2001
Posts: 79,898
Galveston, TX
Well that alone tells you that you do not have a permissible purpose. You cannot just pull credit reports to prescreen/market products.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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#2254406 - 05/25/21 08:44 PM Re: ext/modification procedures for account review ADN
ADN Offline
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Joined: Mar 2007
Posts: 205
Okay. Let's say we contact the borrower prior to the note coming due and they request an extension, can we pull a credit report at that time to see if they qualify for an extension? Our management is communicating they would like to do some type of limited underwriting prior to granting an extension.

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#2254407 - 05/25/21 08:47 PM Re: ext/modification procedures for account review ADN
Andy_Z Offline
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You could pull a credit report on an existing loan if you were for example skip tracing the borrower. But as Randy noted, you're trying to prequalify. If the borrower is going elsewhere to secure a loan to pay you off, you'd absolutely have no reason to access their credit report and privacy is such a huge issue. I'd recommend the bank contact the borrower and ask what the plan is, refi with you, someone else or retire the debt in some other way and then you should react accordingly.
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#2254459 - 05/26/21 06:58 PM Re: ext/modification procedures for account review ADN
John Burnett Offline
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John Burnett
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Cape Cod
A request from the borrower for an extension is a credit request, and sufficient for the creditor to pull a credit report. But if the creditor determines that it will not permit an extension, it now has a denial and a need for an adverse action notice. But you can't pull a report without a request for credit, whether it's a request to refinance, for an extension, or for another form of accommodation.
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