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#2254563 - 05/27/21 08:32 PM HELOC Exception to policy?
ccman Offline
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We have a borrower who does not meet all of the underwriting policy for our HELOC. Can an exception be made to approve the request
if it is tracked and documented. The approval would come from our Sr. Management. Trying to stay away from a fair lending issue, if possible. Thanks.

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#2254568 - 05/27/21 08:51 PM Re: HELOC Exception to policy? ccman
Rocky P Offline
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Florida
Underwriting is simple only for the 100% great apps and 100% horrible apps. Once you get into the middle, there are many compensating factors to consider.

Are there exceptions allowed by your policy? Would the exceptions be offered to all applicants? (Is there a centralized underwriting to determine if someone was declined for basically the same reason that this loan is being recommended to be approved? ) Are their similar products or conditions to make the loan.

It would come down to were different applicants treated differently? If someone else was declined, and this one made, you have an issue. If the bank elects to make this loan (HELOC), then, in a comparative file review, they just lowered their lending standards. (Comparative file review looks at practice, not policy.)
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#2254569 - 05/27/21 08:51 PM Re: HELOC Exception to policy? ccman
rlcarey Online
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rlcarey
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Galveston, TX
Approved or not, it is going to be an outlier. If there are mitigating factors, then I hope they are always applied for all other applicants.
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#2254575 - 05/27/21 09:14 PM Re: HELOC Exception to policy? rlcarey
ccman Offline
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Exactly as I described to Management. Thank you all for your replies.

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#2254576 - 05/27/21 09:24 PM Re: HELOC Exception to policy? Rocky P
ccman Offline
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The HELOC Policy has a bullet point that states, "No exceptions will be approved on HELOCs".

This would have to be deleted from the policy. I advised management that this would have to be tracked and reported to the board in
their monthly reports. I believe the weakness is in the borrower's DTI, but the LTV is very low, which may be a rare situation where there
might be similarly situated borrowers, but still would have to be monitored, if the situation ever arises again.

Any other thoughts are welcome.

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#2254582 - 05/27/21 09:52 PM Re: HELOC Exception to policy? ccman
rlcarey Online
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rlcarey
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Galveston, TX
A weakness in the DTI? - hmmm. LTV is low so that means when the bank forecloses the bank will be covered and the borrower will be homeless. While ATR does not extend to HELOCs - this would not be the best of moves in my mind for a lot of reasons unless this borrower has a lot of idle reserves and just not cash flow (income)..
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#2254583 - 05/27/21 10:00 PM Re: HELOC Exception to policy? ccman
Rocky P Offline
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Joined: Jun 2003
Posts: 7,208
Florida
Collateral lending went out in 2005 I believe, and for the reason Randy mentioned.

If the terms are less restrictive, make a HIP or unsecured (or credit card) loan.
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#2254638 - 05/28/21 04:23 PM Re: HELOC Exception to policy? Rocky P
ccman Offline
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Thanks all. I have provided them with my recommendation that the policy stand.

Have a great weekend and happy holiday.

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