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#2259405 - 09/08/21 08:54 PM Adverse Action
ComplianceNewby Offline
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ComplianceNewby
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Louisiana
How do you handle an Adverse Action when the borrower qualifies but the co borrower does not? Just send an adverse action to the co borrower?

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Lending Compliance
#2259412 - 09/09/21 12:01 PM Re: Adverse Action ComplianceNewby
Rocky P Offline
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Florida
f) Multiple applicants. When an application involves more than one applicant, notification need only be given to one of them but must be given to the primary applicant where one is readily apparent.

1002.9 (f) you owe the primary, can send a copy to the coborrower.
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#2259417 - 09/09/21 12:54 PM Re: Adverse Action ComplianceNewby
Third Trip Online
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Don't forget that if you decided to take adverse action based upon information contained in a consumer report, each applicant is due an adverse action notice as required under the Fair Credit Reporting Act.

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#2259462 - 09/09/21 04:42 PM Re: Adverse Action ComplianceNewby
raitchjay Offline
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Compliance Newby...i took your post to mean that you originated a loan to the applicant but denied the co-applicant...is that correct or no?

Because if so...maybe i need to check out the notice requirements in Reg. B again, but i certainly don't send AANs to people who we originate a loan with.
Last edited by raitchjay; 09/09/21 04:44 PM.
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#2259465 - 09/09/21 04:54 PM Re: Adverse Action ComplianceNewby
raitchjay Offline
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I'll add as an aside...i've never really understood the concept when 1 great borrower and 1 lousy borrower apply and you deny the lousy borrower and make the great borrower a loan......if the loan goes south, isn't it preferable to have 2 people to go after rather than 1...and either way, you have the great borrower? Just asking because i've never been a loan officer, and maybe i'll learn something.
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#2259480 - 09/09/21 06:32 PM Re: Adverse Action ComplianceNewby
rlcarey Online
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Raitchjay - I am with you.

If I need to kill a pig to eat, I would rather have two to chase rather than just one, even if one is skinny.

For the life of me this has never made a lick of sense to me. And I highly doubt that such action can be supported statistically and that it purely comes from false perceptions from the by-gone days,.
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#2259481 - 09/09/21 07:02 PM Re: Adverse Action ComplianceNewby
raitchjay Offline
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Ha! I'm going to have to remember that skinny pig line...i like it.
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#2259493 - 09/09/21 10:12 PM Re: Adverse Action ComplianceNewby
Rocky P Offline
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Florida
I agree, but want to throw in one more thought.
From a fair lending standpoint, the bank may be making a loan to someone who is less qualified than another who was denied. What would be needed would be for the lender to document the file that the credit was made solely considering the primary applicant, and that the coapplicant was not considered in the approval, nor were their assets or income a determining factor. If a control group applicant was approved with a (e.g.) 640 credit score, but a minority applicant was denied for credit with a 650 score, there would questions, unless appropriately documented before an examiner looks at the file.
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#2259497 - 09/10/21 02:14 AM Re: Adverse Action ComplianceNewby
Rocky P Offline
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Florida
Couldn’t edit, but the loan policy should provide guidance, again as a benchmark to ensure uniformity and mitigate fair lending risk.

To what extent will examiners challenge? During a comparative file review from he’ll, (1,756 files), they were testing bankruptcy. There were 2 HIP loans flagged as a “matched pair “. Policy said no loans to bankrupt within 3 years. A Black male was denied for a $10k HIP loan, while a White male was approved for a similar amount. Both had bankruptcy within the 3 year period.

Differences? Black applicant was renting, while White applicant secured the HIP with a $30k certificate of deposit. Fortunately, policy also indicated that loans amply and entirely secured by negotiable collateral under the banks control could be made with a SVP’s approval. Had that not been in policy, the EIC indicated that despite the collateral issue, they would have cited the bank for differences in treatment. Whether or not it stuck would be a different story though.
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