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#2262702 - 11/19/21 03:00 PM possible reporting issue in MB
CloudShape Offline
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Joined: Oct 2002
Posts: 471
Edge of Sanity
We have had an ongoing issue with MortgageBot this year. For some reason, they locked down the data collection method for ethnicity, race, and sex for not in person applications so that the only option is a 3 - NA. I don't believe this is correct based on 1003.4(10)(i) which states:
10) The following information about the applicant or borrower:
(i) Ethnicity, race, and sex, and whether this information was collected on the basis of visual observation or surname;

It does not state that you only have to report if it was collected on the basis of visual observation or surname if it is an in person application.

In addition, the "Getting It Right" guide seems to support this, as it states for the data collection method for ethnicity, race, and sex:
 Code 3—Not applicable
NOTE: Use Code 3 if the requirement to report the applicant’s or borrower’s (ethnicity, race, sex) does not apply to the covered loan or application that your institution is reporting.

The only time it does not apply, according to Reg C, is if the borrower/applicant is an entity or if it is a purchased loan the FI has the option to report the DI or not. I also know in a FAQ that was issued that the CFPB stated that if the FI did not get the DI in a not in person application, that they prefer the FI use a 2 - not collected on the basis of visual observation or surname but that FIs could use a 3 - NA in those circumstances. And to me, it just looks odd that we are saying we aren't required to report the DI (3 - NA) when we clearly are required to under the regulation and we are reporting it for mail, internet, telephone, and other not in person applications.

We also had an exam at the beginning of the year and I asked our examiner about this and the response was that we should be using a 1 or a 2, not a 3, for not in person applications as well as in person applications. So now we are faced with hours of scrubbing before submitting the LAR next year or a possible 75% - 80% error rate in those fields.

So my question for MB users is - did you check with your examiners on this issue and what did they say? Is MB right, wrong, or indifferent?

And out of curiosity, if you use a different software, do you have this issue? We like MB, but if this is going to be an issue every year, we may have to look for different software.

Thank you.
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#2262708 - 11/19/21 03:42 PM Re: possible reporting issue in MB CloudShape
Eric The Underwriter Offline
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Joined: Sep 2018
Posts: 15
Well, Appendix B only states you must only collect based on visual observation or surname when the application is taken in-person. It goes on to say you only report when the electronic means to take the application include a video component. But, I am not here to argue that interpetation.

I completely agree that NA is inappropriate. If it is a phone appointment and they don't provide it then my understanding is it should be a 2 (not collected). We have MortgageBot as well (unfortunately) and are experiencing the same thing. However, scrubbing the data shouldn't be that hard unless you have non-person entity apps mixed in (which would actually be 3 - NA). If you don't, then wouldn't all 3's just be changed to 2's?

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#2262715 - 11/19/21 04:15 PM Re: possible reporting issue in MB CloudShape
raitchjay Online
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Joined: Oct 2009
Posts: 8,674
OK
I'm still fuzzy on the NA vs. not collected thing on non face-to-face applications......has this issue finally been settled, or is still pick your argument and go with it? I've always been in the NA camp, but i really just want to put this thing to bed in my mind.
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#2262720 - 11/19/21 04:48 PM Re: possible reporting issue in MB Eric The Underwriter
CloudShape Offline
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Joined: Oct 2002
Posts: 471
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My interpretation of (10) in the appendix is that is saying you have to collect it visually or by surname if it is in person and the person declines to provide it themselves, but it does not say that is the only time you have to report whether it was collected visually or by surname or not.
10. If the applicant chooses not to provide the information for an application taken in person, note this fact on the collection form and then collect the applicant's ethnicity, race, and sex on the basis of visual observation or surname. You must report whether the applicant's ethnicity, race, and sex was collected on the basis of visual observation or surname.

And yes, I am hoping the scrub will be that easy, but still, for any FI with a lot of loans, it is extra time scrubbing which would not have to be done if we could report it correctly in the first place.
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#2262722 - 11/19/21 04:56 PM Re: possible reporting issue in MB raitchjay
CloudShape Offline
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CloudShape
Joined: Oct 2002
Posts: 471
Edge of Sanity
I wish they would settle it because that is my issue. According the 'Getting It Right" guide, you only use 3 - NA when you aren't required to report the DI. So if we get an application in the mail from a Brazilian-Japanese female (who supplied the DI to us), we have to report the information given to us so how can we say we aren't required to report it?

So glad it is Friday and I can not think about this for a few days. . . .
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