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#2267146 - 03/03/22 03:31 PM Safe Harbor vs. Violation
Believing... Offline
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Joined: Apr 2012
Posts: 290
In the mountains
We normally rely on the credit report to determine MLA status. Lenders do not obtain credit reports for CD-secured loans, so if they fail to search the DoD site as a back-up, does the bank just lose its safe harbor for the loan or is it an actual violation? Although we no longer get covered borrower statements, we do have questions on our applications that apply to servicemembers, dependents, etc.

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Lending to Servicemembers (SCRA, JWNDAA), War, Terrorism
#2267156 - 03/03/22 04:21 PM Re: Safe Harbor vs. Violation Believing...
rlcarey Offline
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rlcarey
Joined: Jul 2001
Posts: 78,948
Galveston, TX
Not getting a credit report on a CD secured loan is a very poor credit underwriting decision. If there is an IRS lien outstanding, your security is gone, as the IRS lien will take priority.
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#2267235 - 03/07/22 03:55 PM Re: Safe Harbor vs. Violation Believing...
Believing... Offline
Gold Star
Joined: Apr 2012
Posts: 290
In the mountains
Yes, I agree with that--just haven't had any luck doing anything about it. Back to my original question, we've had an external auditor say that it is a violation if we do not get either a credit report of MLA search. Is is true that an inadvertent violation exists, or does the bank just lose its safe harbor?

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#2267683 - 03/15/22 07:06 PM Re: Safe Harbor vs. Violation Believing...
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 46,707
Bloomington, IN
I do not believe it would be a violation. I didn't see anything within the regulation that made if mandatory to perform the check. Where the violation would come into play is if you did not perform the check and made a loan to a covered borrower and did not provide the required disclosures.

If that happened you would have no safe harbor or other remedies to avoid any potential lawsuit and/or regulatory penalties.
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The opinions expressed are mine and they are not to be taken as legal advice.

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