Hi there,

I'm between a rock and a hard place when it comes to my Sr. Lending VP's interpretation of a loan denial. In an effort to save costs on Underwriting hours and generating/mailing adverse notices, she has instructed our Loan Officers that when a borrower does not meet minimum qualifications for a loan (ie. 580 credit score when our minimum is 620), to state to the borrower, "Unfortunately we do not have a loan product that meets your needs at this time. Would you like to withdraw your application?" After which point, if the borrower gives their blessing to that very leading question, the LO is free to withdraw the app.

Given the credit score example above, this is CLEARLY a denial situation, and my LOs are very much misrepresenting themselves when they say that we don't have a product that meets their needs. My questions surrounding this is twofold - can this damage their NMLS status if it came under investigation? Also, are there any regulations that I can reference that specifically prohibit this behavior? She is not receptive to an interpretive conversation regarding what constitutes a denial, so I need something black and white.

This is not sitting right with me at all, and I do not want the reputation of my LOs to be damaged long-term because my VP is only concerned about labor costs.

Paragraph 2(c)(2)(v).
1. Terms of credit versus type of credit offered. When an applicant applies for credit and the creditor does not offer the credit terms requested by the applicant (for example, the interest rate, length of maturity, collateral, or amount of downpayment), a denial of the application for that reason is adverse action (unless the creditor makes a counteroffer that is accepted by the applicant) and the applicant is entitled to notification under §1002.9.

Credit score would be a term. Automobile loan would be a type.

Credit score is not even term - it is an underwriting condition.

The VP is off their rocker.

A little late to this conversation:

"Unfortunately we do not have a loan product that meets your needs at this time. You have the product the applicant just doesn't qualify for it. Would you like to withdraw your application?" IMHO this is discouraging the applicant.