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#55233 - 01/17/03 05:57 PM Adverse Action - Business Purpose
Anonymous
Unregistered

Bank receives loan application from a broker.
Application is for the purchase of undeveloped property (for a commercial project).
The applicant's gross revenue the previous year was less than $1Million.
Bank denies application.
I believe the bank is responsible for sending an adverse action notice to that person, but since he doesn't know the broker sent the application to our bank, won't he be confused upon receiving the denial form from us?

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Lending Compliance
#55234 - 01/17/03 07:36 PM Re: Adverse Action - Business Purpose
Kaos Offline
100 Club
Kaos
Joined: Dec 2002
Posts: 130
Our bank would send the denial. It sounds like you received an application with financials, and made a descision to deny. If the applicant has questions about how you got the information, they should be addressed to the broker.

One other thing we always want to see from a broker is the applicants signed authorization to release information. Call us paranoid.

Opinions are my own.

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#55235 - 01/17/03 07:37 PM Re: Adverse Action - Business Purpose
complylady Offline
Platinum Poster
complylady
Joined: Jul 2002
Posts: 614
Michigan
See Reg B 202.11 (g) Applications submitted thru a 3rd party. This is what we do on our consumer broker applications (would also work on commercial). As the broker will submit to another lended and try to obtain approval, they do not want the applicant to get AAN's while they are still working on obtaining approval. So our recordkeeping documents we complied with the Regulatory requirements, we prepare an AAN listing our reasons and send it to the broker with a cover letter. Then if the broker obtains approval elsewhere they do not have to provide a notice, however if they are unable to obtain approval they prepare 1 notice listing the reasons the various lenders used.

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#55236 - 01/17/03 09:04 PM Re: Adverse Action - Business Purpose
Kaos Offline
100 Club
Kaos
Joined: Dec 2002
Posts: 130
This is a great procedure. We kicked it around a while back with our RE department. The concern at the time, was whether or not the broker would actually hold up their end. I think some of the RE lenders knew the brokers to well.

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#55237 - 01/20/03 10:59 PM Re: Adverse Action - Business Purpose
Lucy Griffin Offline

Diamond Poster
Lucy Griffin
Joined: Nov 2000
Posts: 1,544
Yes -- you absolutely owe the customer an adverse action. They may not realize that your bank considered the application but since they used a broker, they should certainly be prepared for the possibility.

Most creditors accepting applications through brokers or dealers find the most efficient way to send notices is through the broker/dealer. You should have some sort of written understanding that allows you to be fairly certain that the broker or dealer complied.

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#55238 - 01/21/03 05:19 AM Re: Adverse Action - Business Purpose
Princess Romeo Offline

Power Poster
Princess Romeo
Joined: Jun 2001
Posts: 8,272
Where the heart is
In many commercial brokerage transactions, it is not uncommon for the broker to present a transaction without specific details on the identity of the borrower. Basically, they are shopping on behalf of their customer, but they do not want any lender doing an "end-run" around them to get the deal.

So - they will present information on the property, LTV, cash-flow, general credit info, etc., to see if the bank is interested. In those cases, if you decide the deal is not your "cup of tea", you have no choice but to send the notice to the broker.

Yeah - and that concept is REAL popular with the commercial lenders!
_________________________
CRCM,CAMS
Regulations are a poor substitute for ethics.
Just sayin'

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