We have no company-wide recognized pre-approval program for in-house loans, and our secondary market mortgages are closed in the investors names so we report nothing on them.

However, we have ONE secondary market originator who does his own underwriting and therefore we report his loans. He does pre-approvals. Does this one guy change our procedure for the entire company? Do we now report preapproval status 1 or 2 on each and every single purchase application throughout the whole bank or just for the applications this one originator takes? He started with us at the end of Septemebr (don't ask...we didn't know what he was doing until later) and I don't know if:
a) what he's doing affects the whole bank and if so
b) do I report using the change from 10/1 on or
c) do I have to revamp all of 2007 just because of one lender?

Help?!?!

1)Is he doing true pre-approvals on a specific property or pre-quals?
2)Where are you hiding the body after you shoot him?

1. He's doing both - his processor and I have had lengthly conversations about the difference between pre-approvals and pre-qualifications.

2. He's too far away to kill, so I'm making a voodoo sock monkey of him.

1) Your FI does not have a pre-approval program, correct? So I'd tell this guy he cannot be doing pre-apps. If he wants to do a pre-qual, he cannot have a property identified. If he has a property, it's a full blown application and he (and you) should treat it as such.
2) ROAD TRIP!!! Can I ride shotgun?

You can differentiate separate departments within your financial institution as not having a qualified pre-approval program but not separate loan officers/originators within the same department. Therefore, IMO, if your financial institution is allowing this loan officer to issue pre-approvals that meet the definition within Reg. C then your financial institution has a pre-approval program.

This is kind of like saying your financial institution doesn't take telephone applications, but you have this one loan officer that consistently takes telephone applications from his best customers. It's not what you say you do...it's what you do that sets your procedures.

So I can treat our in-house lenders one way and our secondary market folks another and be OK?

ETA: Oh, and TR - I don't get to tall anyone anything...I jsut have to figure it out after they've done it.

Yea but you lost me somewhere between you don't report loans that close in the investor's name and this guy is underwriting for the investor, not your FI. If that's the case and these loans close in the investor's name, isn't he a delegated underwriter for the investor and don't they report his loans because he's approving for them not you?

Oy, sorry - I think my brain is too fried to explain this very well....I shall attempt to break it down:

1. We have in-house lenders who do not do any secondary market anything. All of their originations/denials/withdrawals are reported by our FI for HMDA, but they do not have a pre-approval program.

2. We have secondary market originators who do no in-house lending. Everything they close are 'brokered' loans that are underwritten, closed, and funded by the investors. We do not report these for HMDA since our people did not make the credit decisions.

3. We have ONE secondary market originator who is also a designated underwriter for a couple of investors. He does no in-house lending, but he does all the underwriting for his applications. He also does pre-approvals sometimes. His originations never hit our books because they are either closed in the investors name or are closed in ours with an immediate transfer and are funded by the investors. We are reporting his loans/withdrawals/denials since he makes the decisions.

What I don't understand is whether his pre-approvals affect the way we report bank-wide or just his applications? Or rather, our secondary market department's applications.

So he's part of the secondary market group that you DON'T report on, right? And he's underwriting and pre-approving based on the investor's guidelines in the investor's name, right again? So if you don't report his originations, why would you report his withdrawals and denieds and his pre-approvals? Am I still missing something?

We have a qualified pre-approval program for our secondary market department. We do not have one for in-house loans or consumer loans.


If he's your employee then he affects your financial institution IMO. Your secondary mortgage underwriting should be consistent throughout your FI.


From the FAQs:

Program---In general. An element of the definition of "preapproval request" is the existence of a "program." How is it determined whether a program exists?

Answer: A preapproval program exists when the procedures established and used by the lender match those specified in 203.2(b)(2). A program, regardless of its name, is not a "preapproval program" for purposes of HMDA if the program does not meet the specifications in the regulation. By the same token, a program may be a preapproval program for purposes of HMDA even though it is not so named. The question is whether the lender regularly uses the procedures specified in the regulation. If a lender has not established procedures like those specified in the regulation, but considers requests for preapproval on an ad hoc basis, those requests need not be treated as requests for preapproval under HMDA. Failure to establish and consistently follow uniform procedures, however, may raise fair-lending and safety-and-soundness issues.

Based on your description, your loan officer, representing you the lender, is regularly using the procedures specified in the regulation. Assuming the "pre-approvals" meet the required specifications in the regulation.

My understanding is that I am to report Mr. One Underwriter-guy's everything since he makes the credit decisions, despite the fact that none of our other originators do this. He just joined us at the end of September (and I didn't know about his - er - activities until way later) so our standing procedures now have to be changed to accomodate him. I'm trying to determine how extensive those changes need to be.

Could someone just bash me in the face with a skillet now, please? I think I would enjoy it more.

And herein lies my confusion with this situation. Is this lender representing Becca's FI or the investor?

That may be the grand prize question, TR. I think I will send this 'up the chain' for clarification.

Unless he is an agent for the investor, not an "approved underwriter", then he represents the FI for which he works.

From page D-2 of the GIR:

Credit decision of agent is decision of principal. If an institution approves loans through the actions of an agent, the institution must report the action taken on the application (loan originated, approved but not accepted, or denied, for example). State law determines whether one party is the agent of another.

And from page D-1:

Broker’s use of investor’s under-writing criteria. If a broker makes a credit decision based on underwrit-ing criteria set by an investor, but without the investor’s review prior to closing, the broker has made the credit decision. The broker reports as an origination a loan that it approves and closes, and reports as a denial an application that it turns down (either because the application does not meet the investor’s underwriting guidelines or for some other reason). The investor reports as purchases only those loans it purchases.

Well, he's definitely our employee. So let me see if I understand...

- he is a broker who makes his own decisions based on investor criteria
- we report his decisions on our FI's LAR
- we can separate the secondary market department as a whole for pre-approval program purposes

am I close?

IMO,

No, you (the lender) are a broker that makes the decisions based on the investor's criteria. He is simply your employee acting on your behalf.

Yes, you report your (his) decisions.

Yes, one department may have a pre-approval program and subject to the pre-approval requirements. Another department may not have a pre-approval program and would not be subject to the requirements.

I understand what you're saying, Dan, but then where does this from Becca's original post come in? Or are the rest of the secondary market LOs just sending info to the investor to underwrite?

Bingo TR, the rest of the originators do not underwrite - just the one guy. Everyone else sends files in to the investors' underwriting departements to be processed.

Utlimately, TR, this guy represents us. If the investor did a QC review and did not like his decisions...we could suddenly have a number of long-term mortgages on our books. He is a delegated underwriter for VA/FHA. I can't remember if he underwrites FNMA/USDA or not. Some of his loans never see the investor until closing and some do...depending on his limitations. SO...does that help clarify?

BTW, he is not new to our institution, he's just back again! LOL! Before when he was here, we actually booked short-term a number of his deals prior to sale/transfer.

Fortunately, I did not have to deal with him the first time around.

Same secondary market guy, different issue...sort of.

The loans he underwrites are closed through/transferred to investors who would fall under the heading of mortgage companies. Which purchaser code do I use for these? I'm quite sure the answer is simple and straightforward, but I've got impending submission brain fry and seem to be stuck here.

ETA: the only thing holding me back from assigning these all code 7 right off the bat is that the majority are then sold again down the line. All of them are either VA, USDA, FHA, or Fannie/Freddie conventional.

I would say that 7 (mortgage bank, etc.) is the right answer. It really doesn't matter if the investor you are selling to goes ahead and sells the loan again.

Does it make any difference at all that some of these are closed in the investor's name or that none of them ever actually hit our books?

I think maybe I'm missing the forest for the trees. I kind of have that 'lost in the woods' feeling....

It doesn't matter. If you read the first few pages of Appendix D in GIR there's a lot of helpful information about brokers and investors.

I did, I just have a way of confusing myself. It's almost like the more details/info I have, the harder it is for me to figure it out sometimes.

Anyway - thanks y'all! I'm going to go with 7s.