We do not have a formal preapproval program. We accept prequalification applications and do so on the URLA 1003, which includes the GMI section.

As I monitor our Adverse Actions, I have noticed that some lenders are collecting GMI on a pre-qual application (with no house identified).

This is not allowed since we don't report pre-quals to HMDA, correct? Am I correct in my thinking that they should be collecting GMI at the same time an address is identified/the application becomes HMDA reportable?

Yes, under HMDA you do not have an application since there is not property so you should not collect. Same with ECOA, you do not have a property at that time.

Hmmm, you don't want to neglect ECOA's requirement for GMI collecting.

1002.13
(a) Information to be requested. (1) A creditor that receives an application for credit primarily for the purchase or refinancing of a dwelling occupied or to be occupied by the applicant as a principal residence, where the extension of credit will be secured by the dwelling, shall request as part of the application the following information regarding the applicant(s):

(i) Ethnicity, using the categories Hispanic or Latino, and not Hispanic or Latino; and race, using the categories American Indian or Alaska Native, Asian, Black or African American, Native Hawaiian or Other Pacific Islander, and White;

(ii) Sex;

(iii) Marital status, using the categories married, unmarried, and separated; and

(iv) Age.

You will also want to note ECOA's definition of refinance..

Look to Reg B's definition and you will note that the bank has latitude in determining what is an application -- For Reg B. Generally, if you do not have a property identified for purchase (pre-qual), you do not have an application. No application, no GMI.

I have seen banks criticized for collecting GMI on a pre-qual with the examiner stating that it is not an application.

This is a tricky issue. Initial prequal requests are not applications for HMDA or Reg B, so collecting GMI is technically prohibited. But denied prequals are considered applications for Reg B, meaning GMI is then required (for Reg B, not HMDA). The dilemma is whether it is better to collect the GMI upfront with the initial prequal request (technically violating Reg B if the customer never identifies a property) or to only collect GMI if/when the prequal is denied.

From the Commentary to §1002.2(f):
3. When an inquiry or prequalification request becomes an application. A creditor is encouraged to provide consumers with information about loan terms. However, if in giving information to the consumer the creditor also evaluates information about the consumer, decides to decline the request, and communicates this to the consumer, the creditor has treated the inquiry or prequalification request as an application and must then comply with the notification requirements under §1002.9. Whether the inquiry or prequalification request becomes an application depends on how the creditor responds to the consumer, not on what the consumer says or asks.

Here's another thread on this issue: https://www.BankersOnline.com/forum/ubbthreads.php/topics/1848966/Re:_Declination_of_prequalific

you will note that the bank has latitude in determining what is an application

Reg. B gives the financial institution latitude is determining what is a completed application and what their procedures are for accepting applications. There is a difference between an application and a completed application.

https://www.bankersonline.com/regulations/12-1002-002