Adverse Action on decline to Purchase a Loan? - 11/06/01 06:21 PM
A bank is going to purchase a mortgage loan from an affiliate and does its credit review before the affiliate commits to the loan - which is necessary to utilize the 23A 250.250 exemption which allows us to purchase the loans outside of the 23A limits.
The bank declines to purchase the loan - the mortgage company goes ahead with its own process and either grants the loan or declines it. The mortgage company issues an adverse action letter if it declines the loan.
Does the bank - that would have purchased the loan - have any obligation to issue an adverse action letter? Per the HMDA guide, the bank would need to report the loan as a decline on its LAR...but is adverse action notification to the borrowing customer by the BANK required? (I realize that if the mortgage company subsequently does not make the loan they would send an adverse action letter.)
The bank would have purchased the loan post closing.....not made the loan. Can I make the argument that this is different from a dealer shopping a car loan to different banks because those banks will actually be the lender. We will NOT be the lender...we will purchase after the loan is booked. If I had to send an adverse action letter, I can't imagine what it would say...we declined to purchase your loan?
Thanks for any insights.