Prequalification - Always a fun topic

For those of you that do prequalifications, how are you differentiating those from your regular applications? Do you use a totally different application, a different process, a designation in a software? Our prequalifications never have an address; we only pull credit and issue a credit only approval letter if the borrower requests a letter; however, I am questioning if our practice alone is enough to defend not reporting from a HMDA perspective.

We do pre-qualifications (application for a purchase but no property address has been identified) and we use the same application; however, we have a designation in our LOS that flags it as such and will not ask for government monitoring information. Like you, we only pull credit and issue a credit only approval letter if the borrower requests one. The credit approval is based on the information stated in the application, and our letter says this. I have outlined this process in our procedures, and made sure to put emphasis on the fact that we do not conduct any comprehensive analysis of the applicant's creditworthiness, which includes income verifications and other matters typically reviewed as part of our normal income approval process.

My understanding is that as long as we do not have a "formal" preapproval program which includes income verifications, our "preapprovals" are still considered pre-qualifications.

I agree with Brightside.....except that we do not exclude GMI..........to date, haven't gotten in trouble for that We always obtain a credit report and we issue a denial if the information on the credit report would be prohibitive of making a loan. We issue a letter similar to what Brightside describes. Lenders tell me that realtors won't show houses without a letter.

We are currently collecting GMI on our prequals as well.

We have enough trouble getting GMI collected without throwing a monkey wrench in the mix.......such as don't collect for a prequel, but once the application is approved and an address identified, call the customer and obtain it at that time. Dream on.

Most banks collect GMI on a prequalification. There's an argument to be made that you shouldn't (and some arguments for why you should), but I don't see examiners pick on this either way.

I, too, think it's easier to collect GMI when you take the praqualification application.