App withdrawn - do not have income

How do we report for HMDA if we do not have a number for income (but our policy would have required for it to be considered for a credit decision to be made)?

Seems like "NA" does not fit exactly, but $0 is an actual number and would seem like the person did not have income (vs. we don't know what their income is).

Any guidance would be appreciated!

I think your only option is NA. As you noted $0 would not be correct.

I am kind of arriving to the same conclusion. Except that the comments do not seem to cover this situation at all. But I am also not seeing another option. Can it be such a rare occurrence that nobody has raised it?

5. Income data—credit decision not made. Section 1003.4(a)(10)(iii) requires a financial institution to report the gross annual income relied on in processing the application if a credit decision was not made. For example, assume an institution received an application that included an applicant's self-reported income, but the application was withdrawn before a credit decision that would have considered income was made. The financial institution reports the income information relied on in processing the application at the time that the application was withdrawn or the file was closed for incompleteness.

Since it sounds like a credit decision was not made in your scenario, i think this applies. You can't rely on a figure that you do not have. I think NA is your only choice, as Carolina Blue said.

I have been going in circles because of the NA having such strict instructions and this not falling under any one of them. But it does not sound like I am missing anything, it just isn't there.

https://files.consumerfinance.gov/f/201511_cfpb_hmda-reporting-not-applicable.pdf

Instructions to report NA for Income:

 Covered loans or applications for which the credit decision did not consider, or would not have considered income,
§ 1003.4(a)(10)(iii); Comment 4(a)(10)(iii)-6;
 Covered loans or applications when applicant or co-applicant is not a natural person, Comment 4(a)(10)(iii)-7;
 Covered loan is secured by, or application is proposed to be secured by, a multifamily dwelling, Comment
4(a)(10)(iii)-8;
 Purchased covered loans for which the financial institution chooses not to report the income, Comment
4(a)(10)(iii)-9;
 Covered loan to, or an application from, the institution’s employees to protect their privacy, even if the institution
relied on their income in making the credit decision, Comment 4(a)(10)(iii)-3

I think the first bullet point is your answer...."did not consider...income". You can't consider it if you don't have it.

But that comment is referring to a when a credit decision IS made.

Exactly why I am spinning in a circle here, raitchjay!

I'm in the NA camp because you did not rely on income. I don't think the "credit decision" wording is absolute. They could have withdrawn right away - before you made a decision.

I too agree with reporting NA - you just don't have any other options (for this entry).

If we have withdrawn applications, do we put NA in the Intro Rate period?

Assuming a credit decision was not made, yes, you list the rate as NA for withdrawn applications. If you made a credit decision (and are reporting it as approved but not accepted), then you list the rate.

2. Applications. In the case of an application, § 1003.4(a)(21) requires a financial institution to report the applicable interest rate only if the application has been approved by the financial institution but not accepted by the borrower. In such cases, a financial institution reports the interest rate applicable at the time that the application was approved by the financial institution. A financial institution may report the interest rate appearing on the disclosure provided pursuant to 12 CFR 1026.19(e) or (f) if such disclosure accurately reflects the interest rate at the time the application was approved. For applications that have been denied or withdrawn, or files closed for incompleteness, a financial institution reports that no interest rate was applicable to the application.

Adam, I believe they are asking about the introductory rate period, not interest rate. You need to report introductory rate period for all applications. You will only have NA if the person applied for a fixed rate loan (or purchased a reportable fixed rate loan).

You are correct, Carolina Blue. Good catch as I somehow missed the "period" at the end of the sentence.

My answer was for the interest rate, and Carolina gave you the correct answer for the rate period.

Any thoughts on what to do if terms were not really applied for at the time of the withdrawal, i.e. let's say that the applicant didn't mark whether they wanted an ARM or a Fixed Rate? In such a case one doesn't really have the information to accurately complete the Intro Rate field, but "NA" does not seem to be allowed for other than when the application is for a fixed rate loan.

If the CFPB doesn't come out with some sort of comment about withdrawn applications where the information was not determined prior to withdrawal, I'll be very surprised. It's a glaring hole right now that has an obvious answer (NA).

I'll also say that you should really look to see if you actually have an application v. prequalification if you don't know the income or don't know the product that the person is applying for. It's up to the FI to determine application procedures, but I would think most would require income to be an application.

2. Prequalification. A prequalification request is a request by a prospective loan applicant (other than a request for preapproval) for a preliminary determination on whether the prospective loan applicant would likely qualify for credit under an institution's standards, or for a determination on the amount of credit for which the prospective applicant would likely qualify. Some institutions evaluate prequalification requests through a procedure that is separate from the institution's normal loan application process; others use the same process. In either case, Regulation C does not require an institution to report prequalification requests on the loan/application register, even though these requests may constitute applications under Regulation B for purposes of adverse action notices.

Agreed, and that was my consideration as well that you could potentially say no application really exists. Not much you can do with these as the Regulation is currently stipulated.

For HMDA purposes the lack of income would not make the application a prequalification, it would simply make it an incomplete application and HMDA would require you to report the disposition of that incomplete application as either withdrawn, denied or closed for incompleteness whichever the case may be.

Agree with Dan. Call it an incomplete application. Someone should have sent a Notice of Incompleteness or at least made a verbal request for the missing info.

Are you saying an institution can't establish their application process to require income for an inquiry/prequalification to transition to an application for HMDA/ECOA purposes? Or just that there is no HMDA/ECOA specific requirement for income (like TRID)?

You can require income as a condition for a "complete" application but you cannot require it as a condition for having an application.

You only need income in order to make your credit decision (the complete application). If you require income to make your credit decision and the applicant failed to provide their income then you have an incomplete application but you have an application nonetheless.

What would you consider the line between inquiry/prequalification and application? Does a creditor have any flexibility to require certain information before an application is tripped?

This is a complex topic that I spend 2 hours teaching in a webinar. It's difficult to answer it fully here but let me try. The "flexibility" that Reg B & C talk about ("made in accordance with procedures") isn't so much about what info you need as it is about the channel of delivery. For instance, will you allow verbal applications or do they have to be in writing? Read A.1. below carefully.

This is from our training outline on Reg B:

A. Application (General):
Application means an oral or written request for an extension of credit that is made in accordance with procedures used by a creditor for the type of credit requested. [§1002.2(f)] In other words, in some circumstances, informal inquiries, whether verbal or in writing, must be treated as an application pursuant to Regulation B. [FDIC FIL 35-96]

The definition of "application" in HMDA is:
…means an oral or written request for a covered loan that is made in accordance with procedures used by a financial institution for the type of credit requested. [§1003.2(b)(1)]

Reg C says nothing about a "completed application." It does say in the preamble to Reg C that Reg B's definition of application is similar. Since Reg C doesn't provide any more guidance on applications or completed applications, let look more at Reg B.

1. Procedures Used:
…refers to the actual practices followed by a creditor for making credit decisions as well as its stated application procedures. For example, if a creditor's stated policy is to require all applications to be in writing on the creditor's application form, but the creditor also makes credit decisions based on oral requests, the creditor's procedures are to accept both oral and written applications. [Commentary to §1002.2(f) #2]

2. Lender Flexibility:
[/I]A creditor has the latitude under the regulation to establish its own application process and to decide the type and amount of information it will require from credit applicants[/I] (for a complete application). [Commentary to §1002.2(f) #1]


3. Requirements Triggered by an Application:
The following (when applicable) are triggered by an application, not necessarily a “completed application”:

a. Joint Applicant Intent to Apply Documentation

b. Demographic Information Collection

c. Appraisal Notice and Free Copy


B. Completed Application:
A completed application means an application in connection with which a creditor has received all the information that the creditor regularly obtains and considers in evaluating applications for the amount and type of credit requested… [§1002.2(f)] …as long as prospective applicants are being encouraged to proceed, lenders have reasonable discretion in defining what constitutes an application (completed). [FDIC FIL 35-96]


1. Examples of Information (Regularly Obtained and Considered):

a. Credit Reports
b. Additional Applicant Information
c. Third Party Reports (W-2, Pay Stub, Tax Return, Purchase Agreement, Appraisal, Title, etc.)
d. Third Party Approvals

For example, within the flexibility provided by Regulation B (NOT TRID), some lenders might consider prequalification certificates to constitute an application, while others might require a borrower to have a contract to purchase a property and file a formal written application in order to generate an application. [FDIC FIL 35-96]


2. Lender Responsibility:
The creditor shall exercise reasonable diligence in obtaining such information (to complete the application). [§1002.2(f)] [/I]For example, the creditor should request information from third parties, such as a credit report, promptly after receiving the application. If additional information is needed from the applicant, such as an address or a telephone number to verify employment, the creditor should contact the applicant promptly. [/I][Commentary to §1002.2(f) #6]

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Please read and study what I've pasted above. Words in italics are verbatim. Non-italics represents our comments to help you understand.

You ask where's the "line" between an inquiry/prequalificaiton and application. An inquiry is where you are answering policy, not telling someone yes or no. An application is where you have enough info to say yes or no to their request.

A prequalficaiton is an adjective - not a noun. You can have a prequalifiation inquiry or a prequalfication application.
For example:
1. How much home can I afford? The LO responds by describing DTI & LTV requirements without telling the person if they qualify or saying yes or no to them. That's a prequalificaiton inquiry.
2. How much home can I afford? The LO responds by saying "based on what I've seen, I don't think you can afford any home." That's an application and it triggers a denial. If the LO responded by saying "I think you can afford a home up to $X. Let us know when you find a house" then that's a prequalification application that was approved. It's an incomplete application because you don't have the house yet, however.

Any written or oral request for credit is an application under Reg. B. Reg. B gives you the flexibility in your procedures for accepting applications and what you would consider a "complete application". It does not give you the flexibility to say you do not have a credit application simply because the applicant left a piece of information, such as income, off the application form.

The procedural example Reg B gives is your policy states all your requests for credit must be in writing on your FI's credit application but you also will make credit decisions based on an oral request. Your procedure for accepting applications is both written and oral.

Using the income as a condition for an application because that is one of the 6 items listed for TRID is not applicable for Reg. B. TRID only says you do not have an application for disclosure purposes if any of the 6 items are missing. But Reg. B does not require any of those items for you to have an application subject its rules.

(f) Application means an oral or written request for an extension of credit that is made in accordance with procedures used by a creditor for the type of credit requested.

So what are your "procedures" for accepting credit applications? Mail, internet, telephone, fax, in person, etc.

Again you can require whatever verification information you need to make the credit decision for it to be a completed application but as I said an incomplete application submitted according to your procedures for accepting an application is still an application.

We do not treat prequalifications any differently in our application procedures other than for HMDA reporting.

You both seem to be limiting the procedures for accepting applications to the channel in which they are received, but I'm still not clear on how you are defining the line between application and inquiry/prequalification in a practical sense. If the bank has procedures to only provide policy information until they receive certain information, then isn't that the same as defining an application as requiring that information?

Let me run a few scenarios of Bank- Consumer interactions, if you don't mind, to try and get this more clear in my head. Assume the bank takes applications in person and from mail, internet, telephone, and fax.

1) Consumer walks into a branch and tells the LO they want a home loan. LO asks them for some information including their SSN to pull credit. The borrower refuses and leaves.
2) Consumer walks into a branch and tells the LO they want a home loan. LO asks the borrower to fill out an application. Borrower fills most of it out but leaves the SSN off the app. LO states that they need a SSN to pull credit and evaluate. Borrower refuses.
3) Same scenario, but a mailed in application without a SSN. LO calls the borrower to request the SSN. They refuse.
4) Consumer calls an LO and requests a home loan. The loan officer gets the name, estimated value, and SSN (pulls credit) from the consumer and tells the consumer the loan amount, rate, and other terms of credit the consumer could qualify for under various loan programs, then tells the borrower they will need an income and address to move forward. Borrower does not provide them.
5) Consumer faxes in a handwritten request for a home loan with a lengthy description of why they need a home loan, but without any of the information required to evaluate an application.
6) Same scenario above, but an LO reaches out to the borrower and discusses general information about home loans and requests further information. The borrower says he'll call back with information, but does not.
7) Same as above, but borrower provides some, but not all, information requested.
8) Bank has an online portal that specifically does not ask for a property address. Is it a HMDA application once it is submitted? Can the Bank define these as prequalification requests until an address is obtained?

This has always been a grey area for me, so any help here is appreciated. Thanks!

Edited: Because I don't know how to count. (Second #3 renumbered to #8) Sorry!

If the bank has procedures to only provide policy information until they receive certain information,

Are you saying if I call wanting to know general information about your loan products you won't discuss my inquiry with me unless I submit an application?

The following is how I would consider the scenarios presented.

1. If they refused to provide the requested information then there is no application. This is assuming they refused to provide any information and not just the SSN.
2, 3, 3 & 4 - Incomplete application - requires action under Reg. B. However the second #3 would be a prequalification for HMDA reporting purposes.
5 & 6 - depending on interaction between the consumer & LO it could go either way. The way you present it I most likely would lean toward it being an inquiry.
7. Incomplete application - requires action under Reg. B.

To add an afterthought to my previous post.

A lot of people "cross-reference" application definitions and tries to applies one regulation's definition to another. You can't do that.

Reg. Z /RESPA defines what an application is for their disclosure purposes.

Reg. C defines what an application is for its reporting purposes.

Reg. B defines what an application is for its consumer notification purposes. Reg. B has a lot broader range for what an application for credit is and the notice of action taken requirements. I would estimate that 9 out of 10 application that do not meet TRID or HMDA application requirements are going to meet Reg. B's requirements.

"Are you saying if I call wanting to know general information about your loan products you won't discuss my inquiry with me unless I submit an application?"
I don't think so. I'm saying I would only provide you general information about our loan products until you submitted certain information. I've always believed that Reg B defined an application based on how the bank responds to the request, rather than what the customer does. I would (or at least would have prior to this thread) say that as long as the bank is consistent, they can define an application for Reg B based on requiring certain information, as long as they don't communicate any "evaluation" until the consumer gives them all the requested information. I think there is a hard line for any verification documents, but besides that the institution can require whatever they want prior to "evaluating" the request. That's always been my general understanding at least.

Here's an interesting but not that helpful link to a request for comment from 1998 that lays out the issues: https://www.federalreserve.gov/boarddocs/press/boardacts/1998/199803133/R-1008.pdf

It appears that the only official guidance that came out of this was a definition of preapprovals and that preapprovals are applications, which doesn't really answer the many other questions about the inquiry/prequalification/application issues that were raised.

The request does state the following though in reference to the inquiry/application distinction:

"Regulation B allows creditors to establish their own application procedures, including what and how much information to provide to consumers who request information before applying for credit." Hardly concrete (and way out of date), but this does suggest that "application procedures" that may be established go further than just what channel they are accepted through.

As I stated in my last post, this is a complicated topic and one that is difficult to fully understand or explain through a few written responses. Again, I spend 2 hours teaching this in a webinar and that's not going to get you a full understanding.

The other side of this topic is Inquiries. Inquiries are not applications and do not trigger disclosures. Here's another part of our Application manual: (Pretty soon you'll have the complete book!)

II. Inquiries:

A. Supplying Information:
A creditor is encouraged to provide consumers (business applicants as well) with information about loan terms (i.e. an inquiry). [Commentary to §1002.2(f) #3]


B. Your Response vs. Their Inquiry:
Whether the inquiry… becomes an application depends on how the creditor responds to the consumer, not on what the consumer says or asks. [Commentary to §1002.2(f) #3]


C. Communication of a Decision:
However, if in giving information to the consumer the creditor also evaluates information about the consumer, decides to decline (or approve) the request (inquiry), and communicates this to the consumer, the creditor has treated the inquiry… as an application (completed) and must then comply with the notification requirements (adverse action)… [Commentary to §1002.2(f) #3] The denial does not have to be explicit in nature and can be construed as any communication that would lead a reasonable person to conclude that an application would receive negative consideration. [FDIC FIL 35-96]


D. Examples of Inquiries [Commentary to §1002.2(f) #4]:

1. When a consumer [business applicants as well] calls to ask about loan terms and an employee explains the creditor’s basic loan terms, such as interest rates, loan to value ratio, and debt to income ratio.

2. When a consumer calls to ask about interest rates for car loans, and in order to quote the appropriate rate, the loan officer asks for the make and sale price of the car and amount of down payment, then gives the consumer the rate.

3. When a consumer asks about terms for a loan to purchase a home and tells the loan officer her income and intended down payment, but the loan officer only explains the creditor’s loan to value ratio policy and other basic lending policies, without telling the consumer whether she qualifies for the loan.

4. When a consumer calls to ask about terms for a loan to purchase vacant land and states his income, the sale price of the property to be financed, and asks whether he qualifies for a loan, and the employee responds by describing the general lending policies, explaining that he would need to look at all the applicant’s qualifications before making a decision, and offers to send an application form to the consumer.

Now about the scenarios you provided. In all cases, they are requesting credit you simply are missing information to make a decision. If the LO responds by talking about policy and not saying whether they qualify, then I can argue it's an inquiry. However, everyone of your scenarios says they tell the LO they want a loan (or similar wording). I think these are applications, but are incomplete applications. They are asking the LO to make a decision and providing the LO with info, but just not enough. The LO then has a responsibility to obtain what they need. Here's how Reg B states it:

The creditor shall exercise reasonable diligence in obtaining such information (to complete the application). [§1002.2(f)] For example, the creditor should request information from third parties, such as a credit report, promptly after receiving the application. If additional information is needed from the applicant, such as an address or a telephone number to verify employment, the creditor should contact the applicant promptly.[I] [Commentary to §1002.2(f) #6]

If the LO needs the SSN and can't get it, the LO must either deny the request or send a NOI. Here's how Reg B states this:
[I]When an application is incomplete regarding information that the applicant can provide and the creditor lacks sufficient data for a credit decision, the creditor may deny the application giving as the reason for denial that the application is incomplete. The creditor has the option, alternatively, of providing a notice of incompleteness under §1002.9(c). [Commentary to §1002.9(a)(1)#3]

This last paragraph describes a lot of the scenarios you provided. Notice Reg B never says "this isn't an application." Instead, Reg B says you either request the info (with a written notification) or deny the application.

Your last scenario is different. You may have a Reg B application through your portal, but until a property is identified, it's not a HMDA (Reg C) application. It's a prequalificaiton request (for Reg B), but as I said in my previous post, that doesn't mean that it's not an application.

I hope this helps!

P.S. I really messed up the italics in my previous post. I hope you can see where I was quoting the reg and where it was me talking. It's too late to edit, so I couldn't fix it.

I want to piggy back off this topic, if I can.

We have a "complete" application meaning the borrower provided all info on the 1003. We are working away on the application and the appraisal comes in low. Due to the product guidelines, we have to reduce the loan amount to meet the LTV requirement and we are required to verify 6 months reserves. The borrower no longer has the reserves (according to what is in the file and what is on the 1003). We denied the file due to insufficient funds. Is that acceptable?

The manager of this LO is fighting me on it and said we should have allowed the LO time to document their mistake. *The LO turned it in as a withdrawal but failed to reduce the loan amount, etc. And they didn't meet the 30 day timeframe.

Not quite sure what you are asking but.

1. Lack of funds to close is a legitimate denial reason.
2. If they missed the 30 day notification period due to misclassifying the action taken then that is a mistake that cannot be corrected.

Thank you, Dan. I guess I was looking more for confirmation that we were correct in denying the loan. To me, insufficient funds is a reason and we can't cover it up by withdrawing it and allowing the LO to write a memo explaining why they messed up (????) I gave her the example that if it was submitted to u/w as such that they would have denied it for insufficient funds so its the same reason before u/w.

So, back to my piece of the puzzle, lol . . . if you consider it an application and do not have any information on what type of loan it is, how do you report the "Intro Rate" field?