Explanation of applicant credit report delinquency

Posted By: aud2007

Explanation of applicant credit report delinquency - 08/09/07 01:58 PM

We have a policy that allows approval of a loan application in cases that the applicant has an adverse credit item of $500 or less, so long as we obtain a satisfactory statement from the applicant explaining the reason for the delinquency. Is it in violation of FCRA, Regulation B or other to contact the applicant to request the explanation? Further, are there written guidelines available regarding what is permissable to discuss with the borrower during the application process? If so, where can we find them...Any thoughts would be appreciated!
Posted By: GuitarDude

Re: Explanation of applicant credit report delinquency - 08/09/07 05:42 PM

Just off the top of my head here, but I believe you may discuss any of the info in a consumer's credit report with the applicant if you need more info. The key is to be consistent and refrain from asking questions that cross the line into prohibited bases under Reg B and FACTA/FCRA. For example, if an applicant has a delinquent payment to a hospital, you cannot treat that debt differently than non-medical related debt or solicit medical info (why was the applciant in the hospital) under FACTA/FCRA. If you keep the questions focused on the circumstances surrounding the debt itself and delinquency, you should be OK.
Posted By: LoisLane

Re: Explanation of applicant credit report delinquency - 08/10/07 02:00 PM

My understanding is that from a fair lending standpoint, the regulators encourage us to question an applicant about a blot on the credit report, since an explanation early in the application process could result in a loan origination instead of a denial.
Posted By: ktac MITCH

Re: Explanation of applicant credit report delinquency - 08/10/07 02:51 PM

I agree, as long as you apply it consistently - - working with the applicant to explain "blots" or to clear up negative items that are not theirs is a good thing under fair lending, and is just good customer service.

Be sure this is applied accross the board and you don't have some lenders helping the white married applicants with this
But not helping single ; minority ; etc. applicants.