Reg B Notice

We declined a loan because the credit store was not at least 620, which is required for a conventional mortgage. The reason on the ECOA sheet was "Excessive Obligations" and "Federal National Mortgage Association."

The credit report says "serious delinquencies."

Now obviously the FRCA AAN box should be checked.

But, should I include an additional checked box in the ECOA?

I mean, why isn't there a "poor credit score" option?

You need to review 202.9 and commentary regarding the required specificity of reasons provided to the applicant.

What the heck does a denial reason of "Federal National Mortgage Association" mean?

Sounds like you are going to have your hands full on this one if this is standard practice, include the redelivery of AANs for the last 25 months, as that is what the regulators will require if they find a pattern or practice.

Because you have to give the specific reasons why the loan request did not qualify. Poor credit score is not a specific reason. The reasons that caused the credit score to be too low to qualify are the specific reasons?

Sorry, it actually says, "purchase denied by federal national mortgage association."

We should have also checked "delinquent credit obligations."


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http://www.bankersonline.com/regs/202/s202-9.html
Disclosing that a credit report was obtained and used in the denial of the application, as the FCRA requires, does not satisfy the ECOA requirement to disclose specific reasons. For example, if the applicant’s credit history reveals delinquent credit obligations and the application is denied for that reason, to satisfy § 202.9(b)(2) the creditor must disclose that the application was denied because of the applicant’s delinquent credit obligations.

"Sorry, it actually says, "purchase denied by federal national mortgage association."

That is not a valid reason either - the fact that you can't sell the loan in the secondary market has no bearing on the creditworthyness of the applicant.

1. We are using a vendor provided form. I guess it doesn't seem bad to include "purchase denied by federal national mortgage association" as long as we include a more specific reason for why it was denied. Do you disagree?

2. What if "insurance is denied by PMI"? Is that a valid reason?

well, thank you both for your help.

I'm recommending that we review the credit reports and include specific reasons for denying the loan.

What I have seen is to decline for the credit bureau score (if it was one of the top 4 reasons for the decision) and then list the factors that contributed to the score as provided by the credit bureau agency. If there were additional reasons for the decline, they would be listed as well.

If the underwriting has a cut off for credit score, then a failing credit score would be a decline reason. Where do you see it differently?

The Commentary to 202.9. You have to give the reasons for the failing credit score.

Specifically 202.9(b)(2):

4. Credit scoring system. If a creditor bases the denial or other adverse action on a credit scoring system, the reasons disclosed must relate only to those factors actually scored in the system. Moreover, no factor that was a principal reason for adverse action may be excluded from disclosure. The creditor must disclose the actual reasons for denial (for example, “age of automobile”) even if the relationship of that factor to predicting creditworthiness may not be clear to the applicant.

To clarify, "then a failing credit score would also be part of the decline reason." The rest of my comment was that the four factors from the bureau would also be provided. Are you saying that the letter cannot say that the credit score contributed to the decline? Or that it can? Or something else?

I'm not trying to argue for the sake of arguing. We have used this method in the past so that the consumer has a better understanding of why they did not get approved. Telling them the score was low and why it was low lets them know that the score was the deciding factor and the four "FICO" reasons (when it's from a FICO score) tell them what brought their score down. A more complete picture.

I look forward to hearing your thoughts.

Are you saying that the letter cannot say that the credit score contributed to the decline? Or that it can?

It cannot - it does mot meet the specificity requirements of Regulation B.

I believe he wants to provide the specific reasons that affected the score AND the statement that the score contributed as well. So, the specific reasons would be there.

But............is more than 4 "helpful"?

Glad it's Friday.

I will go back to the commentary:

"If a creditor bases the denial or other adverse action on a credit scoring system, the reasons disclosed must relate only to those factors actually scored in the system."

I agree with you. I have always only disclosed the factors. The score is disclosed in other notices, as required.

I am conducting a Reg B audit and have a question about commerical loans. I am looking at >1million presently and have found two different notices that are being used. One of the notices states "Our decision is based on credit history". Shouldn't there be the FCRA notice? The ECOA notice is there but nothing else. I have read 209.9 and the commentary, and believe it should be there. Can anyone clarify for me?

FCRA does not apply to business credit.