remove coborrower

We have a secondary market refinance application which was a joint application. When credit was run, co-borrower's credit score caused the rate to be higher. Applicant requested that co-borrower be dropped from the loan in order to get a better rate. Any advise on documenting this? Is it a changed circumstance that would require an updated LE? Or since it won't affect the fees, do we just document it with a memo and move on with the application without the co=borrower? Any compliance issues we need to worry about?

How you handle will be up to the investor.

Thanks rlcarey. We contacted our investor and they said it up to whatever is required by CFPB.

The CFPB does not address it, but if the applicants modified their application, I am not sure why you can't just move forward. If the applicants applied for a specific interest rate however, you owe the co-borrower an AAN.

fyi, per TRID, you don't HAVE to do a new LE when you drop a borrower, or any other time except a signed written rate lock.
Just make sure your file is well documented. That goes whether the loan is locked with secondary or not.

Just to clarify, if we have an applicant for a mortgage loan request that we drop a co-applicant (we're at the preapproval stage), but it is NOT related to better pricing, would we owe an AAN? On the other hand, if we drop the co-applicant (borrower's request) because of poor credit (but not related to better pricing), would we owe an AAN?

What do you mean "we drop". How can the lender drop an applicant from a loan application?

It was the borrower's request that we remove the co-applicant. Just trying to determine when (other than your pricing example), we would owe an AAN when a co-applicant is removed.

When you tell the applicants that we will not make you a loan, but if applicant #1 applied by themselves, we would.

Thank you!