Denials

Posted By: stach23

Denials - 08/13/21 02:29 PM

Can loans be denied for personal reasons? Everything you research deals with credit reasons, income, etc. But what if it has nothing to do with credit? For example (and I'm being extreme here), say a borrower killed my mother and I refuse to work with him. I'm the only lender at our bank that handles secondary market loans, so he couldn't just see another lender. Am I able to turn him down? I've not received the six key pieces of information yet, so it's not an official application.
Posted By: raitchjay

Re: Denials - 08/13/21 02:40 PM

I think the key to your question is: are you willing to be brutally frank on the AAN for the reason you're denying them? If so, i think you'd be ok....but i wouldn't try to manufacture a reason or be vague on the AAN...that could cause issues. Of course, i'm answering based on the obviously hypothetical scenario you've presented. Other reasons COULD venture into fair lending concerns. Just my humble opinion.
Posted By: Skittles

Re: Denials - 08/13/21 02:45 PM

I'd also be very careful about your definition of application. While you may not have the six key pieces of information for TRID purposes, that doesn't mean you don't have an application under Reg B or HMDA.
Posted By: stach23

Re: Denials - 08/13/21 02:52 PM

I understand. In this case, I don't have the borrower's SSN, so I don't have a completed application either way. In this particular instance, I was out of the office yeterday, and returned to a message to call the borrower back regarding a refinance, and I have no desire to work with this person for personal reasons.
Posted By: stach23

Re: Denials - 08/13/21 02:56 PM

So without it being a "completed application," an AAN wouldn't be required, correct?
Posted By: raitchjay

Re: Denials - 08/13/21 02:58 PM

Even an incomplete application is eventually going to require you to take some action.....denying for incompleteness if nothing else.
Posted By: Truffle Royale

Re: Denials - 08/13/21 06:44 PM

Originally Posted by stach23
I understand. In this case, I don't have the borrower's SSN, so I don't have a completed application either way. In this particular instance, I was out of the office yeterday, and returned to a message to call the borrower back regarding a refinance, and I have no desire to work with this person for personal reasons.

Unless you own the bank, you don't get to not do business based on personal reasons.
And unless you want this backfiring on you big time, you'd best be going to your boss or the bank president to explain what you want to do and why. Be prepared for them to tell you to do it anyway, too.
Posted By: Oursisnottoreasonwhy

Re: Denials - 08/13/21 06:44 PM

Originally Posted by stach23
I have no desire to work with this person for personal reasons.

I do not believe you that cannot work with a borrower for "personal reasons" and you cannot discourage someone from applying.

Send them an application, if the return it, either they qualify for a loan or they don't.
Posted By: M Cockrell

Re: Denials - 08/13/21 06:52 PM

When I first got into compliance, I was told you could deny anyone for any NON-PROBITIED reason; however, anything outside of the model language is very likely to be scrutinized more thoroughly by examiners.

I would suggest the more you use "Other" as a reason for denial, the more slippery the slope becomes.
Posted By: Dan Persfull

Re: Denials - 08/13/21 07:27 PM

If you have an incomplete application then either send them an AAN for an incomplete application or send them the Notice of Incompleteness. As Ours indicated if they reply then they either qualify based on your underwriting criteria or they do not.

If you are going to base your loan decisions on personal feelings then I would suggest you might be in the wrong business.
Posted By: stach23

Re: Denials - 08/13/21 08:40 PM

Yeah, I get it that it's easy to share your opinions without knowing the full story and knowing what this person has done to my family. Regardless, I proceeded as a professional and moved forward with the loan.
Posted By: MJ

Re: Denials - 08/25/21 08:22 PM

I have heard a famous compliance consultant suggest and have seen the following reason used - Undesirable Character. I agree with being careful and having a second person review. To some extent we can choose who we want to do business with even in our current environment as long as it doesn't violate regulation (or even those comments/opinions we get that are not in print). There is even a famous vendor that will bounce your customer database against FBI most wanted and a multitude of other lists with an OFAC check. Note that depending on the situation you might have to notate your source of the information.
Posted By: MJ

Re: Denials - 08/25/21 08:28 PM

I failed to state Dan's suggestion would be the first route, denial for Incomplete Application or issue an incomplete letter; although, be prepared for the applicant to make the incompleteness whole.