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Ask the Compliance Experts: February 2018

Question:

I was hoping to get your opinion on this scenario.  A loan is denied, and an adverse action notice is generated, can we re-activated the same loan number under a new loan program?

Answer:

In a circumstance where a credit decision has been made and an adverse action communicated to the borrower, that file has reached a final disposition and should remain a denied loan. Reinstating a previously denied loan causes concern and issues with ECOA and especially HMDA. You may only have one disposition per loan file, so you cannot report both a denial and an approval on the same loan transaction. That being said, to promote Fair Lending, support the purpose behind the ECOA, and to provide every borrower an opportunity to qualify, it is highly encouraged to include a second review process for all loans recommended for denial, prior to an adverse action being sent to the consumer. Your scenario seems like the ideal candidate for an Underwriter to provide a counter-offer. If the borrower accepts the terms of the counter-offer, the loan may proceed under the new terms, however if the borrower rejects the counter-offer, then you should deny the loan on the original terms requested but be sure to document that a counter-offer was presented.

 

Question:

Clients often come in to see us for credit recovery advise. Many are ready to purchase homes.  Should an appraisal be asked for on a home before an offer is even made?

Answer:

There are several reasons, a mortgage lender should not engage in any pre-application expenses.  For a residential mortgage loan, no charges, except for credit, can be assessed the applicants prior to acceptance by the applicants of the Loan Estimate.

 

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