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What are the time frames allowed for determining the borrower’s MLA status? On a real estate application, the credit bureau is pulled, at application. We use the credit bureau to get the MLA status. If it takes 70 days to get the final loan closed do we have to pull an updated determination?
§ 232.5(b)(2), and, if so, must timely create and keep the record of that information obtained. The creditor needs to undertake this covered borrower check only once—namely, only at the time that (i) a consumer initiates the transaction, (ii) a consumer applies to establish the account, or (iii) the creditor develops or processes, with respect to a consumer, a firm offer of credit that (among the specific criteria used by the creditor for the offer) includes the status of the consumer as a covered borrower. In order to facilitate a creditor’s process for responding to a consumer’s inquiry about a loan—which could occur days or a few weeks before the consumer’s application for that loan—as well as to reduce the traffic on the MLA Database, § 232.5(b)(3)(i)–(ii) permit the creditor to make a determination and keep a record of the information so obtained 30 days prior to the date of the transaction or the date the consumer applies to establish an account.
Your identification of the borrower would still be good assuming you complied with the requirements of 232.5(b)(3).
The regulations says you may make a determination using the safe harbor methods (DOD database or consumer report) and it is deemed to be conclusive so long as it is done timely and you maintains a record of the information. Timely is considered to be when the consumer initiates the transaction, applies for the account, or 30 days prior to either of these events. If you as the creditor develop an offer of credit for the consumer (prescreen offer) that determination is good if the consumer responds to your offer within 60 days. If they respond after 60 days then the original determination isn’t good and you would need to make another determination.
But keep in mind that the MLA does not apply to residential mortgage loans, which is credit secured by an interest in a dwelling (1-4 residential structure), including a transaction to finance the purchase or initial construction of the dwelling, any refinance transaction, home equity loan or line of credit, or reverse mortgage.
To clarify the customer need only respond to the offer, not the bank originate the loan within 60 days, is that correct?
We have a situation where the credit report was pulled 12/7/16 and we use the credit report MLA indicator. However the application is dated 2/3/17 and the loan originated 2/7/17, more than 60 days after the MLA status check on 12/7/16. The lender used a credit report pulled for a different request by the same borrower. Do I ned to compare 12/7/16 to the application date (is within 60 days) or the loan origination date, (is not within 60 days of MLA determination)?
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