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I’m getting hung up with the Action taken chart for HMDA reporting because it conflicts with Reg B. We have a preapproval program. Because of this, some of our preapproval transactions I feel have thrown us into a gray area for this chart. Here is the scenario I’m getting stuck on.
We have an application that was preapproved. Property has been identified. Customer then withdraws application because of a bad home inspection. The application never got to the next stage of approval clearing the appraisal requirement. Therefore a creditworthy/underwriting requirement is not met. I’m getting hung up on how to report or if I should even report at all. Should I report as “Preapproved but not accepted” or since it is past the preapproval stage, would this now be considered a withdrawn application? Also, if the loan is now considered withdrawn because it is now out of the preapproval stage, should I report at all? If its considered withdrawn and is reported on the LAR, I still have to report that a preapproval was requested. However, that would produce a validity edit of V613.
The Action Taken Chart appears to provide examples for when you are in different stages of an application. This is very apparent with the descriptions given on how to report counter-offers. However, not very clear with the different stages of a preapproval. It feels very wrong not to report this application though. At this point I’m likely going to report this application as Preapproved but not accepted. Just fearful that I’ll get kick back from an examiner down the road because we are now out of the preapproval stage (already had this happen in a previous exam for a similar situation).
Any feed back would be greatly appreciated.
There may be room for discussion but the regulation and the commentary nail it pretty tightly.
Section 1003.4(a) states, “A financial institution shall collect data regarding requests under a preapproval program, as defined in § 1003.2(b)(2), only if the preapproval request is denied, is approved by the financial institution but not accepted by the applicant, or results in the origination of a home purchase loan.”
Comment 4(a)(8)(i) – 5. states, in part, “A preapproval request that is withdrawn is not reportable under HMDA.”
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