[Angie Cowell]

We are reviewing 232.5(b)(2)(i)(B) in regards to our procedures. We interpret this to mean that once the loan has closed we cannot access the DOD database directly or indirectly to see if we have a covered borrower. Therefore, if someone failed to determine prior to closing the loan it is too late. (Does not seem customer friendly).

We are also wondering what this means in regards to loans that are coming up for renewal. When reviewing 232.5(b)(3) Determination and Recordkeeping, would we need to obtain permission from the consumer first to make sure they are wanting to renew prior to being able to search the DOD database to confirm they are a covered borrower?

Thank you.

[kowsley]

This issue is addressed in the recent MLA Q/A interpretive rule that was issued in August 26th in the Federal Register. Question #10 states:

Section 232.5(b)(2)(B) prohibits a creditor from accessing the DMDC database

after

the time a consumer entered into a transaction or established an account, namely “to ascertain whether a consumer had been a covered borrower as of the date of that transaction or as of the date that an account was established.” The point is to ensure that your FI has made a clear determination if the borrower you are lending to is in fact a covered borrower prior to consummating the transaction. This will ensure your FI will provide accurate documentation and disclosures and verify MAPR doesn’t exceed 36%.

The Q/A goes on to state that the regulation does not prohibit a creditor or assignee from accessing the DMDC database for other purposes, such as determining whether a previously covered borrower retains that status. That being said, you should be fine to access the database on a renewal to determine status of the borrower.

[jwelch]

Still on the historic look back issue…. what if during end of month verification procedures, you find that a loan officer neglected to verify MLA status.
We use the credit report indicator for MLA status; however, on this particular borrower, the DOB was not included on the credit report request giving a “MLA search not performed due to missing required data” message. The loan officer did not take the extra step of verifying MLA status directly with the DOD database.
What would be the best steps to take to correct/fix our mistake? We have yet to identify a covered borrower, so odds are this is not a covered borrower but we need to verify and correct. And obviously provide additional training to the officers on what to do if this occurs again.

[kowsley]

Since it is after the time of consummation, there is no “fix” per se; however, I would go into the database now and run the borrower through to insure you in fact do not have a covered borrower. You may want to put a memo in file explaining the situation and include the DOD certificate. While it will not be in compliance at least you can show that you have addressed the issue and provided additional training.

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