COMPLIANCE HOT TOPIC
HMDA – Preapproval Reporting Requirements
Can you provide clarification on the definition of “Preapproval” under the new HMDA rules and information regarding reporting requirements?
Effective January 1, 2018, the new HMDA rule expands the types of preapproval requests that are reportable. Lenders who are required to file now must report preapproval requests that are approved but not accepted (this used to be optional). However, preapproval requests regarding home purchase loans to be secured by multifamily dwellings, preapproval requests for open-end lines of credit, and preapproval requests for reverse mortgages are not reportable under the new HMDA requirements.
You must report preapproval requests for home purchase loans (not for multifamily, open-end lines of credit or reverses) if reviewed under a preapproval program.
A preapproval program is a program in which you (1) conduct a comprehensive analysis of the applicant’s creditworthiness (including income verification), resources, and other matters typically reviewed as part of your normal credit evaluation program; and then (2) issue a written commitment that: (a) is for a Home Purchase Loan; (b) is valid for a designated period of time and up to a specified amount, and (c) is subject only to specifically permitted conditions. Specifically permitted conditions include:
Conditions that require the identification of a suitable property;
Conditions that require that no material change occur regarding the applicant’s financial condition or creditworthiness prior to closing; and
Limited conditions that (a) are not related to the applicant’s financial condition or creditworthiness and (b) you ordinarily attach to a traditional home mortgage application (such as requiring an acceptable title insurance binder or a certificate indicating clear termite inspection and, if the applicant plans to use the proceeds from the sale of the applicant’s present home to purchase a new home, a settlement statement showing adequate proceeds from the sale of the present home).
Preapproval requests reviewed under a preapproval program are only reported if denied or approved but not accepted. The CFPB indicated if you do not regularly use procedures to consider requests but instead consider requests on an ad hoc basis, you are not required to treat the ad hoc requests as having been reviewed under a preapproval program. However, you should be generally consistent in following uniform procedures for considering such ad hoc requests.