HMDA, ECOA, Adverse Action Notices, and Broker Shops. Revised 10/16/17.

Hi Folks,confused the two subjects captioned above have been driving us nuts so we dug deeper to determine what the best advice might be. Many of our clients, especially the Brokers, feel they are exempt from both subjects. Turns out, maybe not. If I do the “lawyer thing” and sound a bit vague it’s because it is hard to interpret these masterfully written regulations. We do our best to understand them for you. We look to see where the evidence tips the scale before deciding which approach to recommend. We always take the approach that should keep you out of trouble. Sometime that means more work for you. But it’s far better than an “administrative action” for failure to comply.

Plus, it might make you a better lender or broker because you will have more of your OWN data to evaluate for opportunities or trends.

First, let’s look at HMDA. This language has changed. It now includes reference to taking applications (the six item threshold) which all brokers and most lenders do. It also establishes unit thresholds that are low enough to now include many smaller broker shops. For more on HMDA reporting: NondepCriteria04

Now let’s look at pre-quals. Pre-quals don’t affect HMDA at all, but they do affect your compliance with ECOA. Please don’t be quick to say you don’t make credit decisions. You probably are making them and just don’t realize it; for example, the client you decline after reviewing the pre-qual because you KNOW they can’t meet your lender’s guidelines. It would be foolish to take a full app when you know it can’t be successful and it would waste the client’s time and money. Your decision is based on your Lender’s guidelines. Most of you do this.  Here you need to decide how you internally want to classify your pre-quals assuming they NEVER reach the six-item threshold that turns them into an indisputable application. After our research, we prepared the attached to guide you regarding pre-quals. It’s not “all or none”. Look HERE.  When do you need to issue an Adverse Action Notice

Hope this is helpful.

Respectfully,

Nelson A. Locke, Esq.

Mortgage Industry Compliance Expert

Attorney and Expert Witness

Office (800) 656-4584

Cell (305) 951-2785

http://www.lockelaw.us

http://expertlenderservices.com