We are now almost two months into the new HMDA regulation and there have been several questions as to reporting the action taken. Specifically, when to report an application as being withdrawn or file being closed for incompleteness. While this data point existed under the old HMDA regulation, it can still be confusing.
First there are applications that must be reported as being withdrawn. Under the new HMDA regulation, withdrawn is reported when the application is expressly withdrawn by the applicant before a credit decision was made. An application is also reported as withdrawn if the financial institution provides conditional approval that specifies underwriting conditions which must be met and the applicant withdraws the application before satisfying all of the specified underwriting and credit worthiness conditions. An application would still be considered as being “withdrawn” if the financial institution made a counteroffer which the borrower agreed to and the loan was subsequently conditionally approved with underwriting conditions but the borrower later withdraws before satisfying those conditions.
When do you report an application as being closed for incompleteness? This part of the HMDA regulation coincides with ECOA. While the HMDA regulation itself does not necessarily require a notice to be sent regarding missing information, for an application to be considered as “file closed for incompleteness”, however a written notice of incompleteness as described under Regulation B 12 CFR 1002.9 (c)(2) must be sent to the applicant. If the applicant fails to respond to the written notice, there is no further action needed on the part of the financial institution and the action taken would be “file closed for incompleteness”. If an oral request for additional information is made by the financial institution and, if the application remains incomplete after the oral request is made, then a written notice denying the application based on the application being incomplete must be sent. In this instance, the file is denied for incompleteness instead of being closed for incompleteness. There are some financial institutions that provide both the notice of incompleteness under Regulation B, and then send an notice of denial for incompleteness. In this circumstance, reporting the application as closed for incompleteness or denied is left entirely up to the financial institution. As always, remember to document your file accordingly.
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