Can I beat a dead horse? I am so confused regarding exactly when a status check must be done for a cover loan. Here is a poll. Comments too, please!

Section 232.5 from the Federal Register

"the creditor may make a determination regarding a consumer applicants status generally when the creditor enters into a transaction or establishes an account that is (or could be) consumer credit...."

I have interpreted that to mean at application for our institution...

Feel free to laugh and throw things at me, but I'm still trying to figure out how we would check the status of an applicant 30 days before application. Is this saying that I can check when the customer says I'm looking for a car but hasn't given me enough info for a credit app? If so, I better not see any credit report ordering!

Cornfed, that provision is for psychics who finance their fees.

Our process will be to check the DOD database soon after we receive an application.

Here is how I understand it.

A customer comes in the branch on 9/1/2016 and applies for a car loan. At that time we would pull the customer's military status and all other items needed to qualify the loan.

The same customer then comes back in to the branch on 9/15/2016 and applies for a lot loan. We could use the customer's military status confirmation that was pulled on 9/1/2016 for this new loan because it is within 30 days.

Agreed. And if 30 days has passed since the credit report (or whatever means used to document status) but the loan hasn't closed yet, you would re-check military status. Thanks, NSF.

And...ouch!.....you said "lot loans." I don't want to do a lot loan! Just sayin'

To my understanding, we don't "enter into a transaction" or "establish an account" until the documents are signed. We are allowing military status to be checked anytime between application and loan closing. But . . . it will be checked with the credit report at the time of application or shortly after.

Ditto Bville.

We will be using the credit report method also......new consumer loan request.....new credit report. No re-using of credit reports even if within 30 days. I am one of those in the camp that thinks that is illegal anyway. I am happy to finally "get my way." We typically access credit same day, next day, or possibly the third day.

Is your bureau truly going to be ready? Just curious.

They SAY they will be.

Experian

Most likely a consumer loan would close within 30 days of application but for lot loans it is unlikely one would close that quickly so would we need to pull another determination of status prior to loan closing if the last determination was more than 30 days prior but is for this loan request?

I am interested in discussion on this as well. Our lot loans take from 30 to 45 days to close, typically.

Yes. The covered borrower check is only good for 30 days. So if they apply and 31 days later you are going to be funding the loan, you will have to check again before funding.

Oh good grief!!

I'm not reading the reg to say the covered borrower check is good for only 30 days. Can you guide me to that in the regulation? 232.5(b)(3)(iii) allows the check to be good for 60 days if a firm offer of credit is extended to the borrower (if certain requirements are met). I'm afraid I'm missing something important.

232.5(b)(3)(i)(ii) and it depends upon the definition of "initiates a transaction" which is anyone's guess. Is it "initiated" when the borrower applies? Or is it "initiated" when the loan is closed?

Bville- I think the "firm offer of credit" is referring to a pre-approval campaign where you mail out the offer. I never took it to mean if they applied, you approved it, and they took forever to get documents back, etc that you could use the covered borrower check for up to 60 days.

As always with this poorly written reg... Until further clarification is received, we will go with another check if the loan is 30 past the original check. Luckily, we have LOS software that will not allow the loan to proceed if the covered borrower check is over 30 days old.

Thanks, now I understand why it's being interpreted that the check is only good for 30 days, which I find very depressing.

On the other hand in the interpretative Q&A it says, "to benefit form the safe harbor provision, a creditor must determine a consumer's covered borrower status at or before the time of the transaction or the time an account is established and make a record of the determination." I want to read this as saying there is no limit on how long the determination is good for.

I was reading that the same way as you Bville. I initially thought 30 days, but after seeing that in the interpretive rule I changed my initial stance. Any other thoughts?

I don't think the interpretation can trump the regulation. I think the regulation is very clear on the 30 days and that it wasn't necessary to expand upon that in the interpretation.

I am now doubting that the status check is only valid for 30 days - in the section by section analysis to 232.5 it states the creditor need to undertake this coverer borrower check only once, namely, only at the time that (I) a consumer initiates the transaction, (ii) a consumer applies to establish the account, or (iii) the creditor develops or processes, with respect to a consumer, a firm offer of credit that (among the specific criteria used by the creditor for the offer) includes the status of the consumer as a covered borrower.

I am reading this to mean if we pull credit and have the MLA status check included, if the loan doesn't close for 30+ days we don't need to check the status again.

Any one else agree with this?

(3) Determination and recordkeeping; one-time determination permitted. A creditor who makes a determination regarding the status of a consumer by using one or both of the methods set forth in paragraph (b)(2) of this section shall be deemed to be conclusive with respect to that transaction or account involving consumer credit between the creditor and that consumer, so long as that creditor timely creates and thereafter maintains a record of the information so obtained. A creditor may make the determination described in this paragraph (b), and keep the record of that information obtained at that time, solely at the time—

(i) A consumer initiates the transaction or 30 days prior to that time;

(ii) A consumer applies to establish the account or 30 days prior to that time; or

(iii) The creditor develops or processes, with respect to a consumer, a firm offer of credit that (among the criteria used by the creditor for the offer) includes the status of the consumer as a covered borrower, so long as the consumer responds to that offer not later than 60 days after the time that the creditor had provided that offer to the consumer. If the consumer responds to the creditor's offer later than 60 days after the time that the creditor had provided that offer to the consumer, then the creditor may not rely upon its initial determination in developing or processing that offer, and, instead, may act on the consumer's response as if the consumer is initiating the transaction or applying to establish the account (as described in paragraph (b)(3)(i) or (ii) of this section).

I know there are several posts on here about WHEN you need to verify if they are or are not a "covered borrower". I keep going back to:
(i) A consumer initiates the transaction or 30 days prior to that time;

(ii) A consumer applies to establish the account or 30 days prior to that time

I'm understanding (i) to mean when the loan IS consummated or 30 days prior, and (ii) to mean at the time the consumer makes application for the loan, or 30 days prior.

So IF I'm understanding this correctly, I feel at my bank, we will have to do them the day of loan closing. My loan officer's in most cases will not even get an application for most of the covered loans, with the exception of vacant land. We are in a small rural community so the biggest majority of customers have banked with us for several years and loan officer's don't make them fill out new application forms each time.

I am the Compliance Officer and if I had to be certain they are pulling this information at the time of application, I have nothing to verify when they actually made application for the loan. Like I said, I'm so confused on this stuff but does anyone else see this as an issue?

I am thinking you can do the check anytime between application and closing - we are utilizing the credit report for the MLA status check which will be run shortly after application.

I don't follow the thought process of the rule allowing the check up to 30 days prior to application - we are not psychics. Although by using the credit report we will know there has been an application taken.