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#2101284 - 09/30/16 06:24 PM
Re: Timing of the Status Check
swiggles
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Member
Joined: Jun 2013
Posts: 90
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Thanks Andy. I guess that's my concern: if they are applying online, I have no idea if they are a covered borrower or not! The vendor is saying because those loans are under 36% the rules don't apply. I hadn't seen anything posted regarding that. That was my concern.
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#2102144 - 10/06/16 05:44 PM
Re: Timing of the Status Check
swiggles
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Diamond Poster
Joined: May 2007
Posts: 1,243
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We get applications and make the loan on the same day. We are verifying the status using the DOD website. So if we receive an application today in the morning, get the status check and close the loan all on the same day, do we have to show proof of the time the customer signed the loan docs in order to determine that the status check was done before the customer signed the loan docs? The status check has a time stamp. the only proof we will have is the time stamp of when the loan funded (time of the deposit or cashiers check). Will proof of the closing be required for this scenario? or will we have to start setting up closings for the next day?
thanks,
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#2102149 - 10/06/16 05:58 PM
Re: Timing of the Status Check
swiggles
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That isn't required and I would feel safe in saying procedurally the borrower check is done before the loan is closed.
Now, the first time you close a loan assuming they are not covered and your file has the verification showing they are, your procedures are discredited. Hopefully that won't happen. But I would not create a rule to time and date stamp everything. In my experience that doesn't work especially if your loan docs are printed, then the database check is done, then the loan is closed because all is good. Unless you're E-SIGN'g docs "when" it is signed is hard to remember to do.
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AndyZ CRCM My opinions are not necessarily my employers. R+R-R=R+R Rules and Regs minus Relationships equals Resentment and Rebellion. John Maxwell
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#2102177 - 10/06/16 06:56 PM
Re: Timing of the Status Check
swiggles
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Diamond Poster
Joined: May 2007
Posts: 1,243
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#2103018 - 10/14/16 03:22 PM
Re: Timing of the Status Check
Andy_Z
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Member
Joined: Jun 2013
Posts: 90
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If the loan is under 36% certain remedies don't apply, but other requirements still do such as disclosures, correct? If the person is not a covered borrower the disclosures are moot. The MLA is moot. And you are not required to do a covered borrower look up, but to get a safe harbor protection you do and it needs to be 1 of 2 methods.
I would maintain that if the bank has an employee, single, not a dependent and that person applies for a laon, no check is necessary and the bank doesn't need a safe harbor. But those instances will be rare.
Andy, can you give me a citation for the "under 36% certain remedies don't apply"? I'm still having trouble with this. Thanks!
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#2104441 - 10/25/16 01:43 PM
Re: Timing of the Status Check
swiggles
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Platinum Poster
Joined: Jan 2007
Posts: 645
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I think this question fits this thread, if not please move:
I have a denial for a lot loan that was denied within three days and the officer forgot to get the military status from the database until after the loan was denied. Is there a problem with that since the customer was not in military service?
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#2104835 - 10/26/16 09:09 PM
Re: Timing of the Status Check
swiggles
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Diamond Poster
Joined: Jul 2006
Posts: 1,115
Where the Green Grass Grows
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I think the consensus previously was that you have to check anywhere from application prior to closing on the loan. So, I'm confused why it would be pulled for a denied loan at all. Unless you are just trying to show that YOUR process is to pull AT application. If that's your process, I would either tweak my process to be more lenient about when it is pulled, or make sure that the check IS being done at application. The APR and documentation showing you read them their APR and payment information would be the only thing affected, so I'm not sure what pulling it for a denied loan would do for you.
Our process is to pull prior to loan closing. We would pull credit on a RE loan, but we don't pay for the status check add on. I want the process as consistent as possible and we don't pull new credit or take a paper app on all new consumer loan requests, so the DOD check prior to closing is our process. (For our lot loans, we are doing it when we do the closing disclosure.)
But, that's just us. I am in no way a guru or an expert and love the feedback here. I was just here, re-reading this thread due to a vendor that posted a compliance update that hinted the status check should be done at application, and they would look at missing status checks on covered loan application that were denied as a problem with your process.
Last edited by Always In Training; 10/26/16 09:24 PM.
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#2104844 - 10/26/16 09:35 PM
Re: Timing of the Status Check
tryin2comply
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Joined: Oct 2000
Posts: 27,763
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Poor choice of words on my part that certain remedies don'tapply. Certain requirements don't apply, but 36% is the only requirement. That was my point.
On the point of DoD checks on denied/withdrawn apps - is this referring to the Bankers Compliance Consulting email? I think the point is, does your policy say you will check all app and when? If so, is it worded such to allow for denials/withdrawals?
If there is no consummation, I see no MLA violation if it isn't checked, but you could inadvertently violate your policy and SOP.
_________________________
AndyZ CRCM My opinions are not necessarily my employers. R+R-R=R+R Rules and Regs minus Relationships equals Resentment and Rebellion. John Maxwell
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#2287201 - 08/01/23 03:23 PM
Re: Timing of the Status Check
swiggles
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Gold Star
Joined: May 2015
Posts: 293
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Bringing this older thread back. Is it still understood that the status check is only good for 30 days? Or, if the status is checked and documented at the time of application, is it still valid if the loan doesn't fund until past 30 days?
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#2292615 - 01/22/24 04:26 PM
Re: Timing of the Status Check
ComplyGuy
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10K Club
Joined: Jul 2004
Posts: 18,999
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Bringing this back to life again and I hope someone can help. Has there ever been any official interpretation to 232.5(b)(3)?
If you do an MLA search at the time of application and it takes the loan more than 30 days to close (or, alternatively, 60 days), do we need to perform another search? I read (i), (ii), and (iii) to all say different things.
3(i) seems to indicate that, yes, we need to (if "initiates" means consummates).
3(ii) seems to indicate that, no, we do not as long as we do it at the time of application.
3(iii) seems to indicate that we have up to sixty 60 days between application and consummation to use it. (Although someone previously mentioned this only covers prescreened offers, as indicated in the preamble).
We just had an instance where there was a relatively significant amount of time between application and consummation for a covered loan (it was due to the borrower) and we have never needed to consider this before.
Any help is much appreciated!
Last edited by A_G; 01/22/24 10:17 PM.
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#2292897 - 01/26/24 06:58 PM
Re: Timing of the Status Check
swiggles
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Platinum Poster
Joined: Feb 2003
Posts: 876
Big Sky Country
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The DoD did indeed issue official interpretations, in the form of Q&As. Here is the Federal Register link for them. Check out Q&A #20: 20. To qualify for the optional safe harbor, must the creditor determine the consumer's covered borrower status simultaneously with the consumer's submission of an application for consumer credit or exactly 30 days prior?
Answer:
No. Section 232.5(b)(3)(i) and (ii) permits the creditor to qualify for the safe harbor when it makes a timely determination regarding the status of a consumer at the time the consumer either initiates the transaction or submits an application to establish an account, or anytime during a 30-day period of time prior to such action. Therefore, a creditor qualifies for the safe harbor under 232.5(b) when the qualified covered borrower check that the creditor relies on is conducted at the time a consumer initiates a credit transaction or applies to establish an account, or up to 30 days prior to the action taken by the consumer. Similarly, the timing provisions in 232.5(b)(3)(i) and (ii) permit a creditor to qualify for the safe harbor when it conducts a qualified covered borrower check simultaneously with the initiation of the transaction or submission of an application by the consumer or during the course of the creditor's processing of that application for consumer credit.Did that clear it right up for ya? ![wink wink](/forum/images/graemlins/default/wink.gif) Obviously, the DoD is not in the business of banking. They use befuddling phrases that leave those of us in the industry wondering what the heck they really mean. 30 days prior to applying to establish an account? Huh? Are we supposed to have a crystal ball that divines one's desire to apply, and check them 30 days before that? ![confused confused](/forum/images/graemlins/default/confused.gif) "Application / Applies" here is an unfortunate word choice, and IMHO never should have been used. The DoD tries to further explain it in Q&A #20, but their efforts were... if I may be so blunt... akin to polishing a turd. (What can I say, my husband was a sailor. ![grin grin](/forum/images/graemlins/default/grin.gif) ) I truly believe the difference between (i) and (ii) is the type of debt obligation the servicemember is getting into: (i) a loan, or (ii) a line of credit. A loan "transaction" creates immediate debt, while a line of credit establishes an account for future debt. The DoD is trying to indicate that either kind of indebtedness counts. Bottom line concept: before a creditor indebts a servicemember (either immediately on a loan transaction or in the future under a credit account agreement), that creditor had better darn well know if the obligor is a covered borrower or not. The safeharbor simply defines how long such knowledge is good for. The MLA check is guaranteed-fresh for 30 days before the obligation is made. I suggest boiling it down to this: How badly do you want the safe harbor? There is no requirement to achieve it - you are free to identify covered borrowers as you like. However, if you want the safe harbor, treat the MLA search as only having a shelf life of 30 days. If more than 30 days has gone by before you establish the loan or credit line, consider it stale and do a new one.
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Me, Type A? Maybe - I'm not done analyzing it yet.
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#2292907 - 01/26/24 09:21 PM
Re: Timing of the Status Check
RebekahL CRCM
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10K Club
Joined: Jul 2004
Posts: 18,999
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Thank you, Rebekah. Clear as mud is right! But thank you for the link. And also thank you for some of the clarity re: the intention based on loans and credit cards. I'm thinking of an exam. If we have the DOD check, are the examiners really going to dig that deep? The exam manuals go into even less detail and are more ambiguous regarding what the regulators are testing (they merely make reference to "in accordance with 232.5"). And, if worse comes to worse, I think I'm okay with asking for forgiveness that we used the 60-day timeframe outlined in (iii) because there was less than 60 days between us approving the loan (we processed a firm offer of credit?) and the consumer consummating (responding to our offer?) the transaction. It's weak, but it's what I have to work with! Thanks again!
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With the lights out, it's less dangerous.
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