We had a file that began as a preapproval then a borrower identified a property before we could even get to the point of issuing an approval. Then chose to withdraw the loan.

Once a property is identified the request falls out of the pre-approval stage and into the application stage. I'm not sure why the examiners backed off because you had a reportable withdrawn home purchase loan request.

They backed off because I would have still been required to report a preapproval code of 1. The fact that we are no longer in the preapproval stage doesn't change that fact that a preapproval was requested.

In the getting it right guide appendix A under action taken it states "Do not use Code 4 if a request for preapproval is withdrawn; preapproval requests that are withdrawn are not reported under HMDA"

We had a preapproval request and it was withdrawn. Doesn't really matter that the stage of the application changed.

In the commentary for the changes to the reg under paragraph 4(a)(8)(I)5 Action Taken - Application withdrawn, it states "A preapproval request that is withdrawn is not reportable"

This is why I'm guessing there is a validity edit now.

My issue now lies with new interpretations under Attachment B and not covering in enough detail when I still have a preapproval request regardless of what stage of the loan I am in, but leads you to believe different stages of your request affect your action taken.

Of course if I contact HMDA help, they will only quote parts of the regulation I've already read.

Sorry, not trying to sound like I'm arguing, just wanted to point out our interpretation of the Reg. I'm thinking I'm going to have to pick a way and stick with it. I'm definitely going to reach out to our examiner for their thoughts on the subject too.

If the applicant withdraws the request before a property is identified then that would be a withdrawn preapproval request, if you denied the request before a property is identified it would be a denied preapproval, or if you approved the request subject to a satisfactory property being identified and they changed their mind before identifying a property then that would be a preapproval approved but not accepted.

Once the property is identified the request now becomes an application and the preapproval action code options are no longer available.

If you do a search on the topic you will find where this has been discussed on numerous occasions.

Dan is correct. If the loan moves from the preapproval stage to a full blown application and then the applicant withdraws prior to a credit decision, the Action Taken equals 4 and the Preapproval equals 2.

I'm not understanding how the preapproval code would change to 2. You still had a request for preapproval. If this loan had closed, I still would report a code of 1 on the LAR for the preapproval code. 1003.4(a)(4) says to report "Whether or not the application or covered loan involved a request for a preapproval of a home purchase loan under a preapproval program" Key word is involved. This app did involve a preapproval request and it was under a preapproval program.

1) Preapproval must equal 1 or 2, and cannot be left blank.
2) If Action Taken equals 7 or 8, then Preapproval must equal 1.
3) If Action Taken equals 3, 4, 5 or 6, then Preapproval must equal 2.
4) If Preapproval equals 1, then Action Taken must equal 1, 2, 7 or 8.

So, what you are saying is if you have a pre-approval application and it changes into a full blown application and after that happens, the loan ends up Denied, Withdrawn or Closed for Incompleteness than that application just falls off the face of the earth? I really don't think so.

Take a look at the FIG and what Randy quoted.

From the FIG:

3) If Action Taken equals 3, 4, 5 or 6, then Preapproval must equal 2.

For reference, action taken 4 = withdrawn.

The FIG can be found at https://www.consumerfinance.gov/data-research/hmda/static/for-filers/2018/2018-hmda-fig.pdf

I totally get the reference from the FIG. My point is that you should not change the preapproval code. Preapproval code 1 however cannot live with action taken codes of 3,4,5 or 6 per the FIG. However a preapproval code 1 can live with an action taken code of 1, 2, 7 and 8.

The regulation says to report whether or not the covered loan or application involved a preapproval request. My app did. Are you saying if the loan closed, I would switch the preapproval code back to 1? That doesn't make sense either. Technically for the loan to close, at some point I would have had to come out of the preapproval phase of the loan. If I went with the argument that once I'm out of the preapproval phase of the loan I should always report the preapproval as a code of 2, then none of my closed loans would ever be reported as a preapproval requested.

Yes but I don't agree with the FIG. And HMDALifer's issue stems from the V613 error.

A pre-approval was requested however that pre-approval turned into an application when the property was identified.

From the regulation, not the FIG.

(4) Whether the application or covered loan involved a request for a preapproval of a home purchase loan under a preapproval program.

I apply for a pre-approval to purchase a new home. 5 days after submitting the application I give you an identified property. You finish processing my application and for whatever reason you deny the loan request.

Preapproval Request = Code 1 - the covered application involved a preapproval request

Action Taken Code = Code 3 - the denied covered application is no longer a preapproval since I am now applying to purchase a specific property. However my application did involve a pre-approval request.

Again this is another conflict between the regulation and the FIG IMO.

The only thing I can think is that they are now saying once a pre-approval request converts to a an application (a property has been identified) the application no longer involves a pre-approval request.

If that is their logic then I have to opine that logic is flawed.

Exactly Dan. This is why I'm so stumped. I really don't agree with the FIG. I also don't think the Reg is clear enough or maybe they made it too clear. I think they still want to know if a borrower requested a preapproval no matter what or why else have the code at all.

Honestly, I think this particular edit should have been made quality edit if one must exist.

I agree that there appears to be a disconnect between the intent of the rule and the FIG. Personally, I think the correct way is to code it as a preapproval requested, but the only way the system is going to let you do it (based on the FIG) is to code it as a preapproval not requested.

Also, when HMDALifer was quoting the rule, I had a thought that it almost feels like the writers of the FIG started to confuse themselves with this statement: "Do not use Code 4 if a request for preapproval is withdrawn; preapproval requests that are withdrawn are not reported under HMDA" If you read this incorrectly, it sounds like you can't list that a preapproval was requested if the application - even after an address is determined - was withdrawn. However, I believe that what this is saying is that while a loan is still in the preapproval stage (before an address is chosen), the application cannot be reported if it is withdrawn (before an address is determined). I believe that the intent was to report whether the request began as a preapproval or not - regardless of how the request ended. This intent/approach would be consistent with the prior rule and the preamble to this rule that references the prior rule and the changes they made (and didn't make) to make the reporting better.

Also, I can't think of any reason why the FIG would say that a preapproval was requested can be used for an originated loan but can't be used for a withdrawn or denied loan. That seems to justify the flaw in my mind.

Dan, this can't be completely true as the FIG says you can report an originated loan as having a preapproval requested, correct?

From the FIG: If Preapproval equals 1, then Action Taken must equal 1, 2, 7 or 8.

I think this is just proof that the FIG is flawed. Or, what am I missing?

I was just brain stormin' but you are correct. If that was their logic the originations would not be able to have a Code 1 for pre-approvals either.

ii. A financial institution reports data for applications that did not result in an origination but on which actions were taken-for example, an application that the institution denied, that it approved but that was not accepted, that it closed for incompleteness, or that the applicant withdrew during the calendar year covered by the loan/application register. A financial institution is required to report data regarding requests under a preapproval program (as defined in § 1003.2(b)(2)) only if the preapproval request is denied, results in the origination of a home purchase loan, or was approved but not accepted.

If the application morphs into an actual application and is withdrawn - they don't care if it involved a preapproval or not. That is the way the commentary reads - so I don't know what the mismatch might be. You are only required to report if it was involved in a preapproval program if it was subject to preapproval and if it is later denied, originated or approved but not accepted.

I guess that makes since, Randy and I understand it is pointless to understand why they did what they did, but sometimes Friday evenings allow us time to do just that.

Whatever the reason, I think the FIG is the end all for 2018 as the edits won't let reporting occur any other way.

I don't have a pre-approval program so this is really a moot point for me and I don't have a dog in this hunt.

Randy please go back to my post #217568, 3 or 4 up. Under that scenario are you saying that Preapproval Requested would be Code 2 because my preapproval request morphed into an actual application?

I see where the FIG indicates that is the case but again the regulation says to report if the covered application or loan involved a request for preapproval. In the scenario I presented my covered application to purchase a specific property did involve a preapproval request.

Or would it be reported as Code 1, Code 7 for action taken and then report the property information on the LAR? I think that is where the disconnect is. In the past these were treated as application and the action taken code was reported based on the application request, not the preapproval request but it was still marked a Code 1 for preapproval requested.

Once preapproval morphs to an actual application it will never disappear from your LAR, however then you only report that it was subject to a preapproval if the action code is 1 or 2.

If the application never morphs into an actual application, you only report the application if you end up with an action codes 7 or 8. Anything else during the preapproval stage disappears.

Randy, I'm not sure I agree with your statement on this topic either. You make the statement when a preapproval morphs into an actual application.
Preapprovals are actual applications defined under HMDA.

You also reference

ii. A financial institution reports data for applications that did not result in an origination but on which actions were taken-for example, an application that the institution denied, that it approved but that was not accepted, that it closed for incompleteness, or that the applicant withdrew during the calendar year covered by the loan/application register. A financial institution is required to report data regarding requests under a preapproval program (as defined in § 1003.2(b)(2)) only if the preapproval request is denied, results in the origination of a home purchase loan, or was approved but not accepted.

I interpret this different than you do. If you focus on the part that says "A financial institution is required to report data regarding requests under a preapproval program (as defined in § 1003.2(b)(2)) only if the preapproval request is denied, results in the origination of a home purchase loan, or was approved but not accepted."

I read this as I have an application that was an application request that was evaluated under a preapproval program if the loan was for a home purchase and the applicant requested a preapproval for their application. Like I said in my earlier comments, just because I've moved to a different stage of my application, doesn't mean that I still do not have a preapproval request. It also does not mean I have a different application. The preapproval request is the application.

So, they apply for a preapproval and then they give you an address and you end up denying the loan and the application then just disappears?? I suggest you e-mail HMDA help or the CFPB directly and ask them, as I don't think they created such a black hole.

Randy, the application disappearing from the LAR is not my position.

My position is:

I apply to be preapproved under your pre-approval program (Code 1 - Preapproval Requested)

A few days later I provide an identified property (application now out of the preapproval stage and is an application to purchase a specific property however a preapproval was requested)

For whatever reason you deny my application.

I am contending that on the LAR the Preapproval Requested section should be a Code 1 and the Action Taken section should be a Code 3. However the FIG indicates the Preapproval Requested section cannot be a Code 1 if the Action Taken is a Code 3.

The regulation under 1003.4(a)(4) plainly states to report if the covered application or covered loan involved a request for preapproval.

(4) Whether the application or covered loan involved a request for a preapproval of a home purchase loan under a preapproval program.

What the FIG is saying is unless the action taken Code is 1, 2, 7 or 8 the fact the covered application or loan began as a preapproval request under a preapproval program is irrelevant. If that's the case then why is reporting any preapproval application relevant?

It appears they are saying an application unless an action code 1, 2, 7 or 8 is taken never leaves the preapproval stage regardless if a property has been identified. So, under their logic if I identify the property and a couple of days later I withdraw the application it would indeed disappear from the LAR since withdrawn preapproval requests are not reportable.

I understand, but it comes down to the fact, that if the application is denied or withdrawn after a property address is provided, they don't care whether or not that the loan application was submitted for a pre-approval. In essence, the pre-approval process turned into a worthless exercise under those circumstances.

that if the application is denied or withdrawn after a property address is provided, they don't care whether or not that the loan application was submitted for a pre-approval. In essence, the pre-approval process turned into a worthless exercise under those circumstances.

Then why have a preapproval category at all (rhetorical)?

All I can say is I'm glad we discontinued our preapproval program in 2005 after the 2004 revisions.

I've wondered the same thing, Dan. They obviously had a reason to keep reporting approved loans that started as a pre-approval, but I just can't think of why approved loans would be more important in any type of evaluation (CRA, goverment, FL, ect) where an approval would provide better data than withdrawn or denied loans. In addition, I don't recall anything in any of the preambles (proposed or final rules) that said anything about a difference in withdrawn/denied vs approved when it comes to a preapproval program (though they go in great detail as to why they no longer need the NA code in the preapproval program field).

That said, I believe the FIG is currently the end all that must be followed due to the system not permitting submissions outside of the FIG rules.

Maybe I am missing something here, but if you have used a preapproval requested code 1, then you would have to use a action taken code 7 for preapproval request denied would you not?