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What’s an application? That’s a great question and one that isn’t quite as easy as it seems. You see, each regulation has its own set of definitions. Thus, what constitutes an “application” for Regulation B (ECOA) can be different than what constitutes an application for Regulation C (HMDA) or for Regulation Z (TRID). Your application date could differ depending on what regulation you’re talking about. It’s also important to note, that you can’t use one regulation’s definition for another.
David explains a HMDA application in the video.
Reg B talked about an oral or written request for an extension of credit made in accordance with the procedures. You'll see almost the same wording. In fact, HMDA even says, "This really is the same as Reg B. The difference is we have to have a covered loan request." In other words, it's a dwelling secure to purchase, refinance, improve home equity, and other home loans. That's the only thing that HMDA applies to. But the bar in a sense of what you're asking for is the same. It's more what they're asking for.
So loans or lines don't matter here. The point is that the definition under HMDA is really very, very close to Reg B's definition, and the whole idea about inquiry, et cetera.
Now let's go down here to Roman numeral six. HMDA gives a little more attention to what a prequalification and a pre-approval are. Reg B doesn't give much, we talked about, "How much home can I afford?" That kind of thing, where it could be tractors, could be cars. HMDA, we're specifically talking about home loans.
And you'll see that there's a paragraph, Roman numeral six, that basically says, "Here's what a prequalification is," but it doesn't really define it.
Let me do this. There's a lot more information on what a pre-approval is. We're going to get there in a minute. And I'm going to tell you this. This is what I'd love to have you write down next to Roman numeral six, prequalification. If it's not a pre-approval, it's a prequalification. Now both of them are on this, "How much home can I afford?" So there's no house identified yet. We're talking about purchasing a house. "How much home can I afford?" We know what preapproval is, or we will in just a few minutes. If it doesn't meet that, it's a prequalification. So what's the definition of prequalification? It lacks being a preapproval. When there's no home identified, let me put it that way.
Published
2022/04/15