Getting ready to submit your HMDA Data by March 1st of each year can be a little daunting as there is very little room for error. One area that can trip you up, especially if you are new to HMDA, is preapprovals. Loan officers often use the terms “prequalification” and “preapproval” interchangeably, but HMDA clearly distinguishes the two. Prequalifications are not reported, while preapprovals are if you have a “preapproval program.” Getting these mixed up can really mess up your data.
David explains more in the video.
All right. Page 23, pre-approvals. I told you there are two full pages. Look at the letter C with me. There has to be a program, first off. Number two, there must be a comprehensive analysis with a written commitment for a designated period to offer a specific dollar amount to purchase a home. That all has to be met. The key to me there is the last part of that, which talks about full verification as typically done by the institution's part of its normal credit evaluation program.
In other words, you're completely checking them out. You don't have a property yet, but you're underwriting the people. That is a pre-approval if it's a program. And they don't define a program, but on page 24, it talks about whether you call it a pre-approval really doesn't matter. If you're doing this on a regular basis, you have a program. Letter E talks about ad hoc, meaning you do it once in a while. Part of this problem is, what do you mean by ad hoc? What's once in a while? What's a program? There is no definition for this. So if you have any questions about that, that's something you really need to take up with your regulators to find out. I've had a couple of clients that thought they didn't have a program, and the regulators ruled they did. Or the other way around. You really want to nail this and ensure you understand clearly.
Published
2022/12/15