Sunday, December 15, 2019

Loan Denials and Withdrawals – Tips to Sure Up your Process

Posted by OnCourse Staff July 30, 2012 1:14pm

Photo Credit: linusb4

In the past few months, my team and I have noted an increase in our recommendations to our clients for monitoring and documenting Withdrawn and Denied loans. While there has not been as huge an upswing in scrutiny by regulatory agencies in this area, it does seem that certain events and changes that have occurred have not been adapted by institutions, causing potential violations where none need be. The following are a few of the more common things we’ve seen, and “fixes” to help your institution be better prepared:

  • Ensure your adverse action form is up to date, as required by y § 1100F of the Dodd-Frank Act. These amendments The FCRA amendments were effective July 21, 2011. These primarily revolve around new credit score disclosure requirements. In addition, make sure that the address of the regulatory body in question is up to date. With all the merging and creation of new agencies as of late, there is a good chance that this may need to be amended.
  • Application dates seem to be a bugbear to trip up banks for the “30 day clock” (the timeframe in which a bank must make a decision on a loan for a consumer as defined by Regulation B). In order to make certain that loans are not slipping through the cracks and not being approved or denied timely, banks should:
  1. Clearly define in process or policy what the bank considers a completed application; this way, there are no gray areas as to what is and what isn’t considered an application by bank standards.
  2. Make sure that once this information is received, the application is DATE STAMPED to document that the Reg. B clock started then.  By doing this, you’ve outlined your parameters, and set a definitive start point for your process.
  • HMDA monitoring also seems to be increasingly an issue for declined and withdrawn loans, not so much with the actual tracking of the loan, but with the information included on the LAR. Those that are responsible for recording/reviewing HMDA LAR input should be well versed on the (current!!) HMDA requirements for information on declined /withdrawn loans; as these change frequently, training for these employees should be as current. That way the LAR can be submitted with less avoidable errors, and subsequent unneeded revisions.
  • Finally, each loan file should be able to sufficiently document the reason for the denial or withdrawal.  This is trickier from the withdrawal standpoint, because sometimes a borrower just walks away from a loan and never bothers to convey their lack of interest to a loan officer.  In those instances, a strong communication log detailing efforts to contact the borrower and the  lack of response are key to justifying the path the bank took on the loan. For denials, the documentation in the file should match the reason on the Adverse Action Notice, and be reviewed by two individuals prior to the notice being sent. Occasionally, we have seen loans denied for one condition, and the Adverse Action Notice being sent with completely different or unclear information being sent to the borrower.

By periodically checking on  the “back end “ of the loan process, you are Safeguarding yourself against unnecessary  Regulation B and HMDA violations that  are never  welcome, especially in this environment where anything has the potential to invite additional scrutiny to your lending process.  Hopefully, these tips will be of use to keep the entirety of your lending activity  violation free.

Comments

Add a comment

  • Required fields are marked with *.

If you have trouble reading the code, click on the code itself to generate a new random code.



 Image

OnCourse Staff

The OnCourse writing staff work to keep you informed about the most pertinent financial industry news of the moment



OnCourse Staff's Posts Subscribe to RSS Feed



Flood Coverage – Still a Hot Regulatory Issue
Interagency Statement on Sharing BSA Resources and Challenges
New Jersey's Corporate Business Tax Legislation: A Look at the Impact for Banks
Correspondent Banking: The Challenges of Data Transparency
Regulation E and Business Account Errors
Controls over Employee and Officer T&E Expenses
Is Regulation CC Put on the Back Burner?
Training – An Investment and Risk Management Tool
Are You Gambling with Your BSA Program?
The Case of Foreign Banks and Heightened Scrutiny
IRS and New Jersey Tax Audits of Banks
State Taxation of Financial Institutions in Today's Environment
Does your 401(k) Plan need an Audit?
De-Risking of Foreign Correspondent Banks
Same Day ACH Credits – Phase One
FinCEN Finalizes Ruling on Beneficial Ownership and Ongoing Customer Due Diligence
Keep an Eye On Your Chip!
Is the IRS Status of your Defined Benefit plan in Jeopardy?
The Dilemma of Banking Medical Marijuana Businesses and Other Indirect Risks
Is your Institution Monitoring Working Capital Lines of Credit?
Financial Reporting and Regulatory Update on the Horizon
BSA/AML Training: Is your program effective?
Planning in a Consolidating Banking Industry
To opt-out or not to opt-out, that is the question – A reminder on March 31, 2015 Call Report, Schedule RC-R, item 3.a
Anti-Money Laundering – The Age of Technology
Top Compliance Topics Discussed at the NJ Bankers Compliance University
Some tips and tricks for dealing with Regulatory Examinations
Updated Regulation E Booklet from the OCC!
Is Flood Disaster Still on the Heat Map?
Have You Implemented Your Plan yet?
FDIC Consumer Newsletter
More Flood Insurance Changes...
Same Sex Married Couples - Ensuring Equal Treatment – Announcement from Consumer Financial Protection Bureau
Truth in Lending (Regulation Z) Annual Threshold Adjustments (CARD ACT, HOEPA and ATR/QM)
FFIEC Releases Revised BSA/AML Examination Manual: So what’s new?
OFAC Consolidates Non-SDN Listings
Coping with HOPA
Coping with the CFPB’s Ability-to-Repay Rule
ABA Survey on Impact of Dodd Frank Compliance
ABA Mortgage Origination Deskbook
Who handles Your Dormant Accounts?
Appraisal Disclosure Rule
Cybercriminals Broaden their Attacks in Social Networks
The Importance of Segregating a Bank’s Credit Function from its Lending Function
Appraisal Management Companies in Regulatory Crosshairs
All About the Home Owners Protection Act
Requesting Current Financial Information
Countdown to Windows XP End of Life and Support: Are you still at Risk?
314(b) Distinct Advantages for Financial Institutions
Where is the Document?
Building a Better Hen House
Ready the Ramparts! : IT Security and the Modern Bank
The Credit -- Er, IT Crisis?
Keeping the Balance: IT Security and the Org Chart
IT Security: "IT's" About Process
Wag the Dog
Consumerization of Technology and its influence on Information Security
Detective, Reactive and Preventive: Evolving Your IT Security
Do You Know The Security Features of the New $100 Bill?
Segregation of Duties for Wire Transfer Processing
How do you charge Early Withdrawal Fees on Time Deposits?
Do you still offer NOW Accounts?
Policy Changes Required – Do you Wait until Annual Approval?
Summarizing ACAMS White Paper on EDD and AML Risk Assessments (Industry Survey)
ACAMS to provide Free Webinar
ACBB Changes its Name
Who Do You Give Cash to?
ABA Briefing to Help Banks Address Cyber-security Threats
The OCC Issues Booklet: “A Common Sense Approach to Community Banking”
Safe Deposit Box Contents are not insured – But They COULD Be!
Allowance for Loan Loss Tips and Tricks
FDIC Can Review New Products
Let’s Talk About Overdrafts!
Community Banks Slowly Warm Up to Private Student Loans
Has your Bank updated the Adverse Action Notice?
Regulation E and NACHA Rules: When you Want to Stop Payment on a Recurring Debit
CFPB Stands Up Against Poor Debt Collection Practices
Don’t Forget the Small Stuff
Double Endorsed Checks: What is the Risk?
Social Media – Will the Regulators Do Spot Checks?
How Does Your Bank Handle Customer Requested Maintenance Changes?
OCC Releases Booklet on "Common Sense" Community Banking
New SAR Filing Updates
Is your BSA/AML automated monitoring system up to par?
The Importance of BSA Training
Office of Foreign Assets Control (“OFAC”) introduces the OFAC SDN Fuzzy Logic Search Tool
Filing the New CTR Forms: What you need to Know
FFIEC Proposed Risk Management Guidance on Social Media: Beware and Prepare
Solutions to Reducing Dormant Accounts at Your Institution
Pandemic Preparedness: Are you testing your Pandemic Plan?
Regulation E Foreign Remittance Rules
FFIEC issues revised “Supervision of Technology Service Providers” booklet
Expiration of Unlimited Deposit Insurance for NIBTAs
Is Your Institution's Marketing UDAAP Compliant?
What is Enterprise Risk Management?
New OCC Guidance Released on Investor Owned Properties
Electronic Work Papers - Why acxell Made the Switch
OCC to Toughen Exams in Response to United States Senate Permanent Subcommittee On Investigations
Clarifying Regulatory Obligations Regarding Continuing Activity SAR Filings
Federal Regulatory Agencies Proposal New Rule
Risk management - Smaller institutions and the benefits of ERM
Strengthening Your Loan Maintenance Monitoring
New Lending Proposal from CFPB
FDIC Reaches Settlement on Overdraft Fees
FRB Guidance on Foreclosures
Loan Denials and Withdrawals – Tips to Sure Up your Process
Regulation O – 5 Easy ways to avoid violations
The Summer of CFPB Proposals
Community Lenders Seize Market Share From Big Banks by Using Advanced Online Lending Technology
Dodd-Frank Rule to Change Legal Lending Limit Monitoring Requirements
The ABCs of a TDR
Supreme Court ruling for the Freeman, et al. v. Quicken Loans, Inc case
New FinCEN Guidance for CTR Aggregation for Businesses with Common Ownership (FIN – 2012 –G001)
Senior member of House of Financial Services Committee Introduces Overdraft Protection Act
FinCEN is looking to streamline the financial institution reporting process by issuing mandatory E-filing reporting requirements.
Curry: Operational Risk Now OCC’s Top Concern
JOBS Act Client Alert - Rules 506 of Regulation D
New Rules Proposal for Servicers Coming from the CFPB
Wall Street Receives Volcker Rule Clarity
De-stressing with stress testing
Banks Participate in Information Sharing to Battle Online Theft
IT security: Is your program still effective?
Banking Solutions: ALLL and GAAP in Agreement
How are the most recent regulatory enforcement trends that banks are facing today affecting internal audit? Why?
What are the most recent regulatory enforcement trends that banks are facing today?
Mobile banking: How do we get there?
UBS further struggles with $2 Billion loss by Rogue Trader
Capital One Becomes Dodd-Frank Test as Nation’s Fifth Largest Bank
Community Banks to receive US Funding for Small Businesses
FDIC fields questions about overdraft guidance
Negligent Hiring – A mistake can cost more than just money!
Regulatory Burden – Managing the Pain
From Embezzlement to Imprisonment: Former Citigroup employee faces charges with $19.2 million in bank fraud
TDR or Not to TDR …Much Ado about Nothing?
Finding the Right Hire
Model behavior: Is your ALM model capturing your bank’s risks?
ALLL best practices: Pay attention to qualitative factors
Abandoned Property Law, and its new New York State of Mind
Consumerization of Technology and its influence on Information Security
FDIC releases Provisions on Dodd-Frank to help Community Banks
Social Media in the Employment Arena – It Gets Funky!
The Proof is in the Pudding: Affects of Dodd-Frank on Community Banks
Banks and Businesses get "swiped" over Fees
A little bit of this, and a little bit of that: Fed Unveils list of Banks Helped during Financial Crisis of 2008
IT Security: "IT's" About Process
To Test or Not to Test; That is the Question
2011 Failed Bank List Hits 25
Wag the Dog
Committee on Financial Services to Hold Hearing on the Effects of Dodd-Frank on Small Biz and Banks Today
2011 Failed Bank List up to 18
A Culture of Whatever: On the Path to Proper Governance
The Test Drive: Leasing or Buying a HR IT Platform
Detective, Reactive and Preventive: Evolving Your IT Security
Cracking the ALLL Code: How to Develop the Right FAS 114 Methodology
Double Digits: Bank Closings up to 11 in 2011
FCIC Releases Report on the Causes of the Financial Crisis
Part of the In Crowd: Thoughts on the Dodd-Frank Act
Another One Bites the Dust: Regulators Close 4 Banks
Keeping the Balance: IT Security and the Org Chart
On Notice: FDIC Issues Rule for Temp Unlimited Deposit Insurance
2011 Failed Bank List Up to 3
Welcome to OnCourse
Stick 'Em Up!
Time for a Tune-Up: The Necessity of a HR Audit
Visa Instituting Two-Tiered Debit Card Interchange Structure
The First Failed Banks of 2011
The Credit -- Er, IT Crisis?
Painting a Masterpiece: The Art of the ALLL Reserve
The Law on Your Side: Understanding HR Regulations in 2011
Building a Better Hen House
Ready the Ramparts! : IT Security and the Modern Bank
No Respite from RESPA