FAQ – HMDA Reporting - Preapprovals
February 2, 2023 BY MQMR Blogger
Question: If we issue preapprovals for TBD properties, are we required to report the preapproval on our HMDA LAR?
Answer: It depends.
If a mortgage lender maintains a preapproval program under HMDA, the lender must report preapprovals that are (i) denied or (ii) approved but not accepted.
A preapproval program for HMDA purposes involves requests for preapprovals for home purchase loans (other than open-end lines of credit, reverse mortgages, or loans secured by multifamily dwellings) whereby, after comprehensive analyses of applicants’ creditworthiness (including verification of income, resources, etc.), the lender issues written commitments valid for designated periods of time and up to specified loan amounts. The written commitments may not be subject to conditions other than the following:
(i) Conditions that require the identification of a suitable property;
(ii) Conditions that require that no material change has occurred in the applicant's financial condition or creditworthiness prior to closing; and
(iii) Limited conditions, such as requiring acceptable title insurance binder or a certificate of clear termite inspection, that are not related to the financial condition or creditworthiness of the applicant that the financial institution ordinarily attaches to a traditional home mortgage application.
If a mortgage lender does not regularly use the procedures outlined above and instead considers preapproval requests on an ad hoc basis, the lender would not have a HMDA preapproval program.
If required to report preapprovals, a mortgage lender should use the date the lender received the preapproval request or completed the application form as the application date. A lender should be generally consistent in which method it uses. For the final action take date, a mortgage lender should report the following for preapprovals:
- Preapproval Approved But Not Accepted = any reasonable date, such as approval date, deadline for accepting offer, or date file was closed; and
- Preapproval Denied = date preapproval request was denied or date notice sent to applicant.