Home Mortgage Disclosure Act (HMDA)/Reg C

Does "Preapproval", when the final loan disposition is "Approved but Not Accepted", also mean "Preapproval Mailings"?

There are two responses to this question - "no" and "it depends". The question appears to reach across two regulations: Regulation C (HMDA) and the Fair Credit Reporting Act (FCRA).

By "Preapproved Mailer" it is assumed you are referring to mailings sent to consumers indicating they have been preapproved for a loan under the FCRA permissible purpose provisions for the "prescreening" of potential consumers. In other words, those customers who meet the criteria which was requested from a credit reporting agency, such as having a specific a specific range of credit score, geographic location, number of trade lines, no foreclosures within a specific period of time, and so on, and therefore received a mailing from your organization indicating they have been preapproved based on this criteria. The fact that a consumer is identified as preapproved in this manner does not make it a reportable transaction for purposes of HMDA - this is the "no" part of the answer above.

However, if the consumer received such a mailing and requested a decision under a preapproval program established under the definition of a preapproval for purposes of HMDA and that request was subsequently approved but was not accepted by the consumer, then yes - this is the "it depends" part of the answer above. Remember though that HMDA''s definition of a preapproval requires a full credit qualification. Regulation C defines a preapproval as:

"Preapproval programs" - A request for preapproval for a home purchase loan, other than a home purchase loan that will be an open-end line of credit, a reverse mortgage, or secured by a multifamily dwelling, is an application under this section if the request is reviewed under a program in which the financial institution, after a comprehensive analysis of the creditworthiness of the applicant, issues a written commitment to the applicant valid for a designated period of time to extend a home purchase loan up to a specified amount. The written commitment may not be subject to conditions other than:

  • Conditions that require the identification of a suitable property;
  • Conditions that require that no material change has occurred in the applicant'' financial condition or creditworthiness prior to closing; and
  • Limited conditions 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."
Citation(s):§1003.2(b)(2); Commentary ¶2(b)-2 & -3; 15 USC §1681b(c)(1)(B)