Academic journal article ABA Banking Journal

Does a "Preapproval" App with Address Trigger More?

Academic journal article ABA Banking Journal

Does a "Preapproval" App with Address Trigger More?

Article excerpt

Q. We have an online tool that allows customers to complete either a preapproval application or a mortgage application. For preapprovals, in most cases, potential borrowers do not input a property address. We don't send early disclosures for preapproval applications, because addresses aren't usually included. However, on occasion, a potential borrower seeking preapproval and not under contract, may indicate the address of the home they are thinking about buying.

In such cases, must we send early disclosures for the preapproval? The customer does not have a contract and potentially never will contract on the home listed. If we are required to send the early disclosures, what happens if the customer is preapproved and decides to purchase a different home? Can we call this a change in circumstance and re-disclose?

A. The Real Estate Settlement Procedures Act rules here. Under it, an application is considered as "the submission of a borrower's financial information in anticipation of a credit decision relating to a federally related mortgage loan, which shall include the borrower's name; the borrower's monthly income; the borrower's Social Security number to obtain a credit report; the property address; an estimate of the value of the property; the mortgage loan amount sought; and any other information deemed necessary by the loan originator. An application may either be in writing or electronically submitted, including a written record of an oral application. …

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