Dropping the Co-Borrower
A loan comes in with a borrower and a co-borrower, and the co-borrower is taken off the loan a week before closing. Instead of getting a new loan number the LO just took the B-2 off the loan, and the loan closed with only B-1. Do I have to report the B-2 information for HMDA? Or is there a Reg that states I have to get a new loan number in this case?
From my prospective the loan number used has nothing to do with the reporting of HMDA other than a method of identifying that specific transaction. That being said, your major problem exists in where you're obtaining your other key information, such as GMI and Annual Income. If the loan was not re-underwritten because of the deletion of a borrower you really do not have an approved loan and cannot authenticate that the Action Taken is "1". For example the income used for HMDA reporting is the income stated on the FNMA1008, or the income used to underwrite the loan, in this case your FNMA1008 would contain the income derived from both applicants. If the loan was re-underwritten to one borrower than your Annual Income would be right. Your source document for GMI information is normally your FNMA1003 which would state two borrowers, which would cause a conflict of information reported on the LAR to what is in the file. Operationally, the loan should have been cancelled and a new number issued that reflects the correct information. The reason for canceling the loan verses actioning the loan as "Approved not Accepted" is that under Reg C a loan should only be reported once on the LAR. By actioning verses canceling the loan, that loan would be reported twice within the same calendar year for the same transaction. Personally I would be sending it back to the business channel requesting that they correct the loan by issuing a new loan number.
The loan was re-underwritten and reflects only Borrower 1 information on the 1008. Also, there are 2 different 1003's in the file as there were seperate applications. I agree the loan file should have been cancelled, and a new number started. Would a company be in violation if they did not report the second borrower?
If the borrower expressly stated they no longer wanted the co-borrower on the application I would consider treating this as a withdrawn application. You state there are 2 1003s in the file and the new app with just the borrower was re-underwritten. It is my view that you have two records - separate applications that need to be reported. It is not double reporting because it is two separate credit decisions being made.