TopCompliance ALERT Logo
                              FRB Guidance on Modification Adverse Action Notices

WEBSITE
QUICK LINKS

HOME

Mortgage Compliance

Service Presentations

CORE Compliance

About Us

Our Clientele

News & Views Posts

Archive

Library

Contact Us



Website
LCG - Link

Visit Us!
News and Views
LCG Weblog - 1
Visit Us!

PRESENTATIONS

Mortgage Compliance

Due Diligence

Forensic Services

FHA Examinations

Legal Reviews/Remedies

CORE Compliance Matrix

Loss Mitigation

Quality Control

HMDA / CRA

Licensing

Policy Guides/QC Plans

IT and IS

_______________

516-442-3456

Email Us




Join Our Mailing List
Overview

The Federal Reserve Board (FRB) has determined that lenders who deny a request to modify a mortgage often are not required to send the borrowers adverse action notices under Regulation B, the implementing regulation of the Equal Credit Opportunity Act (ECOA) [12 CFR 205)].

The FRB has outlined a four-step analysis that should be used to determine whether the notice is required, indicating as well that the same analytical process is used in the Treasury Department's Making Home Affordable Modification Program  (HAMP) and for modification requests outside the program.

Whether the notice is required usually will depend on whether the borrower has defaulted on the mortgage.
Highlights

Whether an adverse action notice is required when a loan modification is denied depends on the answers to four questions:

(1) Would there be an extension of credit?

"Credit" includes the right to defer payment and a mortgage loan modification usually will include deferring payment of a debt by actions such as reducing the interest rate or extending the loan term.

(2) Was there an application?

In general, if a borrower has submitted enough information for the lender to evaluate the modification request, there will have been an application.

(3) Was there an adverse action on the application?

An "adverse action" is a refusal to grant credit in substantially the amount requested or on substantially the terms requested in an application. A denial of a modification request likely would be an adverse action.

(4) Is the borrower delinquent or in default?

Under Regulation B, a creditor is not required to give an adverse action notice to a borrower whose account is delinquent or in default. This applies to mortgage borrowers and, in such a case, no notice would be needed. However, if the borrower is not yet delinquent or in default, an adverse action notice is required.
 Visit our Library for Issuance

Action Button Image 1


Mortgage Loan Modifications and Regulation B's Adverse Action Requirement (FRB - CA 09-13)
 
Action Button Image 1


Lenders Compliance Group is a full-service, mortgage risk management firm, providing professional guidance to financial institutions in all areas of mortgage compliance.

Specializations

Mortgage Compliance
Forensic Loan Audits
FHA Examinations
State and Federal Examinations
Fannie/Freddie/Ginnie Applications
Mortgage Due Diligence
Legal Reviews & Remedies
Loss Mitigation Compliance
Quality Control
HMDA & CRA Reviews
IT & IS Compliance
Statutory Licensing

This communication is sent to our valued clients and colleagues, who regularly receive our Advisory Bulletins, Mortgage Compliance Updates,  Compliance Alerts, Licensing Alerts, and News and Views.

These publications are free to subscribers.

© 2009 Lenders Compliance Group, Inc. All Rights Reserved.