October 5, 2004
Definition of “Application”
Dear [ ]:
Your July 13, 2004 letter to Kenneth Bielemeier, Deputy Superintendent, Mortgage Banking Division, New York State Banking Department (“Department”), regarding what constitutes an application under Article 12-D of the Banking Law has been referred to me for response.
Your company is a registered mortgage broker that uses telemarketing to contact prospective clients. If a client requests information regarding a mortgage loan, your company obtains the client’s credit profile and formulates a loan program for the client’s consideration. If the client indicates interest, then your company forwards a document package to him.
Your company would like to report that an application has been taken when a document package is forwarded since it represents an interest in obtaining a mortgage. You believe that under the current method of reporting, which reports every request for information as an application, your company is overstating the number of applications that it takes thereby providing an excessive amount of applications for the purposes of obtaining a surety bond.
In a June 25, 2004 letter to the industry, Mr. Bielemeier stated that for the purposes of calculating the amount of the bond or deposit that a mortgage broker is required to obtain pursuant to Part 410 of the Superintendent’s Regulations, the Department would use the definition of “application” set forth in Regulation B of the Federal Reserve System (12 CFR 202) (Equal Credit Opportunity). Regulation B defines an application as, “[a]n oral or written request for the extension of credit that is made in accordance with procedures used by a creditor for the type of credit requested.” In the Official Staff commentaries to Regulation B, it is stated that a creditor has the latitude to establish its own application process and to decide the type and amount of information required from credit applicants. However, whether the inquiry or prequalification request becomes an application depends on how the creditor responds to the consumer, not what the consumer says or asks.
Since your company obtains a credit profile that is used to formulate a loan profile for the client, it is the opinion of the Department that your company has made a credit decision sufficient to make the inquiry an application. Accordingly, for the purposes of calculating the amount of the bond, your company should continue to employ the current method.
Thank you for your attention to the above.
Very truly yours,
Alvin A. Narin
First Assistant Counsel
cc: Kenneth Bielemeier