Preventing property address until purchase/contract received?

[Anonymous]

Management has proposed implementing a mortgage intake process that would prevent applicants from entering a property address in an online submission portal. Additionally, originators would be instructed not to add the property address in the LOS until a purchase agreement or contract has been received, even when the applicant has identified or shared a property address.

While I understand the strategic intent behind delaying property address collection, the added requirement of obtaining a purchase agreement before entering the address raises multiple compliance concerns. We’re not sure if any portion of this proposal can be reasonably implemented. By preventing property addresses, all submissions would (likely) be classified as prequalifications, which seems to conflict with regulatory definitions.

It appears this proposal would lead to 1) TRID compliance issues, as applicants should be able to shop for loans without additional requirements (the TRID FAQs and Reg Z Commentary address requiring additional information on top of the TRID six); 2) HMDA underreporting risks, since applications that should be reportable may not be captured because they’re being classified as prequalifications; and 3) possible disparate impact on certain applicant groups, like those applying online.

We’ve heard that this practice is an industry standard. Is your bank currently using this approach? If so, how are you managing these compliance risks and concerns?

[Author]

Posts