The future for borrower pre-approvals after the integrated mortgage disclosures are implemented is a source of overwhelming confusion throughout the mortgage industry.
Pre-approval and initial disclosures should not be lumped together; they are not the same thing. Provided the initial disclosure is given before — any time before — any other documentation is requested from the borrower, the obligation under the law has been met. Anything else needed to complete a pre-approval can be requested at that point.
Additionally, the statement that "pre-approvals specific to a property address are a thing of the past" is simply incorrect. A property address, along with five pieces of information (consumer name; consumer income; consumer's Social Security number to obtain a credit report; an estimate of the value of the property; and the amount sought for the mortgage loan), constitutes an application. At that point, once the required initial disclosures have been provided, any additional documentation necessary to issue a pre-approval can be requested.
So, in reality, "generic, non-property-specific pre-approvals" are of the past. Requesting pre-approvals not associated with a specific property address is where a broker can run into a problem and where the law is subject to interpretation. Without a property address, there is no application, and without an application, initial disclosures wouldn't be provided, and without providing initial disclosures additional information necessary to issue a pre-approval can't be requested.
But, once there is a property address and the five pieces of information are provided, the broker has an application and thus can provide the required initial disclosures, and then request any additional information necessary to issue a pre-approval.
Mr. Tetreault is an underwiter at Stearns Lending. He is not an attorney and his views should not be considered as legal advice. The opinions expressed here are his own, and do not in any way reflect the opinions of his employer.