I need help clarifying the difference between a pre-qualification and a pre-approval. We do not have a written program for pre-approvals in our policy. However, we will give written pre-qualification letters, subject to certain restrictions, to applicants that meet our underwriting standards. Our practice seems an awful lot like my understanding of a pre-approval program without using that word. If you can provide any guidance on how to differentiate the two or classify our current practices I would appreciate it. It is causing problems when determining if adverse actions are necessary under Reg B.
Here is my current situation. Applicant requests a 'pre-qualification' to purchase a primary residence. All information is provided on the application document except a property address. The request is put through our automated underwriting system which says the credit should be denied due to excessive debt to income. The applicant is contacted and then asks for a loan amount we would be willing to lend. Further underwriting is completed to determine he could qualify for a loan amount of xxx. Then the applicant says they will not be proceeding with the application. Does the way this 'pre-qualification' was treated turn it into an application for credit or a pre-approval and therefore require an Adverse Action? If so would you treat it as a counter-offer that was not accepted (denial)?