I have a question regarding commitment letters and meeting the 30 day requirement for making a credit decision after receiving a mortgage application. Recently I've been seeing our commitment letters issued with the verbiage - prior to approval please provide 2011 tax returns and loan may be subject to recalculation of debt to income. I usually see "prior to closing" items, but how does prior to approval meet the 30 day deadline? Wouldn't we have to send a notice of action before the 30 days is up if we haven't received the requested information? I'm just not sure what is accomplished by sending a commitment letter that says subject to approval on it. I may be overthinking this, so any input would be greatly appreciated.

What you are referring too is not a "commitment letter".

That's exactly what I said. The very nature of a commitment letter is an approval subject to certain things such as an appraisal with a certain value. Would you say that if we aren't following up with a notice of action that we are in violation of the 30 day requirement? Wouldn't we be better off issuing an adverse action for an incomplete application, and listing what we need with an as of date?

Depends on the intent of the application. Is this a pre-qualification program?

No, these are actual mortgage applications. We've disclosed and ordered appraisals but because they are self employed we are requiring tax returns which makes sense to me, but I don't think we should be requesting those on a commitment letter. I think underwriting believes just issuing the commitment letter is meeting the "30 days to make a decision" requirement, but if you say "prior to approval" it's not really a credit decision. At this point, some of these applications are 45 days old with these kind of commitment letters in the files.

They sound like incomplete applications to me.

Thank you, that's where I was heading but I just wanted to confirm. I appreciate your help.

I agree and based on a couple of the sample verbiage in the post I would "label" these letters as a notice of incompleteness instead of a commitment letter. If the letters follow the requirements of 1002.9(c)(3) then they meet the notification requirements.

I just looked at 1002.9(c)(3) and I don't see where our commitment letters have the ECOA notice, and the first sentence is "we've approved your loan" not "we are unable to make a decision" so it seems we would be better off using the notice of action form.

Thank you very much for your help.

"we've approved your loan"

I would highly recommend that you get legal counsel to review this letter. You may be committing to something unintended and such statement could also be reviewed under a UDAAP scenario. It is blatantly a false statement.