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#1817848 - 05/28/13 07:00 PM Late Adverse Action Notice
Compliance Audit Offline
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What is everyone doing to avoid a late adverse action notice when the appraisal is not received for 6-7 weeks and does not come back in line with the loan amount - so a decline has to be issued but the 30 day period has expired?

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Lending Compliance
#1817851 - 05/28/13 07:01 PM Re: Late Adverse Action Notice Compliance Audit
Kathleen O. Blanchard Offline

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If the appraisal is all the bank is waiting for to have a "completed application" and the bank does not issue a conditional approval, the Reg B clock is not running during that waiting period. Once you have the appraisal (and hence a completed application) you have 30 days to make a decision.
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#1817931 - 05/28/13 08:33 PM Re: Late Adverse Action Notice Kathleen O. Blanchard
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CA, in light of Kathleen's post, read the definitions of Application and Completed Application in the reg and commentary. They are different.

Regulation:
(f) Application means an oral or written request for an extension of credit that is made in accordance with procedures used by a creditor for the type of credit requested. The term application does not include the use of an account or line of credit to obtain an amount of credit that is within a previously established credit limit. A completed application means an application in connection with which a creditor has received all the information that the creditor regularly obtains and considers in evaluating applications for the amount and type of credit requested (including, but not limited to, credit reports, any additional information requested from the applicant, and any approvals or reports by governmental agencies or other persons that are necessary to guarantee, insure, or provide security for the credit or collateral). The creditor shall exercise reasonable diligence in obtaining such information.

Commentary
6. Completed application—diligence requirement. The regulation defines a completed application in terms that give a creditor the latitude to establish its own information requirements. Nevertheless, the creditor must act with reasonable diligence to collect information needed to complete the application. For example, the creditor should request information from third parties, such as a credit report, promptly after receiving the application. If additional information is needed from the applicant, such as an address or a telephone number to verify employment, the creditor should contact the applicant promptly. (But see comment 9(a)(1)–3, which discusses the creditor's option to deny an application on the basis of incompleteness.)
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#1817943 - 05/28/13 08:36 PM Re: Late Adverse Action Notice Compliance Audit
Kathleen O. Blanchard Offline

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What that is saying is to get the appraisal (and similar documents needed from third parties not under borrower control) as soon as you can but it is not "on the clock".
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Kathleen O. Blanchard, CRCM "Kaybee"
HMDA/CRA Training/Consulting/Mapping
The HMDA Academy
www.kaybeescomplianceinsights.com

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#1830875 - 07/08/13 05:29 PM Re: Late Adverse Action Notice Compliance Audit
Norman Paperman Offline
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[i]I will be the first to admit that I have struggled a bit with this definition and building appropriate procedures.

What are other FI doing with regards to when they do and do not consider the request to be a "completed application". Currently my mortgage sub is required to send...


AA Notices on declined PreQuals

Notice of Incomplete on incomplete files (i.e. not enough info to make a decision)

What can I consider as "other information" in order to cut back on the number of files we have to disposition each month?

Additionally, what happens to those files that are not deemed to be "applications" if they are on our LOS system? Should we flag them as "non app"?

Much thanks!
[/i]
Last edited by Garret01; 07/08/13 05:30 PM.
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#1830878 - 07/08/13 05:31 PM Re: Late Adverse Action Notice Compliance Audit
Kathleen O. Blanchard Offline

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Appraisals, title work, needed inspections are frequent items that are due.
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Kathleen O. Blanchard, CRCM "Kaybee"
HMDA/CRA Training/Consulting/Mapping
The HMDA Academy
www.kaybeescomplianceinsights.com

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#1830891 - 07/08/13 05:46 PM Re: Late Adverse Action Notice Compliance Audit
Norman Paperman Offline
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Thanks Kaybee. So, if a customer were to apply with an application containing name/SS/Income/signature and credit was pulled...

If my policy/procedure stated that the application is not considered complete until we obtain a signed 4506-T...

then I could avoid having to send out a notice of incomplete or adverse action because I didn't have a complete application? Is Reg B concerned with the fact that I have enough information to render a credit decision?

A very loaded question I know, but I appreciate your time/input.
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#1830892 - 07/08/13 05:49 PM Re: Late Adverse Action Notice Compliance Audit
Kathleen O. Blanchard Offline

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You have 30 days to take some action:

>approve
>deny
>issue a notice of incomplete action, which will stop the clock for the time period stated for items the applicant can provide.

Items outside of borrower control are "off the clock".

Many don't realize that there is a requirement to do something within that first 30 days of an incomplete application. A read of the notice requirements all the way down to incomplete application will clear that up.

1002.9 - paragraph a referenced is the requirement for approval or denial within 30 days...so you have 30 days from initial (even if incomplete ap) to approve, deny or give notice of incompleteness.

(c) Incomplete applications. (1) Notice alternatives. Within 30 days after receiving an application that is incomplete regarding matters that an applicant can complete, the creditor shall notify the applicant either:

(i) Of action taken, in accordance with paragraph (a) of this section; or

(ii) Of the incompleteness, in accordance with paragraph (c)(2) of this section.
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Kathleen O. Blanchard, CRCM "Kaybee"
HMDA/CRA Training/Consulting/Mapping
The HMDA Academy
www.kaybeescomplianceinsights.com

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#1830898 - 07/08/13 05:54 PM Re: Late Adverse Action Notice Compliance Audit
hgliii Offline
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I agree with KB. We send notice of incomplete application with no approval or denial. We list those items needed to make a determination on the loan.
We give applicant 10 days to respond or inquiry is cancelled.
Last edited by hgliii; 07/08/13 05:54 PM.
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#1830901 - 07/08/13 06:10 PM Re: Late Adverse Action Notice Compliance Audit
Norman Paperman Offline
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Thank you both. So, either way I am still sending out a NOI to all who apply.

The benefit is that I'm not having to produce/audit the AA notice because the application was never deemed "complete".

Now this would all be out the window if I received all 6 items for a RESPA application; correct? Or can I apply the 4506-T as the 7th item for RESPA?

Does this sound accurate?
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#1830904 - 07/08/13 06:13 PM Re: Late Adverse Action Notice Compliance Audit
hgliii Offline
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Yes. But somewhere in back of my mind, I remember hearing that the #7 any other info required by lender was eliminated. I am getting old and may be confused on that part.

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#1830905 - 07/08/13 06:13 PM Re: Late Adverse Action Notice Compliance Audit
Kathleen O. Blanchard Offline

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Receiving the "6 items" doesn't mean you have everything you need for a credit decision. What else does the bank require from the borrower to be able to make a decision, W-2s, tax returns, divorce agreements, whatever else? That is what you will list in the NOIA.

I generally see the 4506-T listed in the NOIA.
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Kathleen O. Blanchard, CRCM "Kaybee"
HMDA/CRA Training/Consulting/Mapping
The HMDA Academy
www.kaybeescomplianceinsights.com

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#1830907 - 07/08/13 06:14 PM Re: Late Adverse Action Notice Compliance Audit
Kathleen O. Blanchard Offline

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It is fairly common for banks to send the NOIA with the early TILA and GFE (if a RESPA loan).
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Kathleen O. Blanchard, CRCM "Kaybee"
HMDA/CRA Training/Consulting/Mapping
The HMDA Academy
www.kaybeescomplianceinsights.com

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#1830913 - 07/08/13 06:18 PM Re: Late Adverse Action Notice Compliance Audit
Norman Paperman Offline
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Wow. Thanks so much for your help. This is going to drastically reduce the number of AA we are sending out for the mortgage sub. Do you often hear of regulators criticizing FI's for what they choose as their "other information" (4506-T in my case) or is it pretty flexible?
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#1830918 - 07/08/13 06:20 PM Re: Late Adverse Action Notice Compliance Audit
Kathleen O. Blanchard Offline

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Denying when you don't have to inflates your denials for fair lending!

Re your question re 4506-T, I see banks sticking with the "6 items" so can't really say what others experience has been.
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Kathleen O. Blanchard, CRCM "Kaybee"
HMDA/CRA Training/Consulting/Mapping
The HMDA Academy
www.kaybeescomplianceinsights.com

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#1830929 - 07/08/13 06:24 PM Re: Late Adverse Action Notice Compliance Audit
KPOC Offline
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I agree with KB. Don't confuse an application requiring early disclosure under RESPA with a completed application and timing requirements under ECOA. When you get the 6 pieces of information (specifically named in Regulation X), you must disclose based on that information under RESPA. When you receive a completed application (defined by YOUR bank, not any regulation), you must make a decision and notify the applicant.

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#1830935 - 07/08/13 06:27 PM Re: Late Adverse Action Notice Compliance Audit
Norman Paperman Offline
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I misspoke Kaybee. I meant to say that this will reduce the tracking of applications.

Can I apply the 6 items required under RESPA to dictate what is and is not a FAIR LENDING application?
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#1830957 - 07/08/13 06:40 PM Re: Late Adverse Action Notice Compliance Audit
Kathleen O. Blanchard Offline

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Using the NOIA notice cuts down on Reg B violations for the 30 day requirement.

For Reg B, you can set a standard for when you have an (incomplete) application and that can vary by product (residential mortgage, commercial, personal loans, etc.).

Don't forget that indicating that the bank is not interested (other not offering the type of credit requested), even on an inquiry, triggers adverse action.
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Kathleen O. Blanchard, CRCM "Kaybee"
HMDA/CRA Training/Consulting/Mapping
The HMDA Academy
www.kaybeescomplianceinsights.com

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#1830971 - 07/08/13 06:52 PM Re: Late Adverse Action Notice Compliance Audit
KPOC Offline
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Garret, yes you can but why? If you define a completed application as receiving the 6 pieces of information required under RESPA, then you must make a decision within 30 days of receiving it. You also lose the option of providing the NOIA, because you are basically saying that you have a completed application when you have a 1003 in hand. What about appraisal, paystubs, bank statements, etc.?

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#1830981 - 07/08/13 07:01 PM Re: Late Adverse Action Notice Compliance Audit
Norman Paperman Offline
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Thank you Kaybee.

KPOC: I'm starting to understand now.

So I guess I will modify some procedures to say that an application (Reg B) is not complete until I have received a paystub. If by, let's say, day 10 we do not have a paystub we send out a NOIA. If we never hear back then the file is dead/incomplete.

Thanks again to both of you.
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#1830986 - 07/08/13 07:05 PM Re: Late Adverse Action Notice Compliance Audit
Kathleen O. Blanchard Offline

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No. If a paystub is all that is needed from the borrower for a complete application, the NOIA will list a paystub and a deadline for providing it.

If you want to tell them verbally, then watch the calendar and get a NOIA out by day 30 saying you need that paystub.

If you send out a NOIA initially, you can stop watching that initial 30 calendar.
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Kathleen O. Blanchard, CRCM "Kaybee"
HMDA/CRA Training/Consulting/Mapping
The HMDA Academy
www.kaybeescomplianceinsights.com

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#1831009 - 07/08/13 07:35 PM Re: Late Adverse Action Notice Compliance Audit
Norman Paperman Offline
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Gotcha. Thank you so much. There was a lot of dialogue here and I appreciate your patience.
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#1831044 - 07/08/13 08:42 PM Re: Late Adverse Action Notice Compliance Audit
Norman Paperman Offline
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I hate to beat this thing to death but if someone is willing to share a sample of their application policy it would be greatly appreciated. I'm now struggling with how precise/vague to be with the policy. I'm also wrestling with the RESPA prohibition against REQUIRING verification documents prior to issuing a GFE.

http://www.bankersonline.com/forum/ubbth...rue#Post1815119

So, my theory of requiring a paystub/bank statement as a component of a completed ECOA application kind of goes out the window. How could I argue that I don't require verification docs for RESPA if I require them for ECOA?

frown
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#1831047 - 07/08/13 08:57 PM Re: Late Adverse Action Notice Compliance Audit
KPOC Offline
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Garret, it is really important not to confuse RESPA and ECOA. They are completely different rules with completely different requirements. You are correct, you cannot require verification information as a condition for providing a GFE. This has no relation to ECOA. There is virtually no bank discretion in what an application is under RESPA (6 specific items). Under ECOA it is up to the bank to decide what it needs to make a credit decision, and therefore what makes up a completed application. Does that help?

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#1831051 - 07/08/13 08:59 PM Re: Late Adverse Action Notice Compliance Audit
KPOC Offline
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Remember too that a GFE is just an estimate of settlement costs and not a commitment to lend. You don't need to make a credit decision to issue a GFE.

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