1002.9(a)(I)

(a) Notification of action taken, ECOA notice, and statement of specific reasons. (1) When notification is required. A creditor shall notify an applicant of action taken within:

(i) 30 days after receiving a completed application concerning the creditor's approval of, counteroffer to, or adverse action on the application;

I'm new to this rule, so I'm trying to make sure I understand it. A lender has 30 days to evaluate an application and accept, reject, or counteroffer. What if, for whatever reason, the lender cannot make a decision within 30 days? Can that be extended?

Also, has TRID changed the definition of application within Reg B? What does a completed application mean for your bank, regarding this rule?

Thanks!

Reg B gives the creditor flexibility when defining a "completed application" you must document in your procedures what constitutes a completed application and from that point you have 30 days to make a credit decision.

If you discover other items needed to make a credit decision you can issue a notice of incompleteness - other than that you cannot extend.

Note, this is an initial credit decision. For us, we issue a conditional approval, subject to appraised value at X, etc.

TRID has not changed the definition of application in Reg B, but the TRID application is now triggered when ALIENS is collected.

Just so you know, I'm totally using ALIENS in my next memo to our LOs. Do I owe you any copyright dues or anything?

hahaha. No, I didn't come up with it. I'm not that clever But I recently did a presentation and included a meme of the weird alien "expert" from the history channel in my powerpoint haha.

FYI TGPitts - ALIENS is:

Address
Loan Amount
Income
Estimated Value
Name
Social

Awesome. I think I'm going to switch out the first two for "Amount" and "Location" - otherwise I get too many whines of "but this is bare land and it doesn't have a street address!"

Could anyone share the language in your policy that constitutes your idea of a completed application?

Thank you!

For Reg B, it's when we have enough information to make a credit decision. Note that it's just the credit decision....could be subject to a number of things like the collateral being worth what the applicant thinks or a verification of the income on the application or a number of other things. But if you have supplied the info such that we can compare to the credit qualifications in our lending policy, that's a Reg B application.

Following up on CFT, you can have a completed application the minute it's turned-in to the LO. If the bank does not lend outside its' AA, and the property is located in another state, the lender has all the information they need to make a decision. Same with credit. The lender has a 650 minimum and the CR comes in with a 620, that is all the information you need for a decision. It's a rolling timeframe.

Cornfed and Rocky are exactly right. There isn't a cookie cutter answer other than "when you have enough info to make a decision." That's why this topic requires in-depth and repeated training for lending personnel. It's also why I teach a 2 hour webinar on this topic (we get into lots of scenarios to help form the understanding).

David, will you offer the webinar again soon, or is there a recorded version I can buy? My lenders need this training soon. Thanks!

We have this scheduled with BOL on 9/21/16. You can find last year's version in the BOL Store.

I would like to jump in on this as my question the other day didn't quite get the feedback I was hoping for. I have done research and felt pretty confident in my interpretation, but maybe I'm missing something.

My interpretation of Reg B is that is does, indeed, apply to commercial loans whereas a decision must be made within 30 days of completed application so that the customer can be notified of said decision, whether it’s an approval or denial. Am I correct in my thinking?

I’m getting some push back on my interpretation. I’ve tried to explain that commercial loans work differently and that the completed application date can be somewhat “rolling” because you may not have every piece of information to make a decision right away. The information could “trickle” in before it’s actually complete. Said person is basically telling me that commercial loans are not subject to the 30-day rule and that I'm getting it confused with consumer rules.

Thank you in advance for any guidance given.

The Reg B 30 day decision rule applies to all credit: consumer or commercial. You should tell this person to review the definition of "application" and thoroughly read the Commentary. While it's true that many non-consumer applications can come in over time, the definition of application is still the same "a request . . . made in accordance with the procedures established by the creditor . . .."

Below are some sections from our training manual on this topic. Specifically, look at the Timing Requirements section (2 from the bottom). No where does Reg B say this is limited to noncommercial loan applications. Ask them to show you where they think it does.
[You might print this and show it to them]


A. Application:
...any oral or written request for an extension of credit that is made in accordance with the procedures established by a creditor for the type of credit requested. [§1002.2(f)]

B. Established Procedures:
… refers to the actual practices followed by a creditor for making credit decisions, as well as its stated application procedures. For example, if a creditor’s stated policy is to require all applications to be in writing on the creditor’s application form, but the creditor also makes credit decisions based on oral requests, the creditor’s established procedures are to accept both oral and written applications. [Commentary to §1002.2(f) #2]
In other words, in some circumstances, informal inquiries, whether verbal or in writing, must be treated as an application pursuant to Regulation B.

C. Completed Application:
…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. [§1002.2(f)]

D. Application vs. Verification Information:
In most cases, verification information is requested AFTER an application is received.
1. Credit Report, Appraisals, Inspections, etc.
2. Tax Returns, W-2, Pay Stub, etc.
3. Purchase Agreements

E. 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 telephone number needed to verify employment, the creditor should contact the applicant promptly. [Commentary to §1002.2(f)(6)].

------------------

C. Timing Requirements:
Once a creditor has obtained all the information it normally considers in making a credit decision, the application is complete and the creditor has 30 days in which to notify the applicant of the credit decision [Commentary to §1002.9(a)(1) #1].

D. Inquiry or Application?
If enough information has been collected to make a decision and a denial or approval has been indicated to the applicant, this interaction between a lender and prospective borrower is an “application” for the purposes of Regulation B. This is true, regardless of the amount of information collected by the lender, lender application procedures, fees paid to the lender, whether the prospective applicant has identified a specific property or loan amount, or whether the communication is written or verbal.

David - I cannot thank you enough for this information!! It is just what I was needing to prove my point. Not that I should have too since I am the loan compliance person of our bank.

I do have one more question regarding notification requirements. When you are looking at revenues to determine whether it's small or large business you look to the borrower's income only, and not guarantors income as additional, correct?

§1002.9(a)(3) (i) and (ii) both state "a business that had gross revenues . . . " You need to only consider the income of the business for these sections to apply - not the guarantors.

Why oh why do commercial lenders believe Reg B doesn't apply to them...

sigh

David - That's where my thinking was coming from. I appreciate the confirmation!

Darth - Exactly!!

It says "reg" - - - that's mortgage talk.

I went over this very same stuff in our shop a few years ago. We'd hired a few new lenders and CLO asked me to their meeting. On the way out a veteran asked when Reg B was changed.

Hang in there, Kisha!

I think this has already been answered but need to verify my understanding.

Is there any scenario that I am missing for a loan where credit scores are below our policy guidelines that we don't have to send an AAN? Like for example:

we haven't "told them anything"
we haven't "verified" anything"
"we don't "have an application it's a prequal"
"it was received via internet and we haven't seen the application"

my question is if credit has been pulled don't we have to do something for files where credit scores are below our lending policy period? Where I come from if you have an application where you have pulled credit something has to be done...but again I came from a small bank where this wasn't a problem...so maybe I've misunderstood something?

Thanks!

How did you pull a credit report without an application for credit?? Where is the permissible purpose??? The four examples you provided are either wrong or irrelevant.

Hey Randy...I was actually reading another thread you had answered on prequals, credit reports and permissible purposes

Prequals credit reports premissible purposes

I'm so lost on the process that is being taken here actually...apparently there are applications that come here to us with enough information provided where a credit report is pulled...not all six items to make a "completed" application but ss#, DOB, etc so enought to pull credit (again this is how I understand it as I am still fairly new to this company and learning their processes). Some of these applications do not have a property address but are "prequals". My question is if a credit report is pulled and it is below our policy guidelines...example credit score 510 and we can't lend but have not had any further contact with the Borrower, do we have to issue an AAN?

Some of these applications do not have a property address but are "prequals".

First, you cannot have a pre-qual with a property address.

Second, if you don't have a formal pre-qualification process, you need to get this stopped pronto. If you do have a pre-qual program, then you need to outline the specific steps that are required to be followed. If they have a request for a pre-qualification, you have an application for credit and the clock starts then. You end up with a couple of scenarios: 1. You communicate to the applicant that they qualify for XXX dollars with the final approval based on an acceptable property, 2. You communicate to the applicant that they need to submit additional information to complete the prequel process (notice of incomplete application), 3. You send them a AAN if they don't qualify for a loan.

Thank you Randy for your insight. Have a nice weekend.