We use correspondent bankers and have many scenarios where we accept an application, we "conditionally approve" it based on credit and whatever they have submitted and we send out the Loan Estimates and early docs within the required 3 days. Many times the people are just shopping around and they never respond to us or return any calls.
An auditor recently suggested we use Approved Not Accepted for these scenarios, but we are unsure what Action Taken Date to use? Has anyone else run into issues like this and if so what action date did you use?

Thank you.

The rules for Approved Not Accepted are pretty specific on when that reason should be used, so you might want to take a look at 1003.4(8)(i)(c) and the associated commentary here: https://www.bankersonline.com/regulations/12-1003-004.

We have read them but management is still unclear and can't seem to come to a good decision for these scenarios. We cannot use Denied for Incompleteness because we do not send out the Reg. B. Form. And management does not think we should "Deny" them due to incomplete application, because their applications were not incomplete - if they were we would not have sent out early disclosures.

Okay. I didn't answer clearly as there isn't a clear answer without more clarity. Let me see if I can get enough information to answer this.

-Are these full application or pre-approvals (or even pre-qualifications)?
-Is the conditional approval communicated in writing?
-What conditions are included on the conditional approval?

Going forward, I suggest you tweak the letter that goes out with your early disclosures to add a sentence that adds a drop dead date. Something along the lines of: If we do not hear from you by (date) we will close the file for incompleteness.
Note: the code is Closed for Incompleteness, not Denied for Incompleteness. If you add the sentence, no denial needs to be done.

These are full HMDA reportable applications. I'm not sure as far as the conditional approval goes. If we were going to deny them for credit it would be done in the first 3 days. If credit looks good and everything else on the application then we send out a loan estimate and intent to proceed, homeowners counseling manual.
The situation is that many of these people often never respond to us or send their intent to proceed back. Since these have to go on our LAR we don't know of a satisfactory action/action taken date to use.
And again, we do not use the Reg B. letter to be able to use Closed for incompleteness.

What I suggested was what an examiner told me to do to avoid the need for an additional Reg B letter. All we did was change our disclosure letter to let the applicant know that if they don't respond within a specific period of time, we will close the file for incompleteness. It eliminates all the indecision and removes the need for any further communication after the drop dead date.

Well, approved not accepted should not be used unless your conditional approval was only subject to "customary commitment or closing conditions." If it was subject to underwriting conditions, you can't use approved not accepted.

Customary commitment or closing conditions include: a clear-title requirement, an acceptable property survey, acceptable title insurance binder, clear termite inspection, a subordination agreement from another lienholder, and, where the applicant plans to use the proceeds from the sale of one home to purchase another, a settlement statement showing adequate proceeds from the sale.

Underwriting conditions include: conditions that constitute a counter-offer, such as a demand for a higher down-payment; satisfactory debt-to-income or loan-to-value ratios, a determination of need for private mortgage insurance, or a satisfactory appraisal requirement; or verification or confirmation, in whatever form the institution requires, that the applicant meets underwriting conditions concerning applicant creditworthiness, including documentation or verification of income or assets.

So, unless your conditional approval was subject to only customary commitment or closing conditions, your auditor is incorrect about using approved but not accepted.

Now, to list it as withdrawn, the applicant must "expressly withdraw." If they didn't talk to you and tell you this, you aren't going to be able to code it as withdrawn.

This leaves you with two options: Closed for incompleteness and denied. To close the file for incompleteness, you would have had to have sent them a notice of incompleteness under Regulation B, which you said you did not.

Therefore, the only option left is to code it as a denial (and you probably should have sent a denial notice).


If you don't make a final approval, then I would argue that your application is now (again) incomplete - meaning you owe them a notice of incompleteness or a denial (for incompleteness) under Regulation B. If you do one of these options, your HMDA problem goes away.

To summarize, I think your problem is that you aren't following Regulation B by sending them either 1) an Adverse Action notice or 2) a notice of incompleteness.

Truffle: So you are sending a combined conditional approval/closed for incompleteness letter? I've not seen that before but that sounds like a great way to do it (assuming one complies with the notice of incompleteness requirements).

We have the following in our cover letter that accompanies our early disclosures..

If after reviewing these disclosures you wish to proceed with the loan request please acknowledge your intent to proceed with the loan request by doing one of the following.

• Contact the below Mortgage Loan Originator at 812-323-XXXX to inform them you wish to proceed with the loan request.
• Contact your Mortgage Loan Originator by email at the email address provided on their business card or to their attention at XXXXXX@XXXXXXX.com informing them of your intent to proceed with the loan request.
• Provide the bank with a check payable to The Peoples State Bank in the amount of $XXX.00 to cover the cost of the appraisal.

If we do not hear from you within seven (7) business days (excluding Federal holidays and Sundays) from the date of this letter we will assume you have chosen not to proceed with the loan request and no further action will be taken.

We look forward to serving your financing needs.

Adam, no, we are sending the earlies with language similar to what Dan outlined above. There is no conditional approval given at that point.

We do the same thing with the cover letter that goes out with the early disclosures.