The Bank uses TRID's definition of application to define a Reg. B application. Because of that, if an applicant withdraws a request for credit before it becomes an application or the LO denies the request before it becomes an application, is the appraisal notice still required?

If the request was denied, how can it not be an application? You had enough information to make a decision.

Great questions, Wonderofitall. For the first part, if you don't have an application and the applicant withdraws, you never had an application and thus the notice isn't required. For the second part, you do have an application under Regulation B's definition of an application as you have enough information to deny the loan (meaning it becomes an application under Reg B). Therefore, the appraisal notice would be required in your second scenario.

Exactly. To expand on this for the OP, the point here is that the commentary to Regulation B explains that when you have enough information to deny a loan, the request becomes an application by definition of Regulation B. In other words, you can't fully rely on TRID's definition of application when it comes to denials.

I'm going to disagree with the opinion for part 1 of the question. Since when is an incomplete application not an application for Reg B purposes?

Also TRID's definition for an application should not be cross-referenced with Reg. B's definition.

Both Regulation Z and Regulation B have their own definitions of "application." You can have a procedure that defines the "procedures used by the creditor" for loans subject to TRID as requiring a written application that includes the six elements of information constituting an application for loans subject to TRID. However that doesn't carry with it the TRID rule allowing you to skip sending a disclosure if the application is withdrawn or denied before the LE has to be sent.

Regulation B does not have an exception for the appraisal notice when an application subject to section 1002.14 is denied or withdrawn before the end of the third business day after receiving the application. It's ridiculous, I know, but it's even spelled out in section 1002.14(b)(4):

Dan, I don't disagree with you and thanks for the clarification. The way I originally read the question, I saw it as asking if an appraisal notice was required "before it becomes an application". I was thinking in terms of Reg B and in terms of an inquiry or prequal. In rereading the question, I agree with you that they most likely have an application under Reg B, albeit incomplete, it's still an application.

The commentary you refer to, Adam, tells us that the application becomes a completed application on denial (since we had enough information to make the denial decision), and the fact that the application has become a completed application starts the clock on the 30 days within which the Notice of Action Taken, etc., must be given. It has nothing to do with the notice required by §1002.14(b).

The requirement for the notice to an applicant for credit that is to be secured by a first lien on a dwelling is not dependent on the application being a completed application. It is triggered simply on receipt of an application for such credit, long before it becomes a completed application. And 1002.14(b)(4) clearly says the notice is required whether credit is extended or denied, or whether the application is incomplete or withdrawn.

As I have suggested many times, it does fly in the face of reason to require the notice if the application is denied or withdrawn within 3 business days of when it was received (before the notice has to be sent). But, as I have also suggested many times, it is easier to just provide the notice than to waste time looking for reasons not to.

And clearly (perhaps), my response was in the works while Dan and Adam posted their thoughts.