Bank has a preapproval program. During a recent audit, we noticed that in some preapproval files a credit decision was not made within 30 days and notice of incompleteness had not been provided. The origination department has been led to believe that preapprovals do not have to follow the ECOA rule to provide a credit decision within 30 days. Compliance feels that a preapproval request is a request for credit and should be following the 30 days rule.

Our Loan Origination System (LOS) tracks ECOA decisions on applications and send out notices of incompleteness automatically on loan files that are nearing the 30 days without a credit decision asking borrowers to provide the missing information. However the LOS will only do this for a loan application in relation to TRID (6 pieces). The LOS doesn't consider a preapproval request to be a real loan application since there is no property address and won't track the ECOA decision.

When a borrower comes in on day 25 of their preapproval request with an accepted offer on a property, when does the credit decision need to be made---within 5 days based on the preapproval app or within 30 days from the borrower now having a property to purchase. Borrower has not provided everything needed by the bank in order to make a decision. Does the clock start over when a preapproval converts? Is there more than one 30 day clock??

I've read the definition of an application in ECOA and the commentary and I'm getting myself confused. How do other institutions handle this type of situation?

thanks

no one has any thoughts???

How does one get a preapproval? They submit an application, correct?

How is that not an application for credit under Regulation B and why would it be exempt from any of the requirements found in 1002.9?

You might want to read this: It is old and you can ignore the Reg C parts, but the Reg B parts have not changed.

https://www.fdic.gov/regulations/compliance/mortgage/preq2.pdf

I agree, it is an application for credit under ECOA.

However, the Commentary 1002.9(c)(1)--1. Exception for preapprovals. The requirement to provide a notice of incompleteness does not apply to preapprovals that constitute applications under §1002.2(f).

If I understand this correctly, we are not required to provide a notice of incompleteness on preapprovals. We would need to provide a notice within 30 days if the Bank denied or approved the preapproval application.

thanks for the resource--it contains valuable information--even if it is a little older.

bump

JT, IMHO, pre-approvals are unique, by the nature of the program, inhereantly, the application is missing information, namely the property. You cannot send them a notice telling them that they need a property or no further consideration will be given. That's the purpose of the preapproval program, so they can shop.