Written Application Required?

Is a bank required to obtain a written/signed loan application for a consumer home equity term loan?

If a bank is selling the loan it must follow investor requirements.

If the bank will keep the loan in its own portfolio, at present there is the standard requirement that an application be in writing, but that does not necessarily mean written down on a piece of paper by the applicant. It means any application that is:

>written on an application form by the applicant
>taken over the phone or in person by a bank employee and written down on paper or in the bank's system
>an internet application.

It is a common practice, even for applications that will be kept in the bank's portfolio, for a final application to be reviewed and signed at closing. This is particularly customary for loans that will be sold on the secondary market.

"...at present there is the standard requirement that an application be in writing..." Is this a Reg B requirement? Can you please direct me to the appropriate citation? Thank you.

Reg B:

(c) Written applications. A creditor shall take written applications for the dwelling-related types of credit covered by §1002.13(a).

1002.13(a) covers applications for credit primarily for the purchase or refinancing of a dwelling occupied or to be occupied by the applicant as a principal residence, where the extension of credit will be secured by the dwelling.

Also review the commentary to B:

Paragraph 4(c) .

1. Requirement for written applications. Model application forms are provided in Appendix B to the regulation, although use of a printed form is not required. A creditor will satisfy the requirement by writing down the information that it normally considers in making a credit decision. The creditor may complete an application on behalf of an applicant and need not require the applicant to sign the application.

2. Telephone applications. A creditor that accepts applications by telephone for dwelling-related credit covered by §1002.13 can meet the requirement for written applications by writing down pertinent information that is provided by the applicant.

3. Computerized entry. Information entered directly into and retained by a computerized system qualifies as a written application under this paragraph. (See the commentary to §1002.13(b), Applications through electronic media and Applications through video. )

Of course, you must follow your own bank's policies and procedures if they require an application written down by the applicant.