Contingent Approval and Reg B

Posted By: Likes to Comply

Contingent Approval and Reg B - 04/20/22 07:54 PM

I am reviewing a loan file for Reg B timing. Application was on 2.18.22. On 3.15.22 the LO gave the applicant a verbal contingent approval based on the credit analysis, but contingent on the results of the title work and appraisal value. Appraisal came back on 4.6.22 and title work on 4.18.22. Everything checks out so the closing documents have been ordered.

Did the Reg B notification of action taken timing stop on 3.15.22?
Posted By: raitchjay

Re: Contingent Approval and Reg B - 04/20/22 07:57 PM

Did your bank order the title work and appraisal on 3-15?
Posted By: Rocky P

Re: Contingent Approval and Reg B - 04/20/22 08:30 PM

If I'm understanding it right, there are 2 things at stake.

Definition of a completed application
1002.2(f) (f) Application means an oral or written request for an extension of credit that is made in accordance with procedures used by a creditor for the type of credit requested. The term application does not include the use of an account or line of credit to obtain an amount of credit that is within a previously established credit limit. A completed application means 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.

Timing requirements:
9(a) Notification of action taken, ECOA notice, and statement of specific reasons.
Paragraph 9(a)(1).
1. Timing of notice—when an application is complete. 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. (See also comment 2(f)-6.

The creditor must diligently follow-up to endure the application is being handled. The completed application is a rolling date! If the credit report is pulled at application and doesn't meet bank standards, the bank has 30 days from that point to notify the customer. If it's good, go to the next step, e.g. the appraisal. The appraisal may take a few weeks to get. When received, if the value does not meet standards, the 30 days starts on receipt of the completed appraisal, etc.
Posted By: raitchjay

Re: Contingent Approval and Reg B - 04/20/22 08:34 PM

I agree...i just think to the specifics of the question in regards to the date that the Reg. B clock stopped...i think it's relevant when the appraisal and title work were ordered. If the contingent approval was communicated on 3-15, but it took the bank another week to order the appraisal and title work (the remaining things needed to make a credit decision), then i don't think the clock would stop on 3-15 simply because contingent approval was communicated. That's my understanding of things anyway.

There are things the bank needs to make a credit decision that are under the applicant's control (pay stubs, tax returns, etc.) and there are things that the bank needs to make a credit decision that are under the bank's control (ordering title work, appraisals, etc.). I've always been of the belief that the clock is stopped indefinitely if the bank is waiting on the borrower; but for things under the bank's control you can't hide behind the "we don't have a complete application yet" language. Once the bank orders the appraisal and title work, the clock would stop....but not until then. Again, that's how i've looked at this. If i'm wrong, maybe i'll learn something.
Posted By: Likes to Comply

Re: Contingent Approval and Reg B - 04/21/22 09:07 PM

Sorry, I had a few errors in the dates above and here are also the order dates for the two pending items:

They ordered the appraisal on 3.9.22, the appraisal was received on 3.25.22 and sent for an internal review. Review was completed on 4.6.22 and then sent to the Loan Officer on 4.7.22. The title work was ordered on 4.5.22 and received on 4.20.22.

There were no issues with these two pending items, so on 4.20.22 a payoff was requested and updated insurance information was requested.. Once these are received the closing will be scheduled.
Posted By: Rocky P

Re: Contingent Approval and Reg B - 04/22/22 12:16 AM

Seems like they had everything under control! Actions were taken without delay and internallly decisions were made promptly.
If only everything in banking could run as smooth . . . LTC, you trained them well
Posted By: Inherent_Risk

Re: Contingent Approval and Reg B - 04/22/22 01:40 PM

I'd agree with a caveat that I'm assuming that nothing was required from the borrower. If you needed anything from the borrower, then you'd need to give an NOI within 30 days of application (9(c) clock). Title and appraisal are not under borrower control, so you just have a diligence requirement on those, and once you have everything, then you have 30 days (9(a) clock).

Just to be clear on your original question. Though I believe there is some disagreement on this, I for one do not think contingent approval has any effect whatsoever on either ECOA clock. A contingent approval is not an action taken. You can't approve a loan until you have a completed application.
Posted By: raitchjay

Re: Contingent Approval and Reg B - 04/22/22 06:23 PM

I actually agree that the contingent approval is really incidental in all of this and has no particular bearing on the subject at hand. I was merely referencing it as sort of a bookmarker as the OP did.