Denied Loan Requirements

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Question:

Relative to denied loan requests, including home improvement loans, is the bank required to do the following: (1)gather government monitoring info (2)provide the servicing transfer disclosure (3)provide the notice "right to copy of appraisal report" even if an appraisal is not obtained?in violation of Reg B if notice cannot be sent until after the thirty days?

Answer:

1) Gathering monitoring info - if the loan request is subject to HMDA reporting or Reg B information gathering, you would be required to collect and report monitoring information.

2) Servicing Transfer disclosure - if the loan request is subject to the disclosure requirements of HUD Reg X Section 3500.21(b), you must provide the servicing transfer disclosure, unless you deny the loan within three business days after application. If you deny within the three business days, no servicing transfer disclosure would be required.

3) Notice of right to copy of appraisal report - the Reg B definition of appraisal report encompasses more than just a formal appraisal report. It also encompasses internal documentation the bank may have used in valuing the collateral if it didn't obtain a formal appraisal report from a third party. Be sure to read the Reg B definition at 202.14(c) and the corresponding Official Staff Commentary for that section that provides several examples of what is and is not included here. If the loan request is for a dwelling-secured loan, then you would have to either provide the appraisal report as a matter of routine, or provide the notice prior to the time the adverse action decision is communicated to the applicant.

First published on BankersOnline.com 6/07/10