In our view, your customer’s application was incomplete when initially submitted. Under Regulation B, an “application” is an oral or written request for an extension of credit, while a “completed application” is “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 . . . .”

In this case, when the customer initially requested credit, he did not identify the property that would be the subject of the extension of credit. If you regularly obtain and consider such information in evaluating applications, then his application was incomplete when it was submitted. 

Accordingly, you have 30 days from the date of the submission to deny the application for incompleteness or to send a notice of incompleteness. If it has been longer than 30 days, we recommend denying the application and requesting that the customer re-apply for credit.

If you decide to send a notice of incompleteness (rather than denying the application), your notice must specify which information is missing and designate a reasonable period of time to provide that information. Regulation B does not define “a reasonable period of time,” and the regulation’s sample notice of incompleteness does not include a specific time frame. However, we note that Regulation B requires creditors to make credit decisions within 30 days of receiving an application and provides applicants 60 days to request the reasons for a credit decision. Therefore, we believe that between 30 – 60 days would be considered a reasonable period of time. Whatever time period you determine to be reasonable, we recommend that you apply it consistently on all of your notices of incompleteness.

We also note that Regulation B’s requirement to send a notice of incompleteness does not apply to preapprovals that constitute applications. A request for preapproval is an “application” — and exempt from the notice of incompleteness requirement — when a creditor reviews the request and, subsequent to a comprehensive analysis of the person's creditworthiness, the creditor issues a written commitment to extend credit up to a designated amount for a designated period of time. In the future, if a customer would like to apply for a home loan, but has not yet selected a property to purchase, you may wish to consider providing a preapproval.

For resources related to our guidance, please see:

• Regulation B, 12 CFR 1002.2(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….”)

• Regulation B, 12 CFR 1002.2(f) (“. . . 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.”)

• Official Interpretations, 12 CFR 1002, Paragraph 9(a)(1), Comment 3 (“When an application is incomplete regarding information that the applicant can provide and the creditor lacks sufficient data for a credit decision, the creditor may deny the application giving as the reason for denial that the application is incomplete. The creditor has the option, alternatively, of providing a notice of incompleteness under § 1002.9(c).”)

• Regulation B, 12 CFR 1002.9(c)(1) (“Incomplete applications. (1) Notice alternatives. Within 30 days after receiving an application that is incomplete regarding matters that an applicant can complete, the creditor shall notify the applicant either: (i) Of action taken, in accordance with paragraph (a) of this section; or (ii) Of the incompleteness, in accordance with paragraph (c)(2) of this section.”)

• Regulation B, 12 CFR 1002.9(c)(2) (“(2) Notice of incompleteness. If additional information is needed from an applicant, the creditor shall send a written notice to the applicant specifying the information needed, designating a reasonable period of time for the applicant to provide the information, and informing the applicant that failure to provide the information requested will result in no further consideration being given to the application. The creditor shall have no further obligation under this section if the applicant fails to respond within the designated time period. If the applicant supplies the requested information within the designated time period, the creditor shall take action on the application and notify the applicant in accordance with paragraph (a) of this section.”)

• Official Interpretations, 12 CFR 1002, Paragraph 9(c)(1), Comment 1 (“The requirement to provide a notice of incompleteness does not apply to preapprovals that constitute applications under § 1002.2(f).”)

• Official Interpretations, 12 CFR 1002, Paragraph 2(f), Comment 5 (An application for credit includes a situation where “a person asks a financial institution to “preapprove” her for a loan (for example, to finance a house or a vehicle she plans to buy) and the institution reviews the request under a program in which the institution, after a comprehensive analysis of her creditworthiness, issues a written commitment valid for a designated period of time to extend a loan up to a specified amount. The written commitment may not be subject to conditions other than conditions that require the identification of adequate collateral, conditions that require no material change in the applicant's financial condition or creditworthiness prior to funding the loan, and limited conditions that are not related to the financial condition or creditworthiness of the applicant that the lender ordinarily attaches to a traditional application (such as certification of a clear termite inspection for a home purchase loan, or a maximum mileage requirement for a used car loan). But if the creditor's program does not provide for giving written commitments, requests for preapprovals are treated as prequalification requests for purposes of the regulation.”)