Incomplete Application, Oral Requests, and a Late Denial
On March 1, a mortgage broker in Columbus takes a telephone application for a $210,000 refinance. The borrower lists a $25,000 gift from her mother for closing costs but does not provide the gift letter or the mother's bank statement. The broker also has not received the borrower's 2024 W-2. On March 4, the loan officer calls and texts the borrower listing the missing items; the borrower says she will send them “next week.” No written notice is sent. On April 18, the processor closes the file and sends a denial letter stating “incomplete application.” The borrower files a complaint alleging she was never told what was missing and that the delay caused her to lose a lower rate. The broker's file notes show the March 4 call but no written notice. The lender's policy says incomplete files are denied after 30 days.
1. Was the March 4 phone call and text sufficient under ECOA and Regulation B? What should the broker have sent, and by when?
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No. Regulation B requires a written notice of incompleteness when a creditor needs additional information to evaluate an application. The notice must be sent within 30 days after receipt of the application, must identify the specific information needed, and must give the applicant at least 30 days to respond. A phone call and text do not satisfy the written-notice requirement. Because the application was received March 1, written notice should have been sent by March 31-ideally much sooner-listing the gift letter, the mother's bank statement, and the 2024 W-2. The file note of the March 4 call is useful evidence of oral follow-up, but it does not substitute for the required writing. Without that notice, the lender cannot later treat the file as incomplete in the same way.
2. What are the problems with the April 18 denial, and what notice obligations remain?
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The April 18 denial is late and poorly supported. Because no written incompleteness notice was sent, the lender should have either evaluated the application on the information available or sent a proper adverse action notice within 30 days after receiving a completed application. The denial reason “incomplete application” is also too vague; Regulation B requires specific reasons or a statement of the applicant's right to request them. The lender should not use the 30-day internal policy as a substitute for the regulatory timeline. On these facts, the borrower has a credible argument that she was not told in writing what was missing and that the file was closed without a proper notice. The broker should preserve the call log, text records, and application date, and compliance should review whether a corrected adverse action notice and remediation are appropriate.
3. How should the broker respond to the borrower's complaint, and what record-retention issues are raised?
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The broker should not argue that the oral call cured the problem. A practical response is to acknowledge the file handling issue, determine whether the borrower still wants to proceed, and if so obtain the missing documents and re-evaluate rather than treating the file as dead. If the file remains denied, the lender should issue a compliant adverse action notice with specific reasons and the ECOA notice language. The broker should also check whether the rate lock expired because of the delay and whether an extension is available. ECOA records generally must be retained for 25 months after the creditor notifies the applicant of action taken; the broker should retain the application, the March 4 call log, texts, any notices, and the denial letter. Inconsistent handling of similar files creates fair-lending risk, so compliance should compare this file with other incomplete applications.