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Question:

When should a mortgage lender issue a Notice of Incomplete Application?

Answer:

In order to comply with ECOA notification requirements, a mortgage lender must generally notify an applicant of action taken (i.e. denial, approval, etc.) within 30 days of receiving a completed application.  If, however, the application is incomplete regarding matters that the applicant can complete, a mortgage lender has the option of providing a notice of incomplete application (“NOIA”) to the applicant rather than issuing a denial or providing a counteroffer.  A mortgage lender must provide the NOIA to the applicant within 30 days of receiving the incomplete application.  

The NOIA must be written and must include the following:

• Specify the information needed from the applicant;
• Designate a reasonable period of time for the applicant to provide the information; and
• Inform the applicant that failure to provide the information requested will result in no further consideration being given to the application.

If the applicant does not respond to the NOIA within the time period provided, the mortgage lender may close the file for incompleteness and will have no further ECOA notification obligations.  If the applicant supplies the requested information within the designated time period, the mortgage lender shall take action on the application and notify the applicant of action taken within 30 days of receiving the completed application.  It is considered a best practice for a mortgage lender to set up a mechanism to monitor ECOA notification timeframes with the use of software automation, exception  reporting, and/or pipeline monitoring.