Providing Mortgage Disclosures on a Denial

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Q. Good morning Heather, I feel like this is a silly question – but I want to clarify it.

If we receive a mortgage application with the six pieces of information from a borrower that constitutes an application under Reg Z and triggers the need to send a Loan Estimate – if we deny that borrower within three days of the application do we still need to send the Loan Estimate?

A. Hey, that’s a great question. The Official Interpretation to 12 CFR 1026.19 (a)(1)(i) provides the answer: 

4. Denied or withdrawn applications. The creditor may determine within the three-business-day period that the application will not or cannot be approved on the terms requested, as, for example, when a consumer applies for a type or amount of credit that the creditor does not offer, or the consumer’s application cannot be approved for some other reason. In that case, or if the consumer withdraws the application within the three-business-day period, the creditor need not make the disclosures under this section.