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Must the bank provide consumers with the notice of the right to receive a copy of the appraisal at the prequalification stage of the loan process?

My bank will prequalify people for a mortgage loan. It does not consider a prequalification to be an application for credit, so even if consumers are prequalified, they must still formally apply for a loan. There are times when the bank will decline a request for credit at the prequalification stage. Must the bank provide consumers with the notice of the right to receive a copy of the appraisal required under §1002.14(a)(2) of Regulation B at the prequalification stage of the loan process?

Yes. If your bank declines the prequalification request, the bank has made a credit decision and thus, has treated the prequalification as an application. Therefore, the appraisal notice is required. Comment 3 to §1002.2(f), which defines “application,” states:

A creditor is encouraged to provide consumers with information about loan terms. However, if, in giving information to the consumer the creditor also evaluates information about the consumer, decides to decline the request, and communicates this to the consumer, the creditor has treated the inquiry or prequalification request as an application and must then comply with the notification requirements under §1002.9. (Emphasis added.) Whether the inquiry or prequalification request becomes an application depends on how the creditor responds to the consumer, not on what the consumer says or asks.

If the bank does not decline the loan at the prequalification stage, the appraisal notice is not required. Regulation B §1002.14(a)(2) states that notice is required when the bank has an application for credit, and you have stated that your bank does not consider a prequalification to be an application. If the consumer applies in accordance with your bank’s procedures, the bank will provide the notice at that time. (April 2020)

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