Applications Definition Reg. B

Hi, Dave Dickinson. I want to talk about applications. The definition of application in Reg B says that it's an oral or written request for an extension of credit. And then it goes on with this made in accordance with your procedures. Now, a lot of people like to say, well, our procedures are this and this and this, and you don't have an app until... I'm going to caution you a little bit there. The discussion of procedures talks about what you do in the real world. In fact, the commentary of this section says, it's not your policy, it's what you really do. So you might say, we do not take phone applications. Well, is that really true?

When I was an examiner and now as a consultant, I often have seen banks that say that, and while I'm in their institution, I hear loan officers telling people, yes, we can do that. Or no, I'm sorry, we can't do that. They're taking applications, they're making decisions and communicating that. And so you are taking verbal apps in that case. Now you might be able to argue that in the mortgage department, we just won't take an app unless someone fills out all this information online and possibly that's true, but be very careful that if you're making exceptions, then your procedures do maybe vary from what your policy is. There is great flexibility in this, and you want to maybe say, this is what we'll do by department. So for the commercial loans, these are our procedures and for home loans, these are procedures. That would be okay.

But don't shy away from taking an application. Just because you take an application doesn't mean that a whole lot of things happen. Yes, it does trigger some things, like appraisal disclosures of applicable. If you have more than one applicant, joint intent, if it's subject to government monitor information or hummed as demographic information, you would have to collect. But so many times loan officers try to push the application date forward when maybe they should just do these things and then not have to argue that they didn't have an app just yet.

The other thing that a lot of people will get worried about is this 30 day clock that starts. Well, that doesn't begin until you have a completed application. And there is in that definition, quite a bit of flexibility that decides what you need before it is complete. Does that information have to be verified or could it be unverified? That's where the great flexibility comes in. So I encourage you to consider an application sooner than later. And yes, that means that you might have to collect some things or get some things, but trying to play a game that you don't have an app and examiners say you do, can really create some fundamental problems from everything else after that, for tread disclosures and appraisal disclosures, and again, collection of government information, et cetera.

So, I encourage you to think through these things. What are your procedures? What do you define as an app? When do you have an initial app? Discuss these, come to some decisions for your institution, and it'd be of great help. I hope this video will help you do just that. Thanks for watching.