Mortgage Concepts is a recurring video series covering best practices and compliance education for California mortgage loan originators. This video covers the disclosures advising the borrower of the action the lender has taken on the borrower’s mortgage application and the lender’s reasons for the actions, as mandated by the federal Equal Credit Opportunity Act (ECOA). For more information, see Part 1.

For course credit toward renewing your NMLS license, visit

Incomplete applications

Often a borrower submits an application that is incomplete, insufficient to provide the lender with enough information to make a decision for origination of the requested mortgage. Here, the lender responds to the borrower, in writing, within 30 days after the initial receipt of an incomplete application by delivering to the borrower either:

  • a notice of incompleteness [12 CFR §1002.9(c)(2)] ; or
  • a notice of action taken. [12 CFR §1002.9(a)(1)(ii)]

The written notice of incompleteness includes:

  • a list of the information needed from the borrower to complete the application;
  • a reasonable period of time given for the borrower to respond by providing the information; and
  • a statement advising the borrower that failure to provide the information requested will result in no further consideration being given to the application. [12 CFR §1002.9(c)(2)]

When the notice of incompleteness is delivered and the borrower fails to respond within the given time period, the lender has fulfilled its duties to disclose.

When the borrower timely supplies the information requested in the notice of incompleteness, the lender then treats the loan application as complete. [12 CFR §1002.9(c)(2)]

A lender may initially notify the borrower applicant orally of the information needed to complete the application. However, when the application remains incomplete after an oral notification, the lender timely sends either a written notice of action taken or a written notice of incompleteness. [12 CFR §1002.9(c)(3)]

Related video:

Mortgage Concepts: Lender ECOA disclosures of action taken, Part 1

Completed loan applications

After the lender has acquired sufficient information to constitute a completed loan application, the lender has 30 days to:

  • notify the borrower applicant the loan is approved;
  • notify the borrower the loan is denied with the notice of action taken; or
  • counteroffer the borrower’s loan request. [12 CFR §1002.9(a)(1)(i)]

When the lender notifies the borrower of their counteroffer and the applicant does not respond, the lender delivers a notice of action taken within 90 days after delivery of the counteroffer. [12 CFR §1002.9(a)(1)(iv)]

notice of action taken is a document which contains:

  • a statement of the action taken;
  • the name and address of the lender or loan originator;
  • a statement the purposes of the ECOA; and
  • the name and address of the federal agency in charge of the lender or loan originator’s compliance with the ECOA. [12 CFR §1002.9(a)(2)]

This statement identifying the purposes of the ECOA is to be substantially similar to the following:

“The Federal Equal Credit Opportunity Act prohibits creditors from discriminating against credit applicants

  • on the basis of race, color, religion, national origin, sex, marital status, age (provided the applicant has the capacity to enter into a binding contract);
  • because all or part of the applicant’s income derives from any public assistance program; or
  • because the applicant has in good faith exercised any right under the Consumer Credit Protection Act.

The Federal agency that administers compliance with this law concerning this creditor is [name and address as specified by the appropriate agency or agencies listed in appendix A of this part].” [12 CFR §1002.9(b)]

Additionally, the notice of action taken is to contain:

  • a statement setting forth the specific reasons for the action taken; or
  • a notice stating:
    • the borrower applicant has 60 days after the lender’s notice of action taken to request a statement from the lender listing the reasons for denial;
    • that the lender must deliver the reasons for denial within 30 days of the borrower’s request; and
    • the name, address and telephone number of the person from whom the statement of reasons can be obtained. [15 USC §1691(d)(2)]

The lender might choose to provide the specific reasons orally. When disclosed orally, the lender will advise the borrower they have the right to have the lender confirm the reasons in writing within 30 days of receiving the borrower’s written request for confirmation. [12 CFR § 1002.9(a)(2)]

The statement of specific reasons cannot be a boilerplate statement that the borrower did not meet the lender’s internal policy standards. As its name implies, the reasons disclosed are to be specific to the borrower’s application, not generic. [12 CFR §1002.9(b)(2)]

Withdrawn loan applications

Occasionally, after a lender approves an application, the borrower does not further inquire or act on the application. Here, after 30 days following receipt of the completed application, the application is considered withdrawn and no notice need be sent. Applications withdrawn by borrowers do not require a notice. [12 CFR §1002.9(e)]

Related video:

Mortgage Concepts: How to issue the Adverse Action Notice, Part 1