Under which scenario is a Notice to the Home Loan Applicant required?

• A. A purchase money loan to buy a duplex that will be the applicant's principal dwelling, denied based on a credit score.
• B. A loan approved with no adverse action.
• C. A mortgage application not involving a home purchase.
• D. A refinance of an existing loan with no adverse action.

Answer: (A)

Notice to the Home Loan Applicant is required when a mortgage decision involves adverse action based on information in the applicant’s credit file, such as a decision driven by a credit score. In this scenario, a purchase-money loan to buy a duplex that will be the applicant’s principal dwelling is denied because of the credit score. That is adverse action on a home loan based on credit information, so the lender must issue the Notice to the Home Loan Applicant to inform the applicant of the decision and provide rights to obtain a copy of the credit report and to understand how the decision was made. If there’s no adverse action (the loan is approved) or the transaction isn’t a home purchase, or it’s a refinance with no adverse action, the notice isn’t required.