When is a lender required to provide a Notice to the Home Loan Applicant?

• A. A refinance of an existing loan with no adverse action.
• B. A loan approval with no adverse action.
• C. A purchase money loan to buy a duplex that will function as the applicant's principal dwelling, denied based on a credit score.
• D. A personal loan denial based on credit score for a conventional loan.

Answer: (C)

Notices to a home loan applicant are required whenever a home loan application is subject to adverse action based on information in a credit report, such as denial or a move to less favorable terms. The notice serves to inform the applicant of the action taken and their rights, including how to obtain a copy of their credit report.

In this set of scenarios, the only one that involves a home loan and an adverse action due to a credit score is a purchase-money loan to buy a property that will serve as the applicant’s principal dwelling, which is denied based on the credit score. A duplex can qualify as a principal dwelling if the borrower intends to occupy one unit as their home, so this is indeed a home loan. Because the action is denial tied to the credit score, the lender must provide the Notice to the Home Loan Applicant.

The refinance with no adverse action and the loan approval with no adverse action do not trigger this notice because there’s no adverse action to disclose. A denial for a personal loan, while it may require other notices under different laws, is not a home loan, so it wouldn’t hinge on the Notice to the Home Loan Applicant.