What must a lender provide if they deny a mortgage application?

When a lender denies a mortgage application, they are required under the Equal Credit Opportunity Act (ECOA) to provide a Notice of Action Taken. This notice must include specific details about the decision, including the reasons for the denial. This requirement is in place to ensure transparency and allows applicants to understand why their application was not approved, which can help them address any issues or enhance their future applications.

A simple letter of denial does not meet the legal standards for informing the applicant about the specifics of the decision. While providing a current credit report could be beneficial to the applicant, it is not a requirement upon denial. Similarly, an alternative financing plan is not standard and may not be relevant in a denial situation, as the focus at that point is on the reasons for the denial itself. Thus, the correct answer emphasizes the importance of clear communication regarding the reasons behind a lending decision.