If a loan is approved with additional collateral than what offered at application, is an adverse action required? i.e. a customer applied for a heloc using their home as collateral, the loan was approved taking a vehicle as additional collateral. The loan was not declined, just approved with the additional collateral.

What you describe is not an approval. It's a denial (we can't do what you asked) and a counter-offer (but we could do this instead). If the customer accepts the counter-offer, no AAN is required. If they don't, an AAN is triggered. You can verbally inform them of the denial/counter-offer, but if they will not offer the additional collateral, you'll need to send a written AAN.

Approved (not accepted) like David mentioned means approved under substantially the same terms and conditions that was originally requested by the applicant.

This is a hard concept for many loan officers who "approved" the loan request, but under different terms. These could be a lesser amount, additional collateral, shorter term, etc. If it is not substantially the same, it is a counteroffer, and if the counteroffer is not accepted, it is a denial.

If you use the model counteroffer/adverse action letter or similar a separate adverse action notice is not needed if the applicant does not accept the counteroffer. The notice illustrates the concept...we can't do this but can do that.

Commentary

"6. Counteroffer combined with adverse action notice. A creditor that gives the applicant a combined counteroffer and adverse action notice that complies with §1002.9(a)(2) need not send a second adverse action notice if the applicant does not accept the counteroffer. A sample of a combined notice is contained in form C–4 of Appendix C to the regulation."

Model Form C-4

http://www.bankersonline.com/regs/12-1002/12-1002-appc.html