If the title come back with issues, would you consider that a withdrawal by the cust (which is what the bank coded it as) or a denial?

Depends on the issue with the title. Is it something the borrower can clear and won't and it was part of the closing conditions? From HMDA:Getting it Right:

Action taken—conditional approvals.

If an institution issues a loan approval subject to the applicant’s meeting underwriting conditions (other than customary loan commitment or loan-closing conditions, such as a clear-title requirement or an acceptable property survey) and the applicant does not meet them, the institution reports the action taken as a denial.

It would be a denial under Regulation B.

Ok....and if it wasn't something the borr could not control, then it would be approved, not accepted?

http://www.ffiec.gov/hmda/faqreg.htm#action

Action Taken

Conditional approvals---customary loan-commitment or loan-closing conditions. The commentary indicates that an institution reports a "denial" if an institution approves a loan subject to underwriting conditions (other than customary loan-commitment or loan-closing conditions) and the applicant does not meet them. See comment 4(a)(8)-4. What are customary loan-commitment or loan-closing conditions?

Answer: Customary loan-commitment or loan-closing conditions include clear-title requirements, acceptable property survey, acceptable title insurance binder, clear termite inspection, and, where the applicant plans to use the proceeds from the sale of one home to purchase another, a settlement statement showing adequate proceeds from the sale. See comments 2(b)-3 and 4(a)(8)-4. An applicant's failure to meet one of those conditions, or an analogous condition, causes the application to be coded "approved but not accepted." Customary loan-commitment and loan-closing conditions do not include (1) conditions that constitute a counter-offer, such as a demand for a higher down-payment; (2) underwriting conditions concerning the borrower's creditworthiness, including satisfactory debt-to-income and loan-to-value ratios; or (3) verification or confirmation, in whatever form the lender ordinarily requires, that the borrower meets underwriting conditions concerning borrower creditworthiness.

It turns out that in this case, it was an issue with the title...there was a large lien that came back on it from the power company (which is from the prior owner), and although the customer could have paid the lien to continue with the loan, they refused (don't blame them).

So, then would this be considered an approved, but not accepted?

I glazed right over that....thanks!

Hopefully this does not seem like a silly question, but I have some differing opinions on whether or not an the receipt of a satisfactory appraisal would be considered an underwriting condition or a loan closing condition for purposes of conditional approvals? In the Q&A, it speaks to the loan-to-value ratio, but not the actual appraisal itself, as an underwriting condition. The suggestion to me has been that because the appraisal is out of the borrower's control it would not be considered an underwriting condition but rather a loan closing condition.

Any thoughts appreciated.


Thank you!

An appraisal is an underwriting condition. From the above link to the FAQs.

For example, if approval is conditioned on a satisfactory appraisal and, despite notice of the need for an appraisal, the applicant declines to obtain an appraisal or does not respond to the lender's notice, then the application should be coded "file closed for incompleteness." If, on the other hand, the applicant obtains an appraisal but the appraisal does not support the assumed loan-to-value ratio and the lender is therefore not willing to extend the loan amount sought, then the lender must use the code for "application denied."

Dan,

Thank you for getting back with me so quickly. The scenario at hand is that a conditional approval was issued, subject to receipt of a satisfactory appraisal, etc. However, prior to the receipt of the appraisal the applicant withdrew their loan application. The entry on the LAR was coded as approved not accepted rather than as a withdrawn. IMO it should have been coded as a withdrawn because the "final" decision to approve the credit was not and could not have been due to the appraisal had not been received. Would you agree?

I have just a quick minute before I have to get back to some training but this should be coded as closed for incompleteness.

You issued a conditional approval and for whatever reason the applicant decided they did not want to meet the condition either by deciding not to proceed with the application or refusing to provide the information.

Not a problem at all. I know we're all very busy.

I guess I'm a little confused though. It was wasn't that the borrower did not want to meet the condition rather the bank (the one who ordered the appraisal at the borrower's request/approval) just had not received the appraisal back from the appraiser prior to the applicant withdrawing their request. The other issue is, it is my understanding that in order to close a file under HMDA as "file closed for incompleteness" a conforming Regulation B incomplete letter needs to have been sent. In this case, no such letter was provided. In addition, sending an incomplete letter would not have been appropriate under Regulation B because the lack of the receipt of the appraisal (due to the appraiser) was not something the borrower had any control over.

Just a thought. Again, I appreciate all your assistance in this matter.

Thank you.

The other issue is, it is my understanding that in order to close a file under HMDA as "file closed for incompleteness" a conforming Regulation B incomplete letter needs to have been sent.

There really is no set format for this in Reg. B other than to tell them what is needed and the date it is needed by. Most likely your conditional approval letter met those conditions.

The FAQs are a little out dated on their wording but the intent is still valid. A conditional approval is a loan decision. Once that decision is made then you follow the FAQs the best you can. In this case, you didn't mention the appraisal had already been ordered, I would report either approved but not accepted if the appraisal supports the credit request or as a denial if it does not. If the appraisal has been ordered but was canceled when the applicant decided not to proceed I would stick with the closed for incompleteness.

Thank you!

k