We have a loan applicant - small business loan - completed commercial loan application. We have told the applicant that we will consider the loan with a cosignor (we did not specify who). The customer decides to not move forward with the loan. Our application has the verbaige that says the customer can request a written statement of the reason for denial. Since we denied the first request and said we would consider if the person provided a cosignor - are we in compliance with just documenting the file as a withdrawn application?

Regulation B 202.9
6. Counteroffer combined with adverse action notice. A creditor that gives the applicant a combined counteroffer and adverse action notice that complies with § 202.9(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.

It is not withdrawn. The bank denied the request and told them how you would consider a new application, and you have the disclosure about requesting reasons for denial.

Record it as a denial. It cannot be reported as withdrawn because the bank made a credit decision.

So - if we document the file that the loan was denied based on lack of collateral, excessive obligations, but that we countered that we would reconsider with a cosignor - we would be fine?

Whether you denied the application or made a counteroffer that was not accepted, you end up in the same place. I was going with your statement that you denied the application.

Either way since the customer is not going forward, you end up with a denial and the action taken must be coded as such.

Under Regulation B, if you provided the adverse action notice complete with counteroffer and the counteroffer was not accepted, you require no further action - as cited above.

For HMDA reporting purposes, you must report the loan as a denial not a withdrawal.

thanks for the answers.