Customer is prequalifed for a mortgage loan. Finds a property. Has a sales contract but it falls through. Bank had not yet ordered a Home Inspection or an Appraisal which is part of the underwriting requirements for this particular mortgage loan program.

Customer was provided a Notice of Credit Decision that indicated "Borrower withdrew the loan application".

HMDA "Action Taken" reporting as it stands now is "Approved not accepted".

Question - Is "Approved not accepted" appropriate or should it be "File closed for incompleteness""?

Did the borrower request a withdrawal when the contract fell through? If bank had not made a credit decision and the borrower withdrew, then the loan should be coded as Code 4 - Application withdrawn.

I think more information is needed in this situation. However, did you actually approve the customer before the contract fell through?
If not, selecting APNA probably wouldn't be suitable.

Was even any type of underwriting decision made for these borrowers?

This could be considered a "Withdrawn" loan, but as stated earlier, you need more info to make an accurate determination.

Bank had made initial credit decision - (had tax returns; credit references; proof of funds for closing; etc.).

And the customer was approved? Or denied?

Approved. If the contract had not been "canceled" the Bank would have ordered a Home Inspection and Appraisal to complete the underwriting requirements prior to "final" approval.

Bump

IMO, I'd consider this an APNA.

I have been searching to see if this had been addressed, I am sure it has been but haven't found it, and this was close.
So this person is approved not accepted for that home,
and so that application is logged on HMDA. If they come back in two weeks later and have found a new house, should that be considered a new appliation? and they will have two different HMDA entry's. Would the new one have a new application date of when they found the new house?


snd one more - lady applied for home purchase and had dad as cosigner, then as we were processing it they switched application to dad as purchaser and she would just guarantee the note. (so that new husband wouldn't have community property ownership) - would that all be one transaction? I think our customers try to make this even harder than it is by itself.

Thanks for any help.

Scenario 1: you can either treat it as a new application, in which case you'd have 2 HMDA entries (one approved not accepted, the 2nd an origination) OR treat the origination as a continuation of the original application and just report the origination (this is what i would do).

Scenario 2: I would treat this as an amended application and a continuation of the original application, i.e., only report one LAR entry, the origination. You'd want to document your file (for instance, you would have gathered GMI on a person who ended up being a guarantor only).

thanks so much- you can make a decision and then drive yourself crazy second guessing yourself.

Along these same lines, we have an application for a purchase of a new home. Down payment funds are going to be from sale of current home which is under contract. Everything looks good on the loan. A week before closing, the sale of the current home falls apart and she backs out of the sale of the new home. Is our application approved not accepted or is it withdrawn or something else?

All other conditions have been met? If yes, then it is approved not accepted.

From the Q and A:

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.

The only thing is there is insufficient funds to close on the new home without the proceeds from the sale of the old home which fell through.

That fits in with the example, however:

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.

That leaves it as approved not accepted per the example.

Great! Thanks for the info, Kathleen! Your opinion is greatly appreciated.

I guess one last question here...

The Q&A says for that part "...a settlement statement showing adequate proceeds from the sale." In our situation, there is no settlement statement because the sale never materialized. We just knew that if the sale did happen that there would be sufficient down payment funds. Still Approved Not Accepted? Sorry for the confusion!

But you were conditioned upon a sale providing the proceeds, and the sale would have provided a settlement statement. Same answer.

Great!