The commitment letter will typically have conditions attached to it, which, in your case, sounds like included a satisfactory termite inspection. Since the applicant did not meet one of the conditions, the application is denied. Also, once you make a credit decision, which you did when you provided the commitment letter, the applicant can no longer withdraw either.
Make sure you send out an AAN for this one. Also, maybe it's just your wording, but make sure that your loan officers know that only applicants can withdraw applications; the bank cannot.
Last edited by KPOC; 02/22/13 08:34 PM.