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#2018310 - 06/04/15 02:03 PM Denied, Withdrawn, or Approved-Not Accepted?
RVFlyboy Offline
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Borrower applies for a mortgage loan. Mortgage loan application contemplates sale of current home and funds from that sale applying to the new purchase. Loan application goes to underwriting and is approved conditioned on funds from sale of previous home. Sale of previous home falls through. Customer notifies us they are not going to go through with mortgage loan because sale fell through. Is this withdrawn, denied, or approved but not accepted? I think because it went to underwriting, withdrawn is no longer an option. But I could make a decent argument for either of the other options. What say the masses?
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General Discussion
#2018319 - 06/04/15 02:21 PM Re: Denied, Withdrawn, or Approved-Not Accepted? RVFlyboy
MBrownie Offline
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I would lean toward denial. Commentary to 1003.4(a)(8)#4:

If an institution issues a loan approval subject to the applicant meeting underwriting conditions (other than customary loan commitment or loan closing conditions) and the applicant does not meet them, the institution reports the action taken as a denial.

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#2018357 - 06/04/15 02:51 PM Re: Denied, Withdrawn, or Approved-Not Accepted? RVFlyboy
David Dickinson Offline
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This is specifically mentioned in the FFIEC HMDA FAQs on 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."


Although it seems odd to most, HMDA requires this to be "approved, not accepted". It is not a denial for HMDA.

I believe you would still have "adverse action" for Reg B and need to send an AAN, but HMDA basically says the lender isn't denying the request. The conditions didn't come through as expected. The lender approved the request and the borrower couldn't make it happen.
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#2018369 - 06/04/15 03:07 PM Re: Denied, Withdrawn, or Approved-Not Accepted? RVFlyboy
MBrownie Offline
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Thanks Dave, I wondered about "loan closing conditions". Good to have the clarification.

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#2018370 - 06/04/15 03:07 PM Re: Denied, Withdrawn, or Approved-Not Accepted? David Dickinson
RVFlyboy Offline
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David, can you expand on your rationale for AA being required under Reg B?
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#2018616 - 06/05/15 12:49 PM Re: Denied, Withdrawn, or Approved-Not Accepted? RVFlyboy
rlcarey Online
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The borrower has a "lack of verified funds for down payment".
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#2018685 - 06/05/15 03:09 PM Re: Denied, Withdrawn, or Approved-Not Accepted? RVFlyboy
David Dickinson Offline
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Jim: I've tried to reconcile Reg B and HMDA in this type of scenario before. I believe Reg B's definition of "adverse action" captures this. I've tried to find something in Reg B that says it's incomplete, withdrawn, etc, but can't and (as Randy points out), it's a denial for lack of down payment" (or similar wording).

HMDA clearly says in the FAQ this is "approved, not accepted".

On the surface, this seems to be a contradiction, so I understand the "struggle" as I've been there. I would liken it to HMDA calling a construction to perm loan a "purchase" but the TRID rules calling it a "refinance". There are actually lots of example where TRID and HMDA don't use the same identification for the same loan. Likewise with Reg B and C in this case.
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#2022930 - 06/25/15 11:55 AM Re: Denied, Withdrawn, or Approved-Not Accepted? RVFlyboy
Michelle M. Offline
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One of the customary conditions is clear title. If all borrower conditions are met, and the seller is not willing to pay a lien to clear the title, do I need to issue a denial letter to my applicant per Reg B?

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#2022932 - 06/25/15 12:14 PM Re: Denied, Withdrawn, or Approved-Not Accepted? RVFlyboy
rlcarey Online
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That is another situation in which the loan would be coded as an approved but not accepted under HMDA, but you would be required to send them an adverse action notice for "unacceptable collateral" or similar reason that you use in this situation under Regulation B.
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#2022933 - 06/25/15 12:31 PM Re: Denied, Withdrawn, or Approved-Not Accepted? RVFlyboy
Kathleen O. Blanchard Offline

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And just explain to them that the letter is required by regulation.
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