We had a mortgage application which would not go secondary market due to required improvements. Counteroffered to do loan in house, borrower accepted. Do we do a turndown and put counteroffer made and accepted and HMDA report as denied or do we just do the turndown and put counteroffer made and accepted?

Do we treat the first application for secondary market as a denial & report it on HMDA?

As long as the loan closes, an accepted counter offer would be reported as an origination. No need to report the denial based on the original terms.

Do we need to do a turn down on the original application as it didn't fit into the secondary program?

TMatt said you would only report the terms of the origination (I agree). There aren't two applications from the client--just one.

No need to report a denial and the origination! Make it easy on yourself

I understand we will only report the loan we originate on HMDA.

Do we need to do a written notice of action taken to show we counter offered and it was accepted, or is just a verbal good?

An accepted counter-offer is NOT adverse action. A non-accepted counter-offer is adverse action. For example, if I verbally counter and you accept, no adverse action notice is needed.

I have several instances where our credit department issued a counter-offer and the borrower accepted the offer. Then for whatever reason the loan does not close. I notified the credit department that a counter-offer not accepted needed to be reported as a denied loan for HMDA purposes; they responded with the borrower DID accept the counter offer (there is no reason to deny) but for whatever reason(s) the loan did not close. Is this scenario reported as Approved not Accepted?

Why would they care? No adverse action letter is needed (assuming a proper counteroffer notice); it is simply coding on the LAR.

Sharron: You are correct that if the borrowers didn't close on the counter-offer, it wasn't accepted. They may have "temporarily accepted" it, but not legally. Your credit department is wrong from a Reg B & C standpoint.

As KB pointed out - if you sent a counter-offer & AAN combined notice in the beginning, the Reg B side of things is done. However, if the counter-offer was verbal, no AAN was ever sent.

There's some info missing. I would explore why the loan was not closed. Was it truly withdrawn? If so, you're back to triggering an AAN since the original request was denied. How do you support "approved not accepted"?

Sharron, welcome to BOL.

Agree with KB and David. Once it gets to a counteroffer that is not taken, you have to look at the situation as it was "not approved under the conditions the applicant originally requested". To drive a point, in a completely absurd situation, application $200,000 underwriting counteroffers $50,000. Applicant says yes, but never takes it. Is it approved not accepted - no, because it's not under the conditions originally requested. In the case of "accepting" a counteroffer, accepting means the loan closed, not saying OK, I'll take it.

Bringing this thread back up because on another compliance site, a response from the FFIEC/HMDA Help treats it differently than what I have always been taught regarding counteroffers and final action taken to be reported. Interested in seeing what comments are made from the many gurus here!

Initial Question:

Question circulating in --- Compliance Forum generating multiple answers. Counteroffer is made and accepted by borrowers. Seller then backs out of deal causing loan not to close and borrowers to withdraw. Answers to date are "Approved Not Accepted," "Denied," and "Withdrawn." None of these are clear cut. Is one correct or more preferable over the other? Should one choose and just document their reasoning?

Just received response from FFIEC/HMDA Help. Applicable excerpt follows:

"We apologize for the delay in response. As per the information provided, please refer to the following that was based upon a conversation that we had internally as to a similar question that was posed to HMDA HELP:

If an applicant accepts the terms of a counteroffer from a bank it can be assumed at that time the bank has approved the credit application. The applicant has accepted the new terms of the application since they communicated to the bank they approve the change of terms to the application. If the applicant later refuses to go forward and have the loan originated, the action taken should be recorded as ‘approved and not accepted.' The loan would not be counted as a denial since the applicant did accept the new terms.

For counteroffers the original terms are reported when the applicant does not accept the counteroffer. In those cases the applicant never accepts the new terms so the original terms are reported and the action taken is reported as ‘denied' by the institution.

Often times loan applications are treated as continuous as they occur within the same calendar year so terms can changes as they are agreed upon by the applicant and institution. If the applicant is accepting new terms as they are offered by the bank those are then what gets reported. It is when they are counteroffered and the applicant expressly does not accept them that the original terms get reported for the loan or most recently agreed upon.

Different federal regulators may have different interpretations of how to report these instances, but typically the most recent accepted loan terms are what get reported on the LAR."

That's new and contrary to everything we've ever heard.

I know this makes it difficult for you, but 1 reply vs. the dozens that say different doesn't make me a believer. If you choose to report this is "approved, not accepted" be sure to hang on to the email response as your proof.

Your response David is exactly what I expected to read! To report as ABNA is very contrary to the various different sources of guidance over the years. It has always been our understanding that if a counteroffer is accepted it is when the loan originates.

Curious to see what other regulators thought about this so checked with a FRB HMDA person and they are in complete agreement with HMDA Help!
They stated the loan was NOT denied.
A counter offer was accepted by the borrower even though it did not close, ABNA is the best choice since there wasn't a loan originated. It is not a denial, can't be reported as w/d since a credit decision was made, and it was not an incomplete application.

Reference was made to the Reg C Commentary: If an institution makes a counter offer to lend on terms different
...report as a denial if “the applicant does not accept the counter offer or fails to respond” ...

In this instance the applicant did accept the counteroffer so it is not reportable as a denial.

Very interesting...

If i "accept" your offer to sell your house....i buy your house. If i don't end up buying your house, how did i "accept" your offer? I think they're all wet.

Yikes! I don't have many but I'd sure like to know I was reporting them correctly.
Additionally, am I correct that, by extension, if this is to be marked ABNA you wouldn't send a denial letter either?

Is it just me or do we get a wild hair like this every year right before submission time?

MLO: Applicant, we can't approve your request as is but we can approve as that.

Applicant: Great, lets proceed.

Several days later:

Applicant: I've changed my mind I've decided I don't want the as that.


How did the applicant accept the counteroffer if they don't consummate the offer?

It's not just you Truffle!
I think you do send a denial. You are denying their original request and you're not making them a loan. Even if this is true for HMDA (which I'm still not buying yet), there are other instances, where you report ANA for HMDA and send a denial under Reg B.

To push back on this recent interpretation: The applicants do not accept the counter-offer just because they say momentarily say "yes" but later back out. I can see the "logic", but I can also then see the logic of calling this a withdrawal. The applicants withdrew. Why would we need to call it "approved, not accepted"? (don't answer that. Just trying to punch holes in the logic.)

For regulators reading this post:
If you're going to come up with a new interpretations, PLEASE send it out to all. Don't allow field examiners to be the communicator of new information.

[quote][/quote] Or HMDAHelp either. They're wrong more often than not so having to hang our hats on a communication from them is particularly scary.

Truffle - agree and often see them referred to as HMDA NO Help!

David - you indicated that you can see the logic of withdrawal, but a credit decision had already been made in the counteroffer - we can't do this, but we can offer this.

Counteroffers are a challenge enough to just get the systems back to the original requested terms to report accurately. Can't imagine if you were to follow HMDA Help guidance how you would track these to reported as ABNA.

I know. That's why I said "Don't answer this". I was just trying to say "if you can do that logic, then you could do this logic too" when comparing a counter that was a "yes" and changed to a "no" by the applicant. No different than "we made a decision (approved), but they didn't accept". Could we go back and say that's a withdrawal? Again, I know that's not right. Maybe it's a bad example.

It directly contradicts the FAQ that states that an institution reports a 'denial' if they approve a loan subject to underwriting conditions and the applicant does not meet them. The applicants want $XX loan amount; Loan-to-Value ratios exceed limit due to low appraisal value, the lender requires a higher down payment and lower loan amount. The applicant wants to proceed (maybe they're still shopping around, maybe they are trying to come up with more to bring to the table, etc...) but in the end they don't come up with the extra down. FAQ says that's a denial. FFIEC HMDA Help and an FRB HMDA person agrees that they verbally accepted the counter to move forward on new terms or amounts so it's ABNA?

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.

A conditional approval and counteroffer are not one in the same.

A conditional approval says we will approve your loan request if you provide satisfactory verification for the following information.

A counteroffer says we can't approve your request as applied for but we have approved you under these terms.

From the GIR:

b. For a counteroffer (your offer to the applicant to make the loan on different terms or in a different amount from the terms or amount applied for), use Code 1 if the applicant accepts. Use Code 3 if the applicant turns down the counteroffer or does not respond.

If you are putting conditions on the counteroffer then you have not approved them under different terms. A counteroffer should be made based full underwriting. IOWs your underwriting says we can't approve them for $200,000 but we can approve them for $175,000. You make the counteroffer for the $175,000.

::I'm really kicking myself for opening up this thread::

I'm not Joker. This is good to know and if examiners see it differently, we need to know and discuss.

The whole issue rests in what does "accepts" mean ("use Code 1 if the applicant accepts")? Does it mean initially, even if things change? Or does it mean the loan is closed.