A loan officer recently retired and while cleaning out his office we found a few older files where he pulled credit on a borrower and based on that information the file should have been submitted for denial. This file was dated 4 months ago. At this point we don't think we should be sending out a denial letter this late in the game but am wondering if we should at least deny the loan internally and report it as a denied loan for HMDA purposes.

I would deny and send out the AAN even at this late date. From the perspective of an examiner looking at it, i'd rather be able to say we identified it and sent it out, even very late, than we found it and did nothing. JMO.

Don't understand why you think you shouldn't communicate the denial to the applicant. Yes you're past the 30 days but what if that applicant is still waiting to hear something? I'd send the AAN and definitely report for HMDA.

I can assure you if you do not send the AAN when the examiner finds it they will have you send it out and then most likely have you do a file review to make sure you don't have any others laying around in the past 25 months. If you do you will get to send out those AANs as well.

So: "..i'd rather be able to say we identified it and sent it out, even very late, than we found it and did nothing".

I'm a four-peat - send it out with an apology the file had been inadvertently misplaced. Also see if you can verify that any decision was communicated. If those are spotted without an explanation, the examiners will beat the bank up, like Dan mentioned.

It's another reason to track credit bureaus and match to applications/renewals, etc., besides looking for prescreening

I agree....send the AAN with an apology letter. Chances are, the denial WAS communicated to the applicant verbally but there is so much information on an Adverse Action Notice that the applicant is entitled to receive. This exact scenario happened at my former bank. A loan officer was fired and dozens of files were discovered in the officer's desk drawer, complete with credit reports, some with tax returns. The task was assigned to compliance and I prepared and mailed about 45 denials with letters.....yep, I did.