If,for example, an application is denied and the reason it is denied is because all the debt on the credit report is up to the credit limits (LO states that applicant has a history of debt consolidation loans and then running up the debt again), Other on the Adverse Action is marked and that reason is described. Recurring high debt is not a "model" reason on an Adverse Action Notice.

So my question is this...For HMDA reporting do we report code 9 - Other for Reason for Denial and then type the stated reason in the text field, or since the reason ultimately has to do with credit history, should we report code 3 - Credit History with no explanation in the text field?

If you type an Other reason on the Reg B AAN, you should use code 9 and state the specific reason in the text fields.

The following is from our HMDA Training Manual:
If “other” is completed on the Regulation B denial it must be entered here for HMDA. [Commentary to §1003.4(a)(16) #3] Code 9 is also used for the following: [FIG]
A.) Length of Residence
B.) Temporary Residence
C.) Other reasons specified on the adverse action notice.


You didn't ask, but why wouldn't this be "excessive obligations" on the AAN?

Our AAN says Excessive Obligations to Income. The applicant actually did cash flow for the credit request. The powers that approve/decline loans just didn't want to take the chance on that customer again based on their pattern of debt consolidation and then running up the debt to the limits over and over.

Would the 2017 rules be the same? If Other is chosen on the AAN, then always code 9 for Other on the LAR?

Thanks very much for the help!

I'm stumped on this as well. We have AAN's when a score does not meet guidelines will state as such. We have told them this cannot be the only reason that another key factor that impacted the applicants score must be selected as well. They do select a credit reason and include that in the letter as well however, the letter still has "score does not meet guidelines" listed in the other category of the letter when it technically is a credit reason. Should I reporting the code of 9 with the description? My fear is that an examiner will feel this is really a credit reason where a code of 3 is appropriate and already being used.

the letter still has "score does not meet guidelines"

Well, your first problem is that is not acceptable on an AAN regardless of whatever other reason you place on the AAN.

Yes. Cannot get them to budge on stopping that. Which is why we told them they have to select an appropriate credit reason(s) as well to support why the score is not approvable. From the way I'm interpreting the HMDA Reg though, if a denial reason of "other" is ever used on the AAN, I have to report that way. I do however think this current method of how our denial letters are being done will result in some form of kick back from an examiner.

Citing the credit score as the problem fails to inform the applicant what in the credit file is preventing your lenders from approving the request. It also gives the appearance of saying "This isn't our fault, blame it on the score" as if it were a third party making the decision on the credit application. Both are wrongheaded.

"Cannot get them to budge" means either it hasn't been explained adequately to "them", or "they" just don't care enough about compliance. There's something missing in management's support of compliance here, I suspect.

Have you pointed them to the Official Commentary to 1002.9(b)(2) with an emphasis on the Comment #4 there? Official Commentary carries the same penalties of non-compliance as the regulation itself. It seems pretty clear when it says "the reasons disclosed must relate only to those factors actually scored" (emphasis added).

And when they have to go back and reissue AANs for the last 25 months during your next examination - they might want to start budging now.