While I used to be of the same opinion, I disagree Rocky. We've recently written an article on this topic. Here's part of it:
What if the borrower initially accepts your counteroffer, but for whatever reason, the loan still does not close? The HMDA Rule changes clarify that where the applicant has communicated acceptance of the new terms (i.e. the counteroffer), then there is a “reset” of the application.
Comment #9 to §1003.4(a)(8)(i) of HMDA states, If the applicant agrees to proceed with…the financial institution’s counteroffer, the financial institution reports the action taken…based on the terms of the counteroffer. For example, assume a financial institution makes a counteroffer, the applicant agrees to proceed with the terms of the counteroffer, and the financial institution then makes a credit decision approving the application conditional on satisfying underwriting or creditworthiness conditions, and the applicant expressly withdraws before satisfying all underwriting or creditworthiness conditions and before the institution denies the application or closes the file for incompleteness. The financial institution reports that the action taken as application withdrawn…
While we often try to draw similarities between Regulation B and HMDA, it’s not always possible. However, when it comes to counteroffers, Regulation B uses similar language to address the fact that an accepted counteroffer is not necessarily an adverse action, even if the loan doesn’t close. Under Regulation B, adverse action is defined, in part, as, “a refusal to grant credit in substantially the amount or on substantially the terms requested…unless the creditor makes a counteroffer…and the applicant uses or expressly accepts the credit offered…
So, under both Regulation B and C, applicants can agree to a counteroffer without the loan closing. If the applicant says, “Yes, that sounds good” to your counteroffer, but later says they don’t want to move forward, Regulation B says the application is withdrawn. How the application is reported for Regulation C is going to depend on where you were at in the process. If you had already approved the applicant based on the terms of the counteroffer, you would report “Application Approved but not Accepted”; if you had not made a decision yet, or the applicant had not met all underwriting/creditworthiness conditions, you would report the application as “Withdrawn”. Either way, an accepted counteroffer essentially washes away the original application. Now you’re dealing with the accepted counteroffer and as the CFPB notes in the preamble to the August 2017 revisions, limiting the reportable actions taken for counteroffers to only covered loan originated or application denied might lead to less complete and accurate reporting. So, your reporting options are essentially reset with the applicant’s acceptance of a counteroffer and all codes are back on the table.
For counteroffers, the original terms (that the applicant originally requested) are reported on the LAR 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. This stands to reason, because a counter offer is a rejection of the initial offer. 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 counter-offered and the applicant expressly does not accept them that the original terms get reported for the loan or most recently agreed upon.
bOaty: I know much of this is written toward HMDA clarification, there are many Reg B issues in this as well. I see this question lining up the same for both Reg B & C.