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#2167864 - 03/13/18 01:43 PM Counteroffer Denied
Chip Offline
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If a financial institution provides a written counteroffer to include the reason for denial and a date to close the file. The applicant wants to move forward with the counteroffer. The counteroffer is then denied at some point during the processing of the application. Is the FI required to send a denial for the counteroffer? What if the counteroffer wasn't presented in writing, would that make a difference as to how the denial for the counter would be handled?

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#2168038 - 03/14/18 10:12 AM Re: Counteroffer Denied [Re: Chip]
RR Joker Online
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The counteroffer is then denied at some point during the processing of the application. Is the FI required to send a denial for the counteroffer? Yes

What if the counteroffer wasn't presented in writing, would that make a difference as to how the denial for the counter would be handled? You would still owe a final denial.
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#2169108 - 03/20/18 09:02 AM Re: Counteroffer Denied [Re: Chip]
Dan Persfull Offline
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If a financial institution provides a written counteroffer .....The counteroffer is then denied .....

A counteroffer is a firm offer of credit on terms different from those originally applied for based on your underwriting of the loan request. If you approved the applicant on different terms what happened to cause you to withdraw that offer of credit?

Was a counteroffer actually made or was it an invitation to reapply with additional collateral, a co-signer, etc.?

In either case you took adverse action on the second request (the so called counteroffer) therefore I agree with RRJ; you owe the consumer an AAN giving the reason(s) you withdrew the counteroffer.
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#2169528 - 03/22/18 09:35 AM Re: Counteroffer Denied [Re: Chip]
John Burnett Online

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Think of the purpose of the AAN. It conveys both the fact that a request has been denied and the reason (or an invitation to ask for the reason) for the denial. This applicant thought he had a second chance under different terms, whether or not the first response was an actual counteroffer. The lender changed its mind and denied the applicant that chance, probably for a good reason that hasn't yet been conveyed to the applicant. Yes, a new AAN is needed.


Edited by John Burnett (03/22/18 09:36 AM)
Edit Reason: clarity
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#2170939 - 03/29/18 03:12 PM Re: Counteroffer Denied [Re: Chip]
bOaty Offline
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What if a counter offer has been accepted by the applicant and they later change their mind and withdraw? Does this revert back to being denied since the original terms of the request were denied?
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#2170940 - 03/29/18 03:14 PM Re: Counteroffer Denied [Re: Chip]
bOaty Offline
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Let me clarify that this is in regards to Reg B and not HMDA.
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#2170983 - 03/29/18 04:35 PM Re: Counteroffer Denied [Re: Chip]
Rocky P Offline
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"What if a counter offer has been accepted by the applicant and they later change their mind and withdraw? Does this revert back to being denied since the original terms of the request were denied?"

Accepted means closed, not a "statement" that "I accept your offer". It would be denied as the loan was not approved substantially how the applicant originally requested.
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#2171089 - 03/30/18 11:20 AM Re: Counteroffer Denied [Re: Chip]
David Dickinson Offline
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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.
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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.
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#2171127 - 03/30/18 12:59 PM Re: Counteroffer Denied [Re: Chip]
RR Joker Online
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boaty, since you aren't concerned with the HMDA end of things...why does it really matter? [I'm just curios]
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