In reading a memo in a loan file, it states that when the cash flow analysis was received, the borrower did not qualify for the loan request and that the lender reviewed the cash flow analysis with the borrower. A couple of days later the applicant asked the LO to keep the application open because the applicant was having their accountant review the financial statements that was submitted because he believed there was an error. About 12 days later, the applicant contacts the LO to say that the financial statements were incorrect and were in the process of being corrected and to please continue to keep the application open. Then 20 days later the applicant asked that the application be withdrawn.

The LO did not send out a Notice of Action Taken back when the initial determination was made that based on the financial analysis the applicant did not qualify.

The LO was not able to make a "final" decision on the application because he never received the corrected financial statements.

Is this a denial for HMDA or a Withdrawn application?

Do you consider this to be a denial under Regulation B?

I think that the LO didn't because he didn't do an adverse action notice.

If they would have asked me when the customer requested to keep the application open because of incorrect information, I would have recommended a Notice of Incomplete information with a deadline to provide the corrected documents. I don't think I would have had the LO issue a decline because there was knowledge that information that was relied on was incorrect.

But I wasn't sure if the LO's verbal discussion with the applicant that they didn't qualify based on the original financial statements counted as a denial or if that could be ignored because of the discussion to keep the application open due to needed correction to the documents.

I ask because I have seen more than one instance where a lender calls a file withdrawn when it really is adverse action under Regulation B. For example: one lender had a customer expressly withdraw by e-mail after the appraisal came in too low to get the cash back they needed. The examiners cited them for both a HMDA violation as well as a Reg B violation for not sending the AA notice.

Regarding your situation, I'm not really sure if you have a denial or not - you might need more information or supporting documentation to justify either way.

If it was a denial under B you should code it that way for HMDA and you technically have a Reg B violation. If it wasn't a denial under B, you can't code it as a denial for HMDA.

when the cash flow analysis was received, the borrower did not qualify for the loan request and that the lender reviewed the cash flow analysis with the borrower.

It would be difficult for the LO to convince me they did not verbally tell the applicant they did not qualify for the loan due to cash flow.

A couple of days later the applicant asked the LO to keep the application open because the applicant was having their accountant review the financial statements that was submitted because he believed there was an error. About 12 days later, the applicant contacts the LO to say that the financial statements were incorrect and were in the process of being corrected and to please continue to keep the application open.

This further supports my assumption the applicant was told they did not qualify due to cash flow because the applicant contended the information was in error and he was attempting to correct the information to see if he could qualify for the loan.

Then 20 days later the applicant asked that the application be withdrawn.

This implies to me the applicant couldn't revise the financials to improve the cash flow enough to qualify for the loan.

IMHO you have a denial.

My thoughts exactly, Dan. It doesn't matter what the lender called it if they told them they couldn't do the loan on substantially similar terms as they applied for.

Would you report the denial date as 1.24.18 or would you report it as 2.27.18 when it was "withdrawn" and the file was closed?

Hard to tell without knowing exactly how the conversation actually went. I would get clarification from the LO, but it may be the earlier date if Dan is correct. You could always send a late AA notice (which you technically owe them if it was, in fact, denied) and then use the date on the AA notice.

2. Action taken date—applications denied and files closed for incompleteness. For applications, including requests for a preapproval, that are denied or for files closed for incompleteness, the financial institution reports either the date the action was taken or the date the notice was sent to the applicant.