Looking for help. I have been made aware of a HELOC loan request in a different state (Florida). Assuming our documentation system can handle it, where do banks usually go wrong when doing this?

Not being familiar enough with the State laws, disclosure requirements, limitations on fees and charges, mortgage tax requirements, servicing requirements, foreclosure requirements. One-off lending in another State has its risks.

State laws are a bear, and they don't stop at origination, you also have to consider servicing a loan with different requirements. Registration is required with SOS, banking regulator, or mortgage/consumer lending licensing in order to lend in some (relatively rare) states as well.