Since you have a conditional approval and the appraisal is an underwriting/creditworthiness condition, this would be a denial.
13. Action takenâ€”conditional approvals. If an institution issues an approval other than a commitment pursuant to a preapproval program as defined under Â§ 1003.2(b)(2), and that approval is subject to the applicant meeting certain conditions, the institution reports the action taken as provided below dependent on whether the conditions are solely customary commitment or closing conditions or if the conditions include any underwriting or creditworthiness conditions.
i. Action taken examples. If the approval is conditioned on satisfying underwriting or creditworthiness conditions and they are not met, the institution reports the action taken as a denial. If, however, the conditions involve submitting additional information about underwriting or creditworthiness that the institution needs to make the credit decision, and the institution has sent a written notice of incompleteness under Regulation B, 12 CFR 1002.9(c)(2), and the applicant did not respond within the period of time specified in the notice, the institution reports the action taken as file closed for incompleteness. See comment 4(a)(8)(i)-6.
Adam Witmer, CRCM
All statements are my opinion, not those of my employer, and should not be taken as legal advice.www.compliancecohort.com