We have a certain product promotion that we have been offering for some time which pays for the closing costs. After evaluating expenditures, management wants to limit it to property in state only (our locations are all in one state). I think with any product, you have to evaluate CRA, F/L and UDAAP. Are there any concerns that I may not be thinking of?

If you label it for your assessment area, trying to increase penetration there, what is the issue, (As long as the AA is fair and does not intentionally exclude any Majority Minority tracts)

We mention in our CRA that we consider contiguous counties in our market area as secondary lending areas and 3-4 of those contiguous counties are in another state.

By secondary lending area, what do you mean?
If you "market" in the areas, the regulators could consider it a REMA (Reasonably Expected Market Area), and consider it in your fair lending analysis even though it's not your AA.
If you mean you would "consider" a loan there, as long as you're not intentionally excluding any MM tracts, it should be OK.

L2C,IMHO, the bank needs to identify what they are planning to do, and documented with WHY. What is the non-discriminatory business decision. It appears confusing (without additional input) to say your secondary lending area is in a different state, but the bank is restricting what they are lending.