Hello - The regulatory guidance is that a bank report their principal reason or reasons for denial; it seems to imply that should there be more than one reason for denial that they be placed in the order of importance meaning a primary reason for denial, a secondary reason, etc. I would assume this is accurate for the purposes of fair lending reviews and ensuring that groups of comparators are truly comparable. I'm working on an internal underwriting review and have pulled my groups of comparators and am finding that the denial codes in no particular order which is causing my groups to not be truly comparable once I identify the primary reason for denial is not the same for all applications. Example: my protected class loan is denied for DTI and Credit History; my comparators are approved with DTIs that are the same as the denied application and they received credit exceptions for the DTIs based on mitigating factors. My denied application has the same mitigating factors and should have also been eligible for an exception; however, upon reviewing the underwriting notes, I see that the primary or principal reason for denial was collections and bankruptcy which is considered subprime credit and no exceptions are made for this. Had the applicant not had these, he would have received the credit exception for DTI and been approved. So the accurate reason for denial was 1) Credit History and 2) DTI as this was a denial reason but was not the principal or primary reason for denial.

Am I correct in my assumption that the denial reasons should be reported based on the order of significance in the overall denial and should I provide guidance to my quality control team to modify their procedures?

Help me please!

The regulation only states the principal reasons (up to 4 reasons) for denial are to be reported, it does not specify any specific order for those reasons to entered to the LAR.

We reported them in the order they were disclosed on the AAN. Now that we are using the "no reason" AAN we report them in the order they are listed on our flow sheet.

If you want them listed in the order of importance then that would be an internal decision.