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#81283 - 05/19/03 04:53 PM Adverse Action Notice - withdrawn app
tjbanker Offline
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If a customer comes to the bank with an application for a real estate loan and then withdraws the application two days later, what are our requirements? No prelim docs were sent out yet. Send a withdrawn notice only? Thanks.

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General Discussion
#81284 - 05/19/03 04:59 PM Re: Adverse Action Notice - withdrawn app
Al Miller Offline
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Think HMDA. Only if an application was expressly withdrawn BEFORE a credit decision was reached can that code be use. If you pulled credit and made marks on the report indicating "good" or "bad", it is probably too late for that choice. If good credit (that is, no indication that you would do other than approve the application), I would classify it as "Approved, not Accepted" even though you did not complete all the steps for formal approval. If there are credit issues that might prevent you from formal approval, I would go ahead and send an Adverse Action Notice.
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#81285 - 05/19/03 07:18 PM Re: Adverse Action Notice - withdrawn app
David Dickinson Offline
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I agree with Al, up to the last point. Even if I was GOING to deny this application, if the applicants call and say "never mind, we're withdrawing" I would NOT send an AAN. I would mark "withdrawn" and the date on the application and file it with the rest of the AAN/Withdrawals/etc.

One other note, monicamn said something about sending a withdrawal notice. There is no regulatory requirement to do so. If this is your bank policy, that's OK, but I want to make sure that you, and everyone else knows that this is not a requirement of Reg B.
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#81286 - 05/19/03 07:51 PM Re: Adverse Action Notice - withdrawn app
upstateNY Offline
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A withdrawal is a withdrawal, regardless of where you are in the approval process. I say that with one caveat - If you have determined that you are rejecting the customer and have communicated that to them, its a rejection. In other words, I wouldn't play the game - "If you're going to reject me, then I withdraw".

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#81287 - 05/19/03 08:28 PM Re: Adverse Action Notice - withdrawn app
Al Miller Offline
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The examiners look hard to make sure you are not hiding denials as withdrawns. I believe it too high a risk to not send the notice.
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#81288 - 05/19/03 08:38 PM Re: Adverse Action Notice - withdrawn app
Andy_Z Offline
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My experience is that we do not have a lot of these and the lenders keep good running notes as to why the WD was requested. We lose money on these so we want to know if it relates to our processes.

We have not been questioned on these in any of the audits we go through, OCC, FHA, VA.

I too would rather not send an AAN saying "you can't borrow from us" after they have already said they didn't want to. We do want them back.
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#81289 - 05/19/03 08:45 PM Re: Adverse Action Notice - withdrawn app
SMQ, CRCM Offline
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Between the lines
Just had this discussion with our examiners. I was told to only use "Withdrawn" if we had not made a credit decision; if we had already approved the loan, use "Approved, not accepted."

I would also advise that you mark your application as withdrawn and note the date so that you have something to back you up for not sending out the disclosures.
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#81290 - 05/19/03 08:58 PM Re: Adverse Action Notice - withdrawn app
Dan Persfull Offline
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Andy & David, I agree with your reasoning not to send the AAN, but how would you document your file that the "withdrawl" was made before the decision to deny?

I guess what I'm trying to ask is how do you prove to an examiner that the withdrawl did not take place after a "verbal" notification to the applicant?

I'm not trying to argue your point, I'm just trying to get some ideas that may help our process.
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#81291 - 05/19/03 09:01 PM Re: Adverse Action Notice - withdrawn app
Andy_Z Offline
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Unless it is written down, how do they prove we had made a decision?

I had one instance where there was a note from the lender, "call him and tell him the rate. That may be a deal breaker". Customer didn't want the loan at that rate and withdrew. It was coded as a WD. It was re-coded to properly reflect the "Approved, not accepted" because that is what it really was.

Once the lenders understand the codes, they can follow them pretty easy. Again, good notes as to the application progress help.
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Rules and Regs minus Relationships equals Resentment and Rebellion. John Maxwell

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#81292 - 05/19/03 09:12 PM Re: Adverse Action Notice - withdrawn app
Dan Persfull Offline
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Quote:

Unless it is written down, how do they prove we had made a decision?




Good point, sometimes you only get going on one track and the obvious answer pases you by on the other.
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#81293 - 05/19/03 09:22 PM Re: Adverse Action Notice - withdrawn app
David Dickinson Offline
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Central City, NE
What he said.

Seriously, I agree with Andy. I don't have to prove it, but you're right Dan, there had better not be comments that said we were going to deny or it will be harder to argue the withdrawal.
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#81294 - 06/12/03 06:55 PM Re: Adverse Action Notice - withdrawn app
PET Offline
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Michigan
If the loan was approved, but there were several conditions and the customer "withdrew", would you consider that Withdrawn, Denied for Incomplete App, or Approved Not Accepted? In some cases, we need several conditions satisfied to change the application status from "approved with conditions" to "approved to close". Any thoughts are appreciated!

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#81295 - 06/12/03 07:04 PM Re: Adverse Action Notice - withdrawn app
rlcarey Online
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Approved with conditions is not approved and would require either a notice of incompleteness or a denial notice. You could not treat it as a withdrawn, because a credit decision had already been made.
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#81296 - 06/12/03 07:09 PM Re: Adverse Action Notice - withdrawn app
Dan Persfull Offline
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An application "approved with conditions" is not IMO an approved application.

You're saying if you meet this condition we will be able to approve your loan, but if you can't meet this codition we cannot approve your loan as requested.

I say you owe this person an AAN.
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#81297 - 06/12/03 07:25 PM Re: Adverse Action Notice - withdrawn app
Starky Offline
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O.K. Dan, You'll love this one. A loan officer put on the AAN as reason for denial, "counter offer not accepted."

I had to explain to him that he actually denied the original loan request and I wanted him to list the real reason(s) he denied the request.

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#81298 - 06/12/03 07:41 PM Re: Adverse Action Notice - withdrawn app
Dan Persfull Offline
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Bloomington, IN
I think we may have twin officers.
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#81299 - 06/12/03 08:16 PM Re: Adverse Action Notice - withdrawn app
Sinatra Fan Offline
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Quote:

If the loan was approved, but there were several conditions and the customer "withdrew", would you consider that Withdrawn, Denied for Incomplete App, or Approved Not Accepted? In some cases, we need several conditions satisfied to change the application status from "approved with conditions" to "approved to close". Any thoughts are appreciated!




In almost 27 years in the business, I have never seen a mortgage commitment without conditions. There are always conditions precedent to closing; i.e., proof of sufficient in-force homeowners insurance, satisfactory termite certification, to name just two. However, such conditions are common to most commitments, and I suspect those are not the type of conditions to which you refer.

Suppose the commitment was issued conditional upon an appraised value of at least "X", and the appraisal came in at less than "X", causing you to reduce the loan amount. If the applicant did not execute that loan, it would be considered denied, because you did not approve it for the amount requested.

Now suppose an applicant wanted to refinance his primary mortgage, and was willing to have his home equity line subordinated to your new mortgage. You issue the commitment with the subordination as a condition. For some reason, the equity line holder will not subordinate. Therefore, the applicant does not execute the loan. You have issued a commitment on the terms requested, so, in my opinion, that would be "approved, not accepted."

We had a situation this week where we called an applicant to inform him that, since his appraised value came in lower than he expected, we had to reduce his loan amount. Before we could present the loan to the loan committee for approval, he e-mailed a letter withdrawing his application. My assistant considered that a withdrawal. I argued that the whole reason that he was withdrawing was because we were reducing his loan amount. The triggering event of his withdrawal was the reduction of the loan amount, and therefore I say it is "denied, based on collateral" because we did not approve it substantially as requested. True, we received the withdrawal letter before the formal approval, but, in my estimation, chronology does not trump substance.
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#81300 - 06/12/03 08:47 PM Re: Adverse Action Notice - withdrawn app
Dan Persfull Offline
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Bloomington, IN
Quote:

Therefore, the applicant does not execute the loan. You have issued a commitment on the terms requested, so, in my opinion, that would be "approved, not accepted."





Stephen, you made a very good analysis, but I will have to disagree with the above statement. The loan is not approved not accepted IMO. Your committment was issued on the terms requested by the applicant, but your condition was also that the other loan be subordinated. The condition was not met, therefore you did not make the loan. The loan request was denied based on the subordination not being granted by the other lender.
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#81301 - 06/12/03 08:52 PM Re: Adverse Action Notice - withdrawn app
rlcarey Online
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Galveston, TX
Quote:

The loan request was denied based on the subordination not being granted by the other lender.




I agree.
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#81302 - 06/12/03 09:37 PM Re: Adverse Action Notice - withdrawn app
Sinatra Fan Offline
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As much as I respect Dan's and Randy's judgment, I will continue to press my case on this one. The applicant indicated at application that he did not want to payoff his equity line, but wanted to subordinate it to our lien. We issued a commitment on those terms, exactly as he requested.

According to Getting It Right , code 3 (application denied) includes a situation when an applicant fails to respond to a counteroffer. What is a counteroffer? Two paragraphs above in the book, counteroffer is parenthetically defined as "your offer to the applicant to make the loan on different terms or in a different amount than initially applied for" [emphasis mine]. In this situation, we have not offered different terms, nor have we offered a different amount. We have approved the loan as requested.

Let's say the applicant never informs us that the equity lender refuses to subordinate. And let's say he never closes on the loan. Would you agree that this application is coded 2 (approved but not accepted)? GIR says to use this code when the loan is approved but the applicant "fails to respond to your notification of approval or your commitment letter within the specified time."

So, if I know why the applicant did not close, I report it one way (3), and if I don't know why the applicant did not close, I report it another way (2)? That would make my knowledge--or the lack thereof--the definer of the application's disposition. In that case, "don't ask, don't tell, don't pursue" would seem a reasonable policy.
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#81303 - 06/12/03 10:13 PM Re: Adverse Action Notice - withdrawn app
Dan Persfull Offline
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Stephen, lets talk apple to apple here. The post had to do with an AAN (or at least that's how I took it based on the thread's title), not how to report it for HMDA.

However, page D-10 of the GIR #4

Action Taken - Conditional Approval (Which you have becasue your committment had the condition that a subordination be granted by the other lender) . If an institution issues a loan approval subject to the applicant’s meeting underwriting conditions (other than customary loan commitment or loan closing conditions, such as a “clear title” requirement or an acceptable property survey) and the applicant does not meet them, the institution reports the action taken as a denial .
(Appendix A of this part, Para-graph
V.B.)

So, as far HMDA you may be allowed to report it as "approved not accepted", because your subordination condition would be the same as "clear title" - since the applicant does not have "clear title" due the other lien you would be able to report it "approved not accepted", however, IMHO, you must send the applicant an AAN under Reg. B.
Last edited by dpersfull; 06/12/03 10:18 PM.
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#81304 - 06/12/03 10:32 PM Re: Adverse Action Notice - withdrawn app
Sinatra Fan Offline
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Dan,

Your first point is well taken. I was so focused on the treatment of the application that I failed to notice the "AAN" in the thread title. Mea culpa, mea culpa.

As to your second point, I would argue that the phrase "customary loan commitment or loan closing conditions" is sufficiently vague to generate legitimate differences of opinion as to what conditions would or would not be included within the confines of this phrase.

Finally, your third point, that the application may be treated differently under Reg B and Reg C, is absolutely valid. This difference of treatment, or difference of definition, under these two regulations in particular drives me nuts.
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#81305 - 06/13/03 12:07 AM Re: Adverse Action Notice - withdrawn app
Princess Romeo Offline

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Quote:

O.K. Dan, You'll love this one. A loan officer put on the AAN as reason for denial, "counter offer not accepted."



Dear lord! Someone has been cloning the same loan officer all over the country!!!!

Do you ever feel like a grade school teacher?
Now class, why did we issue a counter offer?
Because the appraisal came in low.
So the reason we didn't approve the ORIGINAL loan request was......

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#81306 - 06/13/03 01:08 AM Re: Adverse Action Notice - withdrawn app
Dan Persfull Offline
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Bloomington, IN
Quote:

So the reason we didn't approve the ORIGINAL loan request was......




Well, DUHHHH, the counter offer wasn't accepted.

(At times I feel more like a kindergarten teacher.)
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#81307 - 06/13/03 02:46 PM Re: Adverse Action Notice - withdrawn app
Starky Offline
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Arkansas
Quote:

Quote:

O.K. Dan, You'll love this one. A loan officer put on the AAN as reason for denial, "counter offer not accepted."



Dear lord! Someone has been cloning the same loan officer all over the country!!!!

Do you ever feel like a grade school teacher?
Now class, why did we issue a counter offer?
Because the appraisal came in low.
So the reason we didn't approve the ORIGINAL loan request was......






I love it Bonnie, that's almost exactly what I did.

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