So - otherwise qualified applaicant - wants loan. Articles in local newspaper detailing all the socially bad things he has done - although no arrests.
we just don't want to make a loan to this person - can we deny and if so for what reason?

FCRA adverse action rules specifically include instances where consumer credit is denied or a charge for credit increased based on information obtained from third parties other than consumer reporting agencies bearing upon the consumer’s creditworthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living, so I believe you would be justified in doing so, provided you are not taking adverse action on any fair lending prohibited basis.

This will be one interesting denial letter.

Unless the Adverse Action notice takes advantage of 1002.9(a)(2)(ii) and includes a notice of the applicant's rights to the denial reason(s) instead of providing the actual denial reasons on the notice.

I'm late coming to the party, but wanted to add:
You don't have to make any loan you don't want to. As long as you're not illegally discriminating, you're perfectly fine to say "No." As Adam suggested, you can use the "no reason" denial. Or you could put "undesirable character" on the "other" line where reasons are listed. On your copy of the AAN, document the heck out of it. Examiners should not have a problem with this.

P.S. I've seen this done a few times for suspected drug dealers, those that have been arrested but not convicted, etc. "Scum of the earth" is not a protected class.

I have seen this done many times, and in quite a few, unfortunately, we used the "ask for the reason" letter and I was the contact. Lucky me.