The Principal Reasons on the Adverse Action Notice is indicated as “can’t grant on terms requested”. If the other reasons are documented in loan file as

1.unable to grant loan at maximum financing due to non-arm’s length transaction

or

2. CAVIR indicates federal debt

Should we be spelling this out on the Adverse Action? The "can't grant on terms requested" doesn't seem to be specific enough for a customer to understand the reason for their denial.

"can't grant on terms requested"

You are correct in your reasoning. The above general statement does not give specific reasons for the adverse action.

You have to tell them why you "can't grant on the terms requested".