Action Taken due to Home Inspection issues

We have a loan that is fully underwritten and approved and we have an appraisal. After the home inspection the buyer and seller can't agree on who is going to pay for repairs so the deal falls apart. This would be coded "approved but not accepted", right?

Now that I look closer at this...we had requested in our Notice of Incompleteness letter a copy of the 2017 W-2 (when available) which we did not receive. The borrower informed us of the deal falling apart before the end of the NOI period. Now I'm thinking this is withdrawn.

Thoughts?

You can only mark an application as withdrawn in the very first period of time before you start getting things you told the applicant you need. It's called an NOI - Notice of Incomplete for just that reason. If you don't get the other things you requested, the HMDA code is 5 - File closed for Incompleteness.

But in your case, you approved the loan and told them so. I would report this as approved but not accepted.

I would think this situation would fit Withdrawn as it sounds exactly like what is said in the second sentence below.

5. Action taken—application withdrawn. A financial institution reports that the application was withdrawn when the application is expressly withdrawn by the applicant before the financial institution makes a credit decision denying the application, before the financial institution makes a credit decision approving the application, or before the file is closed for incompleteness. [b][b][u][b]A financial institution also reports application withdrawn if the financial institution provides a conditional approval specifying underwriting or creditworthiness conditions, pursuant to comment 4(a)(8)(i)-13, and the application is expressly withdrawn by the applicant before the applicant satisfies all specified underwriting or creditworthiness condition[/b]s.[[/b]/b][/u] A preapproval request that is withdrawn is not reportable under HMDA. See § 1003.4(a).

The only part I was hung up on what that we had told the borrower we needed his 2017 W2 and didn't get it and he backed out of the transaction before the end of the NOI period.

I didn't get that this was a conditional approval.

My assumption was that the bank likely only required that the repairs be completed so, if they were completed and the condition cleared, the parties disagreeing over who's going to pay for the repairs is not a part of the loan.

If, as it sounds, the 2017 W-2 (when available) wasn't a pre-closing condition, then I still contend that this would be approved but not accepted.

Approved But Not Accepted based upon FFIEC FAQs.

Conditional approvals---customary loan-commitment or loan-closing conditions. The commentary indicates that an institution reports a "denial" if an institution approves a loan subject to underwriting conditions (other than customary loan-commitment or loan-closing conditions) and the applicant does not meet them. See comment 4(a)(8)-4. What are customary loan-commitment or loan-closing conditions?

Answer: Customary loan-commitment or loan-closing conditions include clear-title requirements, acceptable property survey, acceptable title insurance binder, clear termite inspection, and, where the applicant plans to use the proceeds from the sale of one home to purchase another, a settlement statement showing adequate proceeds from the sale. See comments 2(b)-3 and 4(a)(8)-4. An applicant's failure to meet one of those conditions, or an analogous condition, causes the application to be coded "approved but not accepted." Customary loan-commitment and loan-closing conditions do not include (1) conditions that constitute a counter-offer, such as a demand for a higher down-payment; (2) underwriting conditions concerning the borrower's creditworthiness, including satisfactory debt-to-income and loan-to-value ratios; or (3) verification or confirmation, in whatever form the lender ordinarily requires, that the borrower meets underwriting conditions concerning borrower creditworthiness.