HMDA Denial Reason when unknown lien discovered?

Could someone confirm what HMDA Denial Reason would be reported if a lien was discovered on the credit report or title search, and the applicant did not want it paid off (if required)? Would it be 4-Collateral or 9-Other (Unable to finance for terms or conditions requested)?

I would refer you to your adverse action notice and report what is showing on there. If its showing a denial reason of "insufficient collateral", or the likes of, I would report 4 as a denial reason.

If your denial reason is showing as "Unable to finance for terms or conditions requested" you would report 9. If there is something in file such as memo that the lender clarifies the reason of denial (i.e. LTV is too high), you can also report 4 as well with the 9 code.

If you have provided a conditional approval based on the lien being paid and the applicant refuses that offer you have an approved but not accepted. Getting clear title is a customary closing condition therefore this would not be a denial for HMDA reporting purposes.

To clarify...what if an unknown lien was discovered on the credit report or during the title search process, and it was determined that the subject lien or another lien needed to be paid off, but the applicant refused...and chose not to proceed. Would that be a denial for 4-Collateral or 9-Other (Unable to finance for terms or conditions requested)?

So, you said Applicant - there is a lien on your property that must be paid off in order for us to proceed.- Applicant to Lender - forget it.

Denial based on collateral.