HMDA -- Withdrawn Applications

I am looking for some guidance on loans we suspend for additonal information before making a credit decision and the borrower does not supply the information in the specified time (30 days). We have considered the loan withdrawn for incomplete documentation and sent an a notice (on the denial form) indicating the loan is withdrawn for incomplete documentation. Is this permissible?

Separately,on loans we approved where we have not heard back from the borrower, would we classify these is applications as approved by not accepted or could they fall under another bucket?

Please clarify the above. The clouded area seems to be the withdrawn applications.

This is kind of a game of semantics. You can deny the loan for being incomplete (action taken code 3), you could write them a letter stating that if they don't provide XY & Z before a certain date, you will consider their loan withdrawn (code 4) or close it for incompleteness (code 5).

It all depends on how you word your letter to them. I would recommend that you be consistent on these.

In an uncomplicated sense, the easiest way to look at HMDA decisioning is the first decision that is made sticks. If the applicant withdraws before the lender makes a decision, then it would be a withdrawal. If the lender's decision comes first then, depending on the circumstances, the loan would be either a denial or an approval.

On the approval side, the ultimate decision can go two ways. If the loan closes, it would be a closed loan. If it does not close, it would be approved, not accepted by customer.

In the case of incomplete information, it's a bit finer line. We use the guidelines that if the applicant has not provided you with enough information to make a decision, you request what you need and give them a 15 day letter. (E. g. an application without enough information to pull a credit bureau.)

If the applicant has given you information to make a decision (decline), but you need additional information to get the loan approved, then you have the decline for incomplete information adverse action like Dave mentioned.

Because of the uniquenesses of each loan application, customer, product and underwriter, the HMDA decision codes probably cause the most contraversey of any regulation. One of the most important things however is consistancy once you feel comfortable with the decision process.

DOn't forget that a HMDA loan can't be reported as incomplete unless a notice of incompleteness has been sent.

We use the credit report as a brightline test. If we pulled one, we had enough info. to make a decision--either approved and need additional docs or declined and need more info in order to approve--application can not be coded as withdrawn. If we haven't pulled a report, we really don't have enough info to make a credit decision and the application may be treated as withdrawn.

Soccer Mom has it right. As the pace of loan decisioning quickens through automated systems, the internet, etc. Withdrawals are quickly becoming a dying breed. But in my world it is not uncommon for originators to call our central underwriting department advising us that the "customer has withdrawn his request" or "the customer does not wish to complete the application here, so cancel this request." The HMDA staff must guard against the over use of these statuses.
Withdrawal activity is often one of the first things supervisory agencies look at in a HMDA quality control exam.A high percentage of Withdrawals is often a signal that the overall HMDA collection process is flawed in other ways as well. Keep Withdrawals been the lines.