The situation you describe raises concerns under both ECOA and HMDA. Let’s take ECOA first. The purpose of the adverse action notice requirement is to advise the applicant of the reasons their incoming application was denied. When a situation involves a counter- offer that is not accepted, as in this case, the reasons for adverse action must reach back to the original reasons for not meeting the original request but making a counteroffer. So the ECOA notice goes back to the beginning.
This is not a withdrawn application but a rejected counteroffer. Now – and this is tricky – the resolution underECOA does not dictate how the loan should be reported on theHMDA LAR. The best way to treat this is as an application for a HELOC that was counteroffered and not accepted – code 3 if you deemthe counteroffer for a closed end-loan not to have been accepted. Thatmeans deciding whether to report the portion of theHELOC line intended for home improvement (maybe $8,671 of the requested $18,000) or the full amount requested sincemost borrowers don’t know at the time howmuch would be needed.
Answering lending questions is just one Compliance Action benefit.