On Part II - Disclosure of use of information obtained from an outside source.
If the reason for the denial is not due to a credit decision based upon information from a consumer reporting agency, this block should not be checked and the disclosure required from Dodd Frank Act will not fill. If the reason that the denial is for inadequate collateral or income would we check the second set of circumstances, when should we use the 3rd set of circumstances...there seems to be some confusion

If the reason for the denial is collateral value then you would not check the box for credit "decision based upon information from a consumer reporting agency". If the reason is income, It would depend on where you got the information you used to make that determination.

If we do not adverse based upon credit do we need to enter the new disclosures as required by Dodd Frank

possibly, as an example, if you are basing the denial on debt ratio and you used the payment amounts from the credit report to determine that ratio, then, yes, you would include the Credit Agency imformation from FCRA/FACTA reg.