I am reviewing data entered on LAR software for the month of January 2018 and I am getting myself confused. If we have an application that was withdrawn by applicants after conditional approval was issued (this is over a month into process), do we enter the DTI, CLTV and appraised value from appraisal, or do we enter NA since the application was withdrawn? I think we enter the information used in underwriting, since a credit decision was made.

If the action taken is withdrawn, the items you listed (DTI, CLTV and Property Value) would be listed as "NA".

Refer to the CFPB's Reporting Not Applicable chart.

My problem is that the chart and everything else I find specifically state to list NA when "Transactions for which no credit decision was made(e.g., files closed for incompleteness or if an application was withdrawn before a credit decision was made). By that I take it that if a credit decision was made and conveyed to the applicant and sometime during the completion of the underwriting process (appraisal & title work) the applicant withdraws, I would need to enter the information used in the credit decision not NA. Am I misunderstanding something?

Yes, you are misunderstanding.
An application cannot be withdrawn after an underwriting decision has been made and communicated to the applicant.
If you've notified the applicant that they are approved but they decide not to go ahead, then the loan is Approved but Not Accepted, not withdrawn.
Now the NA chart should work for you.

Not trying to disagree just want to get this right the first time. Maybe I should have stated conditional approval. Since all the underwriting and creditworthy conditions were not met before the applicant withdrew the application, it is to be reported withdrawn. Since it has been thru underwriting and we were just waiting on clean title work, you are saying that we will report NA in the fields the same as if we had never done any underwriting. Correct?

maybe this will help.
If you've communicated approval to the applicant and all you're waiting for is clear title, the application can no longer be withdrawn.

Thank you all for your help. I think my brain is fried, but I have got this know.

I have the same question as the OP. Is a "conditional approval" not considered to be a "credit decision" for the purposes of HMDA reporting?

Also, if the CFPB / BCFP had intended for certain fields such as DTI to always be reported as "N/A" when the action taken is withdrawn, why not state that fact simply without including the additional caveat of "before a credit decision was made."?

Because you can't have a withdrawal AFTER a credit decision has been made.

On the commercial side, I've been changing my ANA to WD where a commitment letter was issued (conditional approval which requires a satisfactory appraisal) but borrower "withdraws" before an appraisal is obtained. Is this not correct?

If the application is not fully approved (conditional approval doesn't count), then it can't be Approved Not Accepted. Whether it's truly withdrawn, I can't say. Here's an excerpt from our HMDA training manual on this topic:


4. Code 4 – Application Withdrawn by Applicant
a. Express Withdrawal from the Applicant:
The absence of a reply from the applicant is not a withdrawal. The applicant must “expressly” withdraw (written or verbally communicated). Report …that the application was withdrawn when the application is expressly withdrawn by the applicant…

i. Prior to Denial:
…before the financial institution makes a credit decision denying the application… [Commentary to §1003.4(a)(8)(i) #5]

ii. Prior to Credit Decision:
…before the financial institution makes a credit decision approving the application…, [Commentary to §1003.4(a)(8)(i) #5]

iii. Prior to Notice of Incompleteness:
…before the file is closed for incompleteness… [Commentary to §1003.4(a)(8)(i) #5]

iv. Prior to Satisfying Underwriting or Creditworthiness Conditions:
A financial institution also reports application withdrawn if the financial institution provides a conditional approval specifying underwriting or creditworthiness… and the application is expressly withdrawn by the applicant before the applicant satisfies all specified underwriting or creditworthiness conditions. [Commentary to §1003.4(a)(8)(i) #5]


b. No “Express” Withdrawal from the Applicant:
If the bank doesn’t receive “express” withdrawal communication from the applicant, the creditor must send a denial or a Notice of Incompleteness. [Commentary to §1003.4(a)(8)(i) #5]

I guess I'm not clear on what "fully approved" is. If a commitment letter is conditioned upon certain things happening (satisfactory title, satisfactory appraisal, receipt of updated financials, hazard ins binder, etc.), will it ever be "fully approved" until all of the items in the commitment are satisfied? I guess I could use the ordering of final docs as a tipping point, otherwise, short of having a borrower schedule and not show up to closing would be my only instance of ANA?

I am of the understanding that if an application is approved upon the condition of a clear title, and the customer withdrew the application, that this had to be treated as a denial for Reg B but is to be treated as approved but not accepted for HMDA.

I thought that for HMDA it was classified as approved but not accepted because it is classified as a customary closing condition. Has this changed for 2018?

HMDA defines "ANA" all underwriting and creditworthiness are satisfied. In other words, ALL applicant issues are completely verified. The approval may only be subject to customary commitment or closing conditions. If ANY outstanding underwriting or creditworthiness conditions exist the loan cannot be coded as approved but not accepted. [Commentary to §1003.4(a)(8)(i) #3]

If borrower requested cancelation AFTER a Credit Decision was made and we report action taken as Application withdrawn by applicant should we report the credit score/model, DTI, CLTV and property value instead of N/A?

You can't report a file as withdrawn if a credit decision was made.

So we would report Approved not accepted?

As long as the approval was final and not subject to any outstanding underwriting or creditworthiness issues, yes.

Here is the commentary citation that backs up what raitchjay is saying:

"3. Action taken—application approved but not accepted. A financial institution reports application approved but not accepted if the financial institution made a credit decision approving the application before closing or account opening, subject solely to outstanding conditions that are customary commitment or closing conditions, but the applicant or the party that initially received the application fails to respond to the financial institution's approval within the specified time, or the closed-end mortgage loan was not otherwise consummated or the account was not otherwise opened. See comment 4(a)(8)(i)-13."

I'd like to piggyback off of mac444's question. We are running into this issue a lot.
We have an application that has had conditional approval, the creditworthiness conditions have not been met. We are coding as withdrawn. Is a conditional approval considered a credit decision? We were told by outside audit that we should be reporting the credit score/model and DTI.The HMDA data reporting guide shows report NA if withdrawn before a credit decision, if you report these fields we get a validity error on the HMDA software.
Would you always code credit score/model & DTI as NA on a withdrawn? this is confusing. Thanks!

The Filing Instruction Guide clarifies this:

V679 for DTI says this:
"2) If Action Taken equals 4, 5, or 6, then Debt-toIncome Ratio must be NA or Exempt."

V663 & V664 for Credit Score say this:
"1) If Action Taken equals 4, 5, or 6, then Credit Score of Applicant or Borrower must equal 8888 or 1111; and Applicant or Borrower, Name and Version of Credit Scoring Model must equal 9 or 1111; and Applicant or Borrower, Name and Version of Credit Scoring Model: Conditional Free Form Text Field for Code 8 must be left blank."

"1) If Action Taken equals 4, 5, or 6, then Credit Score of Co-Applicant or Co-Borrower must equal 8888 or 1111; and Co-Applicant or Co-Borrower, Name and Version of Credit Scoring Model must equal 9 or 1111; and Co-Applicant or Co-Borrower, Name and Version of Credit Scoring Model: Conditional Free Form Text Field for Code 8 must be left blank"

For reference, action take code 4 = withdrawn

Not for HMDA. Here's the commentary to clarify this:

A financial institution also reports application withdrawn if the financial institution provides a conditional approval specifying underwriting or creditworthiness… and the application is expressly withdrawn by the applicant before the applicant satisfies all specified underwriting or creditworthiness conditions. [Commentary to §1003.4(a)(8)(i) #5]

Also, look at the Commentary to §1003.4(a)(8)(i) #3. In plain English, it states, to call something Approved, Not Accepted (Action Taken Code 2), all underwriting and creditworthiness are satisfied. The approval may only be subject to customary commitment or closing conditions. If ANY outstanding underwriting or creditworthiness conditions exist the loan cannot be coded as approved but not accepted.

Therefore, conditional approvals (where the conditions are "applicant conditions") are not approvals.

I posted my initial question below on another post, but then found this more recent discussion. I apologize ahead of time for the repeated information on two boards.

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I've been researching and researching in regards to conditional approvals and how to report certain situations. We have a situation where the loan was sent to an investor to be underwritten and loan eventually sold if originated. The investor approved the loan with one last condition to give the clear-to-close. They were asking for a purchase agreement to "verify the proceeds of the loan applied for would be sufficient to cover the entire purchase and that no additional debt would be incurred." The borrower could not produce a purchase agreement due to other circumstances and withdrew the loan.

In reading the differences between customary/closing conditions vs creditworthy conditions, I'm not sure where needing this purchase agreement would fall. If the investor wants to be sure the borrower can afford the loan I say it would fall into creditworthy and we could withdraw the loan. If this falls into the customary/closing condition then it would be approved not accepted.

Has anyone ever run into this type of condition?

Thank you in advance for any guidance.
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So, in reading this more recent thread I'm leaning to the effect that since not all conditions were met it is ok to report this request as withdrawn. What I get hung up on is the "The approval may only be subject to customary commitment or closing conditions." What does that mean? If you have this statement doesn't it mean the loan is not fully approved so you still can't use approved not accepted? I'm backing myself into a corner of misunderstanding and overthinking and can't get out. Please advise. Thank you

Dan answered your question about the purchase agreement in the other thread. You then asked here:
"The approval may only be subject to customary commitment or closing conditions." What does that mean?

Start with this concept:
HMDA wants to know how you treated the applicants.

If you have fully approved the applicant(s) but you can't make the loan because of property issues, you still report the loan as Approved, Not Accepted (not as denied).
If you have fully approved the applicant(s) but the applicant(s) withdraws, you still report the loan as Approved, Not Accepted (not as withdrawn).

See if that helps your understanding. This is a confusing area. Let us know if you're still overthinking or misunderstanding after this post.

The following is from the Q&As pre HMDA 2018. It gives examples of what are and what are not customary closing conditions. I'm not aware of anything in HMDA 2018 that modified what would be customary closing conditions.

https://www.ffiec.gov/hmda/faqreg.htm#action

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.