We have times when we have issued a notice of incomplete and before the expiration date of the NOI, the borrower withdraws their application. No credit decision has ever been made. So is the action taken reported as an incomplete application or a withdrawal on the LAR? Thanks.

5. Action taken—application withdrawn. A financial institution reports that the application was withdrawn when the application is expressly withdrawn by the applicant before the financial institution makes a credit decision denying the application, before the financial institution makes a credit decision approving the application, or before the file is closed for incompleteness. ...

6. Action taken—file closed for incompleteness. A financial institution reports that the file was closed for incompleteness if the financial institution sent a written notice of incompleteness under Regulation B, 12 CFR 1002.9(c)(2), and the applicant did not respond to the request for additional information within the period of time specified in the notice before the applicant satisfies all underwriting or creditworthiness conditions. ...

If they responded (withdrew) prior to the file being closed for incompleteness (the deadline put on the notice of incomplete) then I would report that as withdrawn.

Comment #5 to §1003.4(a)(8)(i) states:
Action taken - application withdrawn. A financial institution reports that the application was withdrawn when the application is expressly withdrawn by the applicant before the financial institution makes a credit decision denying the application, before the financial institution makes a credit decision approving the application, or before the file is closed for incompleteness.

Since the NOI has not reached the expiration date, you should report the file as "withdrawn".

Thank you all very much.

David, How would you look at this scenario when it comes to Reg B? If they withdrew prior to the expiration of the NOIA, would it be considered a decline or a withdrawn?

Not David, but as long as they "expressly" withdrew, you don't owe them an AA notice as you didn't deny the loan.

From the commentary:
"2. Expressly withdrawn applications. When an applicant expressly withdraws a credit application, the creditor is not required to comply with the notification requirements under §1002.9. (The creditor must comply, however, with the record retention requirements of the regulation. See §1002.12(b)(3).)"

Am David.
I agree. If the withdrawal comes before a decision to deny or the expiration fo the NOI, it is simply a withdrawal for Reg B. You should simply document the file is withdrawn (who said what and when) and then you have no further Reg B responsibilities.

Is it possible to have a declined loan for Reg B and a withdrawal for Reg C? I am getting push back that they must match.

If you truly deny them for Reg B, you will typically report that as a denial for Reg C - unless you provide a counteroffer and they accept it.

From the Commentary to Regulation C:
"9. Action taken—counteroffers. If a financial institution makes a counteroffer to lend on terms different from the applicant's initial request (for example, for a shorter loan maturity, with a different interest rate, or in a different amount) and the applicant declines to proceed with the counteroffer or fails to respond, the institution reports the action taken as a denial on the original terms requested by the applicant. If the applicant agrees to proceed with consideration of the financial institution's counteroffer, the financial institution reports the action taken as the disposition of the application based on the terms of the counteroffer. For example, assume a financial institution makes a counteroffer, the applicant agrees to proceed with the terms of the counteroffer, and the financial institution then makes a credit decision approving the application conditional on satisfying underwriting or creditworthiness conditions, and the applicant expressly withdraws before satisfying all underwriting or creditworthiness conditions and before the institution denies the application or closes the file for incompleteness. The financial institution reports that the action taken as application withdrawn in accordance with comment 4(a)(8)(i)-13.i. Similarly, assume a financial institution makes a counteroffer, the applicant agrees to proceed with consideration of the counteroffer, and the financial institution provides a conditional approval stating the conditions to be met to originate the counteroffer. The financial institution reports the action taken on the application in accordance with comment 4(a)(8)(i)-13 regarding conditional approvals."

There are times where you can have a denial for Reg B and a withdrawal for HMDA. There's also times where you could have a denial for Reg B and ANA for HMDA. These are demonstrated in the Action Taken tables provided in the HMDA Small Entity Compliance Guide. Let me illustrate:

ANA for HMDA yet Denied for Rg B:
HMDA states to use Action Taken Code 2 – Application Approved but Not Accepted in all cases where the applicant is approved (all underwriting and creditworthiness are satisfied). The approval may only be subject to customary commitment or closing conditions. [Commentary to §1003.4(a)(8)(i) #3]

Imagine you have fully approved the applicants but the house they want to purchase has lead based paint or fails an inspection and the seller won’t fix the issues. The application must be denied for Reg B, but it would be coded as ANA for HMDA.

You can find support for these in example 2, 3 & 4 of the Action Taken Code scenarios the CFPB provided.

ANA for HMDA yet withdrawn for Rg B:
You fully approve and the applicant “withdraws”. Reg B = withdrawn, but HMDA=ANA.