We have a loan where the title commitment came back showing a pending suit. I am struggling with what adverse action reason to use. Is this a collateral denial or a credit denial? I need guidance.

Is your concern with the pending suit is the bank's lien position? If yes, then it's a collateral issue.You can always choose Other: and write in the specific reason, "Pending suit on the collateral offered."

Yes, that is my concern. Thank you.