Haven't run into this one so not quite sure how to code it. Any insight would be appreciated.

Conditional approval based on satisfactory appraisal. Appraisal came in low. It appears the closing had been scheduled (waived right to receive appraisal prior to closing), but the appraisal was received about 4 days before closing. The closing was scheduled with attorney.

We (bank) were informed customer cancelled closing stating not willing to pay over appraisal amount. We (bank) did not have time to counter based on appraisal; customer just decided to walk away when the appraisal came in low.

So, because the customer cancelled (withdrew) before we had time to counter, is it withdrawn? Or do we code it as denied per the FAQ based on the appraisal not supporting the value?

I would like to say withdrawn because customer walked away without a counter, but just not sure.

Ideas?

In my opinion, you have an approved, not accepted loan.

FWIW - I agree with Melissa. Since the credit decision had been made it doesn't meet the definition of withdrawn.

According to the FAQ, an appraisal is an underwriting criterium. So we conditionally approved the loan based on a satisfactory appraisal. It was not satisfactory, therefore we would not have made the loan based on the conditional approval. I can't see it being ANT?

However, in your original question, you state you - the bank - did not have an opportunity to deny the loan, or provide a counteroffer. The applicant simply walked away from the deal. Therefore in my mind it doesn't matter what would have been, you have what did happen, which was an applicant that submitted a loan that was approved, but ultimately did not accept the loan.

Conditionally approved.

CloudShape, you are correct, this would not be ANA because you didn't have all of the underwriting conditions met.

Did the borrower contact the Bank and "expressly" withdraw? If so, I would consider it withdrawn. If not, it should be declined.

Contact the bank, no. As stated, the closing was outside the bank and the closer notified the bank that the customer had cancelled the closing and the reason why.

I forgot that aspect. He did expressly withdraw; we got the information second hand.

To clarify, we have an email the applicant sent to the closing firm stating they were terminating the proposed purchase.

I don't have a good answer for that one. Sounds like a judgement call to me so whatever way you decide to go, document it well and be prepared to defend it.

You did not fully approve the applicants. You conditionally approved them. Therefore, this is not ANA. You are right. Now, the question is did they withdraw or did you deny them, even though that decision had not been communicated to them?

If they truly withdrew BEFORE anyone made a decision to deny them based on the low appraised value, then it's a withdrawal. BUT, I would question how they knew the appraised value came in low. Did someone from the bank call them and say "Gee. It looks like your appraisal came in lower than what we need. . . ." If so, I would call that a denial. You don't have to use the word "No" to have a denial. If the loan officer said, wrote or even suggested their loan wasn't going to go through, then a decision was made.

If you're going to call it a withdrawal (which I can back up), you need to make sure you have documentation (or a lack of) to prove they pulled out before you made a decision.

I thought I'd add a little more since this seems controversial.

To call an application ANA, the applicant must have met all underwriting and creditworthiness conditions. 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] Underwriting or Creditworthiness Conditions are defined in the Commentary to §1003.4(a)(8)(i) #13(iii) to include a satisfactory LTV ratio and a satisfactory appraisal.

We sent them a copy of the appraisal as we are required to do. Once the customer reviewed that, I think they backed out because they were unwilling to pay more than the property was worth.

My thinking is that once we got the appraisal, there were at least three 'credit decisions' we could have made. We could have denied the loan (sorry LTV is 150%), we could have countered (LTV is 150% but we can still do the loan for a lesser amount or additional collateral securing the loan) or we could have made an exception to policy (LTV is 150% but is a good customer with substantial net worth so we will go through with it). I could not find any evidence in the file as to which way the loan officer was leaning before we learned that the customer backed out of the transaction. So I guess in my mind, we really hadn't made a 'credit decision' yet.

Thank you for all the input. I think we will go with 'Withdrawn' on this one.