Answer:
The key issue to consider would be why the borrower/applicant is removed. If the applicant withdraws because they no longer want the credit or no longer want to be a co-borrower, the situation would be a withdrawal of the applicant and the underwriting process should proceed based on the qualifications of the remaining applicants.
Other reasons for the applicant to remove or be removed from the application could well involve discrimination. If the applicants make the change (such as removing one of three co-applicants after learning that the individual has credit problems) then the change should not be an issue. But, if the applicants restructure the application based on suggestions from the loan officer or anyone else handling the application, there should be thorough documentation about what happened.
On a recent BOL webinar, I was asked whether the lender should send an adverse action notice to a co-applicant when the lender recommended that the remaining applicant could qualify individually. While such a recommendation could, under very limited circumstances, be OK, it is far more likely to be a problem under ECOA, Fair Housing, FCRA, or ADA. Recommendation: don't ever do this.
First published on BankersOnline.com 2/6/06
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