We had a HMDA-reportable application where in order to originate the loan, the ex-spouse would need to sign documents and authorize the transaction (Texas). Because the applicant didn’t feel comfortable approaching their ex, the loan officer asked if they wanted to withdraw their application. Note this was before creditworthiness was determined. In this scenario, would you see it as appropriate to report this application as a withdrawal, or should it be denied? The argument is that the requirement for the ex-spouse to sign documents (Deed of Trust or Quit Claim Deed) is seen as a customary closing condition, not anything to do with creditworthiness or underwriting, so it can be reported as a withdrawal. Another side argued that while it is not part of determining creditworthiness, it is part of the credit decision. Your thoughts?
A credit decision is reported as approved but not accepted if a credit decision had been made 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;
• The closed-end mortgage loan was not otherwise consummated; or
• The account was not otherwise opened,
In your case since no credit decision had been made the loan is not approved or denied, but reporting the application as withdrawn seems appropriate.