For HMDA purposes, when reviewing applications marked as “Withdrawn”, is it an acceptable practice to document the method of withdraw by the applicant (whether verbal or written) and is it also acceptable to document to the “reason” for withdraw?
I ask about the “reason for withdrawn” specifically, because if a FI is going to say that an applicant expressly withdrew the application but states no reason for the applicant making the withdraw, then how can it be proven for audit/examiner purposes that withdrawn was the applicants intention?
Also, isn’t stating a reason for withdrawn helpful in determining the action taken for HMDA “Action taken”?
Do examiners expect documentation in the file for method of withdrawn and reason for doing so?
While it is helpful to document reasons for withdrawal, it is not required that the applicant provide you the reason for their withdrawal. We do find it helpful and reasonable to document the method and make the copy of the expressed withdrawal part of the adverse action file when it is written. Otherwise, documenting the expressed withdrawal and method within the app notes should suffice. The officer may want to document how the conversation went when verbal, but I can see limitations being placed on the officer when it comes to the degree with which they press for reasons as one doesn’t want to burn bridges with customers or prospective customers. Also, sometimes pressing to provide reasons might be seen as a violation of the applicants’ privacy (Ex. medical).
pparks has provided a very thorough response to the question. pparks suggests including the explanation in the adverse action file. that is an excellent suggestion, but let me clarify – Comment 1002.9 – 2. clearly states, “When an applicant expressly withdraws a credit application, the creditor is not required to comply with the notification requirements under §1002.9.