[kmeade]

If a commercial borrower is given a non-binding term sheet, if the bank’s approval is different than what is listed on the non-binding terms sheet, i.e., rate, term, collateral, amount, guarantor, etc., would this be considered a counteroffer per regulation B?

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[jholzknecht]

More information is needed. If the borrower rejected the initial terms and then was offered new terms, the action is a counteroffer. If the borrower was offered one set of terms, but based on underwriting a different set of terms is offered, then the lender’s counter offer may be adverse action. If the terms were changed without cause, the action may be a UDAAP violation.

[kmeade]

An internal form, a non-binding term sheet, is used to document additional application details. To clarify, if approval is different from what is listed on the application/non-binding terms sheet, we have no issues if a counteroffer is made and accepted. If the counteroffer is not accepted, we must issue an adverse action notice telling why the application/non-binding terms sheet was not approved on the terms they applied.

[jholzknecht]

The borrower was offered a set of terms, then the deal changes. If the initial terms were changed because the borrower didn’t qualify, so then different terms were offered and accepted you have a typical counteroffer. If the lender just changed his/her mind about the terms you may have a UDAAP problem – bait and switch.

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