Credit unions that make “Application Withdrawn” action taken reporting errors should pay close attention to the precise definition of the term, according to the NCUA. Matthew Nixon, program officer with the NCUA’s Office of Consumer Protection, shared this finding during a joint agency webinar Tuesday covering fair lending hot topics.
The “Application Withdrawn” action is only meant to be reported when an application is expressly withdrawn by the applicant before a credit decision is made. “Application Withdrawn” cannot be used when an applicant withdraws the application after the credit decision is made.
If the institution is unwilling to make the loan based on the terms requested, the institution should report “Application Denied.” If the institution is willing to extend credit, but the loan is not consummated, it should report “Application Approved but Not Accepted.”
According to the NCUA, when it became aware of this trend, it focuses on credit unions with “Application Withdrawn” rates of more than 25%, which is approximately double the standard market rate.
Nixon said that credit unions with erroneous “Application Withdrawn” reports tend to have unusually long times when it comes to taking action on an application, and can tend to have other Home Mortgage Disclosure Act (HMDA) related errors.
He also said the NCUA looks closely at credit unions that take more than 100 days to take action on an application.
From an examination and supervisory standpoint, such errors can lead to:
The joint webinar also included presentations on:
A recording of the joint webinar will be available shortly on the Federal Reserve’s Outlook Live portal.