Issue with seller - how can we deny?
Any suggestions on how to handle a loan when there is really not a reason to deny with respect to the borrower; however, the seller listed on the purchase contract is an individual that your company has decided (in the recent past) to not do business with? I appreciate any advice on this! Thank you, Tracy
In my opinion, I would use the "9- Other" code, and then document in both the actual file and on the origination system what the detailed explanation was.
I'm not sure I agree with declining the loan and using a declination code of "9". My first question would be what impact the seller has on the transaction, is he a local builder that builds inferior dwellings? If that were the case then I would presume that you could deny the loan based on collateral after receiving proper documentation. But without knowing that fact it is hard to answer the question. Based on the question as it stands, I would have to say that if you declined the borrower based on your institution not wanting to do business with the seller could be a violation of ECOA. Not wanting to do business with the seller is not justification for denying credit to your applicant.
FWIW, I agree with rgrandjean. I think you're asing for trouble if you decline the borrower based on the seller as stated in the original question.
After I posted this question, we came to the same conclusion. I do appreciate everyone's input though!