In the end, they will find some reason why the loan is now denied.

I was denied putting a 2nd electric meter at a property for a stand alone oversized two car garage.

While it is true that if your business' credit is bad, you may be denied for a small business credit card, you are generally applying based on the strength of your personal credit.  

I understand that we need to send out adverse action notice if we were to deny any applicant.

4) The house could be less safe5) My homeowners insurance deny a claim if they tie a fire or other issue to not having building permits. - Is this likely?

Of course, there’s no paper work confirming or denying any of this.

Such as denied property damage claim from improper repairs, denied liability from not having the proper coverage, and workers comp penalties for paying people under the table to do work and them getting hurt.In this situation the agent who insures the primary home could have...1.

They only pay out on certain things, there's a deductible to pay for every claim, they may deny your claim, you have to wait on them to send a vendor, and they will send a cheap vendor and try to cut corners. 

I was trying to get one through Wells Fargo and after doing all he paperwork they called back and said Denied only because I had four investment properties.

When the information is otherwise, the program the borrower was being put into might change or the loan denied.