Reg B Compliance
Question: When we approve a loan to a married individual, we require the non-borrowing spouse to sign a waiver. We do not ask the spouse to sign anything except a waiver. For example, we do not ask the spouse to sign the note or the deed. Is this waiver policy in compliance with Regulation B? We are not in a community property state.
Answer: Whether the practice complies with Regulation B depends on state law. The states that do not have a community property regime are referred to as common law states. That is because the law of the state is largely derived from the system of English law.
Most common law states have preserved the English concept of inchoate rights of one spouse in property owned by the other spouse. Inchoate rights are property rights that are triggered by inheritance. The surviving spouse acquires an ownership interest in the property of the decedent spouse.
For this reason, in many states, the good faith advice of counsel is that the institution should obtain a waiver of those spousal rights in order to ensure access to the property securing the loan. As a best practice, you should obtain advice of counsel to be certain of the specific legal rights and interests of surviving spouses in the states in which you do business.
Copyright © 2004 Compliance Action. Originally appeared in Compliance Action, Vol. 9, No. 6, 6/04
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