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#1083631 - 11/18/08 08:21 PM Regulation AA scope - a non-mortgage loan???
Pickles Offline
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Beach Bum, East Coast, USA
The definition of a Consumer for Reg. AA is a natural person who seeks or acquires goods, services, or money for personal, family, or household use other than for the "purchase" of real property. ... So, if I have a home equity loan (not money purchase) then Reg. AA applies, correct???
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#1083655 - 11/18/08 08:49 PM Re: Regulation AA scope - a non-mortgage loan??? Pickles
rlcarey Online
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rlcarey
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Galveston, TX
Yes. Although I am not sure the wisdom of making a HELOC to someone that needs a co-signer. That is the quickest way to increase your OREO properties.
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#1083914 - 11/19/08 01:00 PM Re: Regulation AA scope - a non-mortgage loan??? rlcarey
Pickles Offline
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Beach Bum, East Coast, USA
I agree... I am trying to find a validate reason to give the underwriter not to proceed with this type of loan. In reality, adverse action was sent on an individual loan request for insufficient income. We then accepted a joint app with owner of property (daughter) and her mother who is not on deed (and doesn't live in the home). IMO, we should not have accepted the joint app since mother was not intended to receive any benefit from the loan and it is evident that she was added as a joint applicant to mitigate the primary applicant's high debt ratio. My argument is that mother should have been considered a co-signer & we don't allow co-signers on real estate secured loans.. Your thoughts?
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#1083939 - 11/19/08 01:50 PM Re: Regulation AA scope - a non-mortgage loan??? Pickles
rlcarey Online
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rlcarey
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Galveston, TX
"My argument is that mother should have been considered a co-signer & we don't allow co-signers on real estate secured loans.."

Be careful going down this road. Regulation B and Regulation AA are two separate animals and have to be considered separately. If two individuals (related or not) apply for joint credit as witnessed by their intent to apply, then you have to underwrite them as you would any other joint applicants. For Regulation AA purposes, if during the underwriting process you determine that one of the joint applicants will not receive goods, services, or money in return for the obligation, then a co-signer notice is required, but it does not impact how you must evaluate the application.

Now, if you have a policy that states that applications for financing or refinancing a owner occupied residence will only be accepted from titled property owners, you are going to have to examine that policy under the fair lending principles.
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#1083984 - 11/19/08 02:27 PM Re: Regulation AA scope - a non-mortgage loan??? rlcarey
Pickles Offline
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Beach Bum, East Coast, USA
I should have clarified.. If they would have initially applied jointly I wouldn't have a problem (no Reg B or Reg AA issues), however, in this case there is a layering affect. The mother never applied initially but because the daughter was denied based on her debt ratio, she asked her mother to apply jointly.. So even though the new app was submitted as joint applicants, IMO the mother should be considered a co-signer / guarantor and should receive the co-signer notice... I think that is what you are telling me)?
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#1084005 - 11/19/08 02:39 PM Re: Regulation AA scope - a non-mortgage loan??? Pickles
David Dickinson Offline
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Central City, NE
I agree the mother is a co-signor. She won't receive benefit from the loan. She should receive the co-signor notice if you make the loan.

Quote:
we don't allow co-signers on real estate secured loans . . .

I don't know how you can have this policy. If they applied and the mother isn't receiving benefit, she's a co-signor. You can't control this. You can't discourage someone from applying this way. I think your policy is not in compliance with Reg B or Reg AA.
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#1084063 - 11/19/08 03:23 PM Re: Regulation AA scope - a non-mortgage loan??? David Dickinson
Pickles Offline
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Beach Bum, East Coast, USA
got it.. thanks!
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