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#696921 - 03/05/07 10:59 PM Separate Mortgage Apps?
timberlane74 Offline
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Is there any good reason to have separate mortgage applications taken for unmarried joint applicants? My institution started it a few years ago for some reason. Any thoughts would be appreciated.

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#696927 - 03/05/07 11:05 PM Re: Separate Mortgage Apps? timberlane74
rlcarey Online
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Well, I would say that you might have a fair lending issue. Creating separate application requirements that are more onerous for unmarried joint applicants could be viewed as discrimination based on marital status.
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#697105 - 03/06/07 03:31 PM Re: Separate Mortgage Apps? rlcarey
timberlane74 Offline
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My feelings exactly...but what do us sales guys no anyways? Thanks

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#697117 - 03/06/07 03:39 PM Re: Separate Mortgage Apps? timberlane74
#Just Jay Offline
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Well, I see you are MN, and posting in Wisconsin, so that makes me curious.

I have worked for three banks in various parts fo the state, and each bank here has required separate apps for unmarried joint applicants. I do not know if it has to do with our Community Property status, but it is common here for joint applicants who are not married to each other to have to complete a separate app.
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#697128 - 03/06/07 03:48 PM Re: Separate Mortgage Apps? #Just Jay
timberlane74 Offline
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We have locations on both sides of the river! But ask for separate apps regardless. Do you know under what reg etc...that it is permissible to do this? Reg B and ECOA sure don't look like the answer to me?

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#697152 - 03/06/07 04:09 PM Re: Separate Mortgage Apps? timberlane74
#Just Jay Offline
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It makes sense to complete separate apps.

Even though they are applying toegther, they are applying for separate credit. They are essentially being approved or denied independently of each other. The fact that they are married or not have nothing to do with the approval criteria.

They will most likely have debts and assets independent of each other, and for privacy reasons, should not be able to see each others obligations and assets, another reason for the separate apps.

This really is not a Reg B or ECOA issue...it is two separate individuals applying for separate credit, just together.
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#697339 - 03/06/07 06:55 PM Re: Separate Mortgage Apps? #Just Jay
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"Even though they are applying together, they are applying for separate credit. They are essentially being approved or denied independently of each other. The fact that they are married or not have nothing to do with the approval criteria."

I guess I need to ask for a clarification of this statement. I thought that we were talking about unmarried "joint" applicants.

If we are, you cannot evaluate unmarried and married joint applicants under separate underwriting criteria. If you add income and debts together for married applicants - you have to do exactly the same for unmarried applicants. You cannot evaluate unmarried applicants individually - that is classic marital discrimination.

Could you please clarify???
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#697501 - 03/06/07 09:06 PM Re: Separate Mortgage Apps? rlcarey
#Just Jay Offline
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No one is being underwritten under separate criteria...the same criteria is applied to both applicants.

If Tom A's credit is great with ok DR for his portion of the loan, and the joint applicant Tim B's stinks and will not be able to carry his portion of the debt, thus you deny Tim B for lousy credit and poor DR, and then possibly deny the loan altoghter because Tom A's DR cannot carry the entire loan, how is this marital discrimination?

Here, each person has to complete their own application for for a loan. If they are married, and the spouse will also be applying for the credit, then we can also add the spouse to the same app, since all debts and assest will be the same anyways since we are a marital property state, what is yours is mine, and what is mine is yours, by marriage.

If there are four applicants for a loan, then we simply get four apps to process for the loan.

I am not seeing the discrimination angle here...help me understand what you are seeing and thinking.
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#697524 - 03/06/07 09:21 PM Re: Separate Mortgage Apps? #Just Jay
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OK, I want to understand this also:

A and B apply jointly for a loan.

Scenerio one - A and B are married and you agregate all debt and income to come up with a DTI for the entire loan amount. Just so we are on the same page - being in community property state is not relevant to this discussion as it wouldbe the same community property state or not.

Scenerio two - A and B are not married. Are you are saying that you split the loan amount and see if each can carry the load?? Or are you saying that you determine if each applicant can carry the entire load?

How would this not be different underwriting criteria based on marital status?
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#697571 - 03/06/07 09:45 PM Re: Separate Mortgage Apps? rlcarey
#Just Jay Offline
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Originally Posted By: rlcarey

Scenerio two - A and B are not married. Are you are saying that you split the loan amount and see if each can carry the load?? Or are you saying that you determine if each applicant can carry the entire load?

How would this not be different underwriting criteria based on marital status?


We look at can they as individuals carry their loan portion as well as can they together carry the overall portion...both conditions do not need to be met in order to get approval though. If the joint resources can accomodate the joint debt, we are in business. But just like with a married couple, ones unbelievbly poor credit can get the loan denied too, regardless if the DR's work out or not.

Separate apps allows us to view and assess as individuals, as well as provide a level of privacy to each applicant. Even though they may be applying for joint credit, does not mean they are entitled to see each others debts and assets...indivual apps also allow them this additional level of privacy.
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#697619 - 03/06/07 10:13 PM Re: Separate Mortgage Apps? #Just Jay
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I'm with Randy on this one. You should not be getting seperate applications if the parties are applying for joint credit. You are running the risk of the marital discrimination Randy speaks of.

I strongly suggest you contact the WBA's compliance expert/attorney on this or your own attorney. We've been advised that seperate applications for joint credit should be a well reasoned and documented exception, not a practice. (Ex: Tom lives out of state.) If Tom and Tim are applying for joint credit you must look at it exactly the same way you would for Mr and Mrs Tom.

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#697622 - 03/06/07 10:16 PM Re: Separate Mortgage Apps? #Just Jay
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2ndary market now allows joint application. I actually had this conversation with rlcarey last year, and then had the conversation with our compliance seminar leaders in Madison. I later forwarded all information to Freddie Mac and won the battle.

Plus, if you look at the applications now they have to sign the joint intent section at the top. I believe this sections negates any right to privacy of financial information to the other applicant.

We have done joint applications for loans ever since. If they can combined afford the debt, that works. We underwrite them a joint applicants just like the married folks.
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#697623 - 03/06/07 10:17 PM Re: Separate Mortgage Apps? #Just Jay
timberlane74 Offline
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Thank you for all your comments...I do understand the "perceived" value of separate apps for privacy purposes, but it still "feels" like disparate treatment.

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#697648 - 03/06/07 10:40 PM Re: Separate Mortgage Apps? timberlane74
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One last thing you want to look at is the Reg. B amendments in 2003. Within those amendments they clarified marital status discrimination:

The preamble states:

6(b)(8)
Section 202.6(b)(8) of the regulation, adopted as proposed, makes clear that a creditor may not evaluate married and unmarried applicants by different standards. Some commenters were concerned that the rule would prevent creditors from considering state property laws. The rule provides that the requirement applies except as otherwise permitted or required by law. Thus, a creditor may consider the rules in §§ 202.5, 202.6, and 202.7 in evaluating applications. But a creditor that aggregates the incomes of married co-applicants, for example, is required to aggregate the incomes of unmarried coapplicants under this rule.

The actual regulation now states:

202.6(8) Marital status. Except as otherwise permitted or required by law, a creditor shall evaluate married and unmarried applicants by the same standards; and in evaluating joint applicants, a creditor shall not treat applicants differently based on the existence, absence, or likelihood of a marital relationship between the parties.

Additionally the FED opined on the privacy of information when you are dealing with co-applicants and co-signers. Although it was within a discussion regarding adverse action, I believe the same premise applies throughout the loan transaction:

Many commenters were concerned about the co-applicant’s or guarantor’s privacy when the reasons for adverse action pertaining to creditworthiness are given to the primary applicant. When a person agrees to be a co-applicant, guarantor, or similar party, however, there is (or should be) a general understanding that information will be shared. Accordingly, the rule has been adopted as proposed.

And trust me, I am very aware of the dangers associated with treating married and non-married joint applicants differently. I worked at a bank in which our dealer buy department was evaluating applications in a similar manner to bbsgrant and the FED made us re-evaluate the 12,000 dealer applications we had received in the last 25 months and offer credit to those non-married joint applicants that would have qualified under the underwriting practices employed for married applicants (even after the fact). It was not done this way because of our policy - which was correct - but it is something the dealer center just decided to do. It was not a fun experience.

We won't even talk about the time they decided to start including insurance payments in the DTI for driver's under 25......
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#697653 - 03/06/07 10:47 PM Re: Separate Mortgage Apps? #Just Jay
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"If the joint resources can accomodate the joint debt, we are in business. But just like with a married couple, ones unbelievbly poor credit can get the loan denied too, regardless if the DR's work out or not."

So how does this violate the regs??

Call me naive, but I still have a hard time understanding how one piece of paper is better than two pieces of paper, if all of the same information is being gathered, and evaluated the same?
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#697698 - 03/06/07 11:14 PM Re: Separate Mortgage Apps? #Just Jay
rlcarey Online
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Well, I am kind of focusing on your statement:

"We look at can they as individuals carry their loan portion as well as can they together carry the overall portion...both conditions do not need to be met in order to get approval though."

As long as you are doing this for married couples also, then you are correct - there may not be an issue. However, that is not how I read that statement. If have never seen a bank evaluate married individuals in this manner as far as portioning a loan amount and the whole loan for DR purposes.
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#697765 - 03/07/07 03:52 AM Re: Separate Mortgage Apps? rlcarey
#Just Jay Offline
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I see where you are coming from....yes, that was very poor wording on my part.
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#697771 - 03/07/07 04:09 AM Re: Separate Mortgage Apps? #Just Jay
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FWIW, I believe this practice smells strongly of disparate treatment. Having married applicants do something different then unmarried co-applicants is discrimination. Next, the only reason they are treated differently is because of the marital status (a protected class). Therefore, we have illegal discrimination.
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#698265 - 03/07/07 10:16 PM Re: Separate Mortgage Apps? David Dickinson
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I skimmed through the replies, so forgive me if this was mentioned and I missed it.

If you use the WBA consumer credit application the instructions at the top say something like:

___Separate credit
___Joint Credit with spouse
___Joint Credit with other than spouse (fill out a separate application for each applicant)


I see what you all are saying, but did anyone call WBA legal on this? I'm thinking there must be a reason they did that.

On the bottom of the application it has the marital purpose statement....only once, I beleive. Could that be an explanation? If you had Jane and John, married joint applicants fill out the application, only one of them would need to sign the marital purpose statement (per WBA reccomendation, not requirement) but if you have John and Jim, unmarried joint applicants you would want a marital purpose statement signed for each of them, thus you would need them to each fill out their own application.

Just a thought

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#698557 - 03/08/07 04:35 PM Re: Separate Mortgage Apps? Reed
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Spin, you may have hit on something. You're talking about the WBA consumer form. We don't use that. We do multi-state RE lending and use the FNMA 1003 form. The language you refer to is not on that form.

I'm sticking with Randy on this one. All joint applicants need to be treated exactly the same.

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#698924 - 03/08/07 09:41 PM Re: Separate Mortgage Apps? Truffle Royale
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Spin you are referring to a consumer application, The Real Estate Freddie Mac for 65 says borrower and co-borrower and omits that information. I guess I was answering for a 1st REM application.

However, the reason they list the 'use seperate application' on the consumer application is because the column II is reserved for the spousal information in the event either of them are married. The WI consumer act requires disclosure to the spouse regardless of whether they are a co-applicant. That is the reason 2 applications are required on consumer credit applications.
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#699665 - 03/12/07 01:07 PM Re: Separate Mortgage Apps? Truffle Royale
timberlane74 Offline
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Make a long story short WBA said it was not a violation to do so...but that doesn't mean it's right...I didn't do the contact, so just going by what our loan officers found out...fwiw I was a t a closing Friday at a large regional title company...after the closing I asked the closer what other FI's do...she said it really is about 50-50...once again thanks for your comments!

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