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#137704 - 12/09/03 10:00 PM Applications and married applicants
CSB98 Offline
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Posts: 1,337
Wisconsin
Here's the situation . . . married applicant comes in and applies for credit by himself. I understand that the spouse does not have to sign the application, but does the spouse's financial information have to be included on the application? I say no, but I have a loan officer that thinks otherwise.

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#137705 - 12/10/03 02:13 PM Re: Applications and married applicants
rlcarey Online
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Galveston, TX
Look to 202.5(c)(2) for your answer. I believe that Wisconsin is a community property state and therefor, it would be a permissible information request.
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#137706 - 12/10/03 07:37 PM Re: Applications and married applicants
Anonymous
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WI is a community property state, but don't ask for the information unless you need it to qualify the applicant. Under Fair Lending Practices, examiners will look to see how you are treating applications for married and un-married applicants.

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#137707 - 12/10/03 10:28 PM Re: Applications and married applicants
rlcarey Online
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Anon - Would you mind clarifying your statement? You are always entitled to ask for the information from marrried applicants in a community property state. How would asking for this information impact a fair lending exam from a marital discrimination standpoint?
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#137708 - 12/12/03 02:47 PM Re: Applications and married applicants
E Street Offline
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Darkness on the Edge of Town
The way I was taught regarding Wisonsin Married Persons, it is not only perimissble, but highly recommended that one obtains the income and debt information (including pulling a credit report) for the non-applicant spouse. It would be potentially dangerous if one only looks at the applicant and not the spouse. The non-applicant spouse may have a load of debt that the applicant spouse could be responsible from a collection standpoint. If one did not analize all marital income and debt, the best credit decision cannot be made. Bear in mind Reg B states one cannot require the non-applicant spouse to be a borrower. One can however, require the non-applicant sposue to sign any documents necessary to encomber the collateral.

E-Street

This does not constitute legal advice. Consult your attorney. My employer may not aggree with my opinions.

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#137709 - 12/12/03 03:03 PM Re: Applications and married applicants
rlcarey Online
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Galveston, TX
Quote:

If one did not analize all marital income and debt, the best credit decision cannot be made.




Unless there is an indication that the applicant wishes to rely on their spouse's income, you cannot automatically include the spouse's income in your debt-to-income calculations. You may however include any debts of the spouse as each party in the marraige is responsible for the debt. If the applicant cannot qualify, then you can ask that they bring more income to the table. Income does not become community property until earned. A spouse cannot pledge the other spouse's future income.
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#137710 - 12/12/03 03:27 PM Re: Applications and married applicants
E Street Offline
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Richard,

I beg to differ, please see the following excepts from the Wisconsin Marital Property Act. This in my non-legal opinion gives a creditor the ability to ask for income.


766.56(1)
(1) If a spouse applies for credit that will result in an obligation described under s. 766.55 (2) (b), the creditor, in evaluating the spouse's creditworthiness, shall consider all marital property available under s. 766.55 (2) (b) to satisfy the obligation in the same manner that the creditor, in evaluating the creditworthiness of an unmarried credit applicant, considers the property of an unmarried credit applicant available to satisfy the obligation

766.31(2)
(2) All property of spouses is presumed to be marital property.

766.31(3)
(3) Each spouse has a present undivided one-half interest in each item of marital property, but the marital property interest of the nonemployee spouse in a deferred employment benefit plan or in assets in an individual retirement account that are traceable to the rollover of a deferred employment benefit plan terminates at the death of the nonemployee spouse if he or she predeceases the employee spouse.

766.31(4)
(4) Except as provided under subs. (7) (a), (7p) and (10), income earned or accrued by a spouse or attributable to property of a spouse during marriage and after the determination date is marital property.


E Street

The aforementioned opinion does not constitute legal advice. My employer may not agree with my opinion. Consult your attorney.

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#137711 - 12/12/03 03:50 PM Re: Applications and married applicants
rlcarey Online
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OK - I can quote sections of the law also, but what section are you referring too to support your claim that you can automatically include the income of the spouse without the applicant indicating that they choose to rely on their spouse's income as part of the credit request. By doing so, you have a Reg B issue for marital discrimination. Do you automatically include the income of the single person's significant other that is living with them but has not married them? If not, you are evaluating single and married individuals differently. The section of the law that you quote indicates that an applicant has the right to pledge the income of the spouse when requesting credit. It doesn't say they have to. If they apply indiviudally relying on their own income and have sufficient income to satisfy the debts of the whole community, then it's a done deal.

If you always rely on the spouse's income during the credit decision, do you then always make them sign the note? Future income is not community property. How do you guarantee access to the income if the community is desolved and the spouse is not obligated on the note?

P.S. It's Randy
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#137712 - 12/12/03 04:46 PM Re: Applications and married applicants
E Street Offline
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Darkness on the Edge of Town
Randy,

Sorry about the name, I was cutting and pasting quickly before a customer meeting. Anyway, the marital unit is a legally sanctioned entity and the Wisconsin Marital Property Act provides guidance on how to approach credit applications. Non-married individuals can apply for joint credit and I would certainly look at the combined income and debt - just as I would married joint applicants. I believe you are misinterpreting my stance. All I am saying is that we can and in most cases should request all the pertinent application information for the non-applicant spouse.

Now when it comes to non-married individuals I would not have a legal leg to stand on from a collection standpoint relying upon the income from a person cohabitating with the applicant, since the State of Wisconsin does not legally recognize cohabitating individuals in the same light as married individuals.

I also would like to point out that from a fair lending standpoint, I would always try to make the loan. If that means going back to the applicant and requesting a "qualified co-siger or co-borrower." so be it. I cannot see how that is discriminatory since the State has placed married residents in a separate legal category.

E-Street

This is not legal advice. Consult your attorney.

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#137713 - 12/12/03 05:07 PM Re: Applications and married applicants
rlcarey Online
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No real arguments with any of those points. I just enjoy discussing the treatment of married individuals in community property states. I have seen many banks get in real trouble by not understanding the laws. I am of the opinion however, that unless the applicant offers the spouse's income for support of the application for the credit obligation, you should not be using it in your credit analysis.
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#137714 - 12/12/03 05:21 PM Re: Applications and married applicants
E Street Offline
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Joined: Apr 2002
Posts: 96
Darkness on the Edge of Town
Randy,

Thanks for the provacative dsicussion. I too enjoy a sprited discussion. It helps hone an arguement. At one pomt in my carreer I was involded in some investiagtions of possible fair lending violations. I have had to re-evaluate my knowledge every so often so I do not make any errors. I do have to say we in Wisconsn have a very strong bankers organization that has provided many workshops on dealing with the Wisconsin Marital Property Act.

I hope we meet in the future. I'll buy you a beer!!

E-Street

This is not legal advice. Consult an attorney.


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#884908 - 01/09/08 11:39 PM Re: Applications and married applicants E Street
02bonne Offline
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I'm tagging this question on to this thread even though it doesn't exactly parallel. I'm trying to get clarification on exactly when you can and can't require a spousal guarantee in a community property state. The excerpt below is from the FDIC guidance on spousal guarantees. It says that requiring a spousal guarantee on secured credit is allowed in a CP state if it's necessary to perfect a lien. Does WI require a spousal guarantee/sign the note to perfect a lien? I've seen a lot of banks in WI require a spousal guarantee as standard course of practice and wasn't sure if it was legal in a community property state.

Secured credit: If an applicant requests secured credit, a creditor may under § 202.7(d)(4) require the signature of the applicant's spouse on any instrument necessary, or reasonably believed by the creditor to be necessary,12 under applicable state law, to make the property being offered as security available to satisfy the debt in the event of default (e.g., an instrument creating a valid lien).13

NOTE: A signature is generally only needed on a security instrument. If applicable state law requires both spouses to sign the promissory note (or other credit instrument) in order to create an enforceable security interest, then the creditor may do so.14

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#884964 - 01/10/08 01:55 AM Re: Applications and married applicants 02bonne
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Originally Posted By: 02bonne
I'm tagging this question on to this thread even though it doesn't exactly parallel. I'm trying to get clarification on exactly when you can and can't require a spousal guarantee in a community property state. The excerpt below is from the FDIC guidance on spousal guarantees. It says that requiring a spousal guarantee on secured credit is allowed in a CP state if it's necessary to perfect a lien. Does WI require a spousal guarantee/sign the note to perfect a lien? NO I've seen a lot of banks in WI require a spousal guarantee as standard course of practice and wasn't sure if it was legal in a community property state. What they're requiring is making the spouse a borrower who hasn't been underwritten. That's a dangerous situation for the bank.

Secured credit: If an applicant requests secured credit, a creditor may under § 202.7(d)(4) require the signature of the applicant's spouse on any instrument necessary, or reasonably believed by the creditor to be necessary,12 under applicable state law, to make the property being offered as security available to satisfy the debt in the event of default (e.g., an instrument creating a valid lien).13 translation: MORTGAGE. Spouse signs our mortgage as "_________husband/wife of _____ is signing to relinquish their rights in the event of foreclosure." (I'm paraphrasing because I don't have the exact language here at home.)

NOTE: A signature is generally only needed on a security instrument. If applicable state law requires both spouses to sign the promissory note (or other credit instrument) in order to create an enforceable security interest, then the creditor may do so.14 This happens in Iowa but not in Wisconsin.

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#885010 - 01/10/08 03:33 AM Re: Applications and married applicants Truffle Royale
rlcarey Online
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Originally Posted By: Truffle Royale
Originally Posted By: 02bonne


NOTE: A signature is generally only needed on a security instrument. If applicable state law requires both spouses to sign the promissory note (or other credit instrument) in order to create an enforceable security interest, then the creditor may do so.14 This happens in Iowa but not in Wisconsin.


Not in Texas or Idaho either.

You might want to review this document in detail and it does the best job of explaining these requirements. Notably, it indicates that:

"If a creditor believes that the co-owner's signature is needed on an instrument that imposes personal liability to assure access to jointly owned property securing the debt, such belief should be supported by a thorough review of pertinent statutory or decisional law or an opinion of the state attorney general obtained prior to requiring the signature."

http://www.fdic.gov/news/news/financial/2002/fil0209a.html
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#2139010 - 07/20/17 09:18 PM Re: Applications and married applicants CSB98
Caroline Compliance Offline
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OLD post, but here's a new reply.

The WBA here in Wisconsin just told me it's actually REQUIRED to consider the income and assets of the non-borrowing spouse.

1) If a spouse applies for credit that will result in an obligation described under s. 766.55 (2) (b), the creditor, in evaluating the spouse's creditworthiness, SHALL CONSIDER ALL MARITAL PROPERTY available under s. 766.55 (2) (b) to satisfy the obligation in the same manner that the creditor, in evaluating the creditworthiness of an unmarried credit applicant, considers the property of an unmarried credit applicant available to satisfy the obligation.

Income is marital property. So are assets. And so are debts.

How could you consider all of that, if you didn't pull a credit report on the non-borrowing spouse? So not only should you, but you are REQUIRED to. (notice the word SHALL. Doesn't say should).

I wonder how many community banks here in WI don't pull a credit report on the non-signing spouse?

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#2139013 - 07/20/17 09:42 PM Re: Applications and married applicants CSB98
rlcarey Online
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You might want to check, but future income of the spouse is not community property. It only becomes community property when earned during the marriage.

766.31 Classification of income. Except as provided under subs. (7) (a), (7p) and (10), income earned or accrued by a spouse or attributable to property of a spouse during marriage and after the determination date is marital property.
Last edited by rlcarey; 07/20/17 09:44 PM.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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#2139072 - 07/21/17 03:10 PM Re: Applications and married applicants CSB98
Truffle Royale Offline

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766.22(2) (b) An obligation incurred by a spouse in the interest of the marriage or the family may be satisfied only from all marital property and all other property of the incurring spouse.

I'd be checking with my attorney for verification of what WBA told you. imho, they're leading you astray.

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#2139172 - 07/22/17 04:40 PM Re: Applications and married applicants rlcarey
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So you'd want to say that since the future income hasn't yet been earned, it shouldn't therefore be relied upon for underwriting purposes? And thus not a consideration in the approval process?

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#2139173 - 07/22/17 04:45 PM Re: Applications and married applicants Truffle Royale
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766.22(2) (b) An obligation incurred by a spouse in the interest of the marriage or the family may be satisfied only from all marital property and all other property of the incurring spouse.

I think this is implying from martial property and all other (implied individually-owned) property of the incurring spouse. Marital property of both spouse, and property that is owned individually by the incurring spouse. Can not include individually-owned property of the non-signing spouse. 766.31 (7) a through f.

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#2139176 - 07/23/17 11:00 AM Re: Applications and married applicants CSB98
rlcarey Online
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Well, if the actual question is whether or not you pull a credit report on the non-applicant spouse in a community property state, prudent lending practices would be yes. You need to know the total debt of the community if they are going to incur dent for which the community is responsible. From the FCRA FTC interpretations:

INFORMATION ON AN APPLICANT’S SPOUSE

A. Where permissible purpose exists. A creditor has a permissible purpose to obtain a consumer
report on an applicant’s spouse if that spouse will be permitted to use the account or will be
contractually liable upon the account, or if the applicant is relying on the spouse’s income as
a basis for repayment of the credit requested. In addition, a creditor may obtain a consumer
report on an applicant’s spouse if (i) the state law doctrine of necessaries (which may make
a consumer liable for certain debts of a spouse) applies to the transaction, (ii) the applicant
resides in a community property state, (iii) the property upon which the applicant is relying as
a basis for repayment of the credit requested is located in such a state, or (iv) the applicant is
acting as the agent of the nonapplicant spouse.

B. Where permissible purpose does not exist. A creditor does not have a permissible purpose
to obtain a report on a nonapplicant spouse if the creditor receives information indicating
that (i) the applicant is not acting as the agent of the nonapplicant spouse, (ii) the applicant
is relying only on separate property to repay the credit extended, (iii) the state law doctrine
of necessaries does not apply to the transaction, or (iv) the applicant does not reside in a
community property state. Where Regulation B, issued under the ECOA (12 CFR 202),
prohibits the creditor from requesting information on such a spouse, a permissible purpose for
making a consumer report on a nonapplicant spouse can never exist under the FCRA. There
is no permissible purpose to obtain a consumer report on a nonapplicant former spouse or on
a nonapplicant spouse who has legally separated or otherwise indicated an intent to legally
disassociate with the marriage. (This does not preclude reporting a prior joint credit account
of former spouses for which the spouse that is the subject of the report is still contractually
liable.)
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#2153670 - 11/15/17 05:00 PM Re: Applications and married applicants CSB98
Carl R Offline
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It appears we’re over thinking this topic. A brief history of the MPA may help clarify. I attended the WBA meeting held in 1985 to introduce the Act.

Essentially, Wisconsin passed the law because of the perception that women, who did not work outside the home, could not obtain credit without their husbands’ signatures. A specific example offered by the WBA sighted a woman (homemaker) residing in northern Wisconsin. She was denied credit to purchase a winter coat because she did not have income in her name. The creditor approved her request provided her husband would sign the agreement. Her husband refused (the WBA relayed two similar examples – the specifics of which I don’t recall). Hence, the MPA. Among other things, the Act deemed income to be marital property, and available to both spouses to repay debt incurred in the interest of the marriage and family, regardless of who actually earned the income. Had the Act been in force, the woman would have been able to buy her winter coat (or the creditor would have violated Reg. B).

With the intent of the Act in mind, the understanding that income is marital property and the fact that all consumer debt in Wisconsin is deemed to be “in the interest of the marriage and family,” here’s what we do, and what I’ve done, for the past 31 years (and stayed out of trouble).

When taking an application for individual credit from a married applicant (in Wisconsin always ask marital status regardless of whether the request is for secured or unsecured credit):

• Always ask about the income of the non-applicant spouse. If disclosed, income from the non-applicant spouse must be considered when calculating repayment capacity (unless a pre-nup so excludes, however, I have never encountered one since enactment of the MPA). Of course, the applicant does not have to disclose non-applicant spousal income information, however, we explain that disclosure can only help (as debts of the non-applicant spouse will be considered – see next bullet point). Handle in a fashion similar to child support, alimony and separate maintenance.
• Always obtain a credit report on the non-applicant spouse. As Mr. Carey points out, there is a “permissible purpose” carve out for non-applicant spouses residing in community (a/k/a Marital, in Wisconsin) property states. Just as income from the non-applicant spouse is available to satisfy debt of the applicant, the applicant’s income may be available to satisfy debt incurred by the non-applicant spouse.
• Only require the signature of the non-applicant spouse on security agreements when deemed appropriate. Either spouse, acting alone, may pledge non-titled property as collateral. In the event the applicant spouse proposes to pledge their pontoon boat as collateral, and to the best of my knowledge pontoon boats are not titled, only one spouse (the applicant) needs to sign the security agreement. Titled property requires the signatures of all on title. In no case may a creditor require the non-applicant spouse to sign a note, co-sign or guarantee the debt.
• With respect to homestead property, homestead rights kick-in, whether or not both spouses are on title to the property. Get signatures of both spouses on mortgages, unless a purchase as described in an earlier response in this thread.
• Thoroughly document an application where the applicant does not wish to disclose non-applicant income information. My opinion: this is the greatest area of risk in the application process.

I thought some background on the MPA might be helpful.

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