Skip to content
BOL Conferences
Thread Options
#1429813 - 08/16/10 08:45 PM NonMarried Applicants
xerx Offline
100 Club
xerx
Joined: Jul 2010
Posts: 226
My loan officer tells me that when he has a married couple apply for a loan, he has them fill out one application and runs one credit report. If he has a non-married couple that has everything commingled (and basically acts married), he treats them like a married couple.

But, if he has two applicants who are economically separate--for example, two brothers--then he has each one fill out individual 1003's and pulls a separate credit report for each, even though they are applying for one loan for one property.

Does this violate Regulation B?

Return to Top
Lending Compliance
#1429820 - 08/16/10 08:53 PM Re: NonMarried Applicants xerx
Dan Persfull Offline
10K Club
Dan Persfull
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
Short answer yes. The loan officer is treating non-married joint applicants differently than married applicants. Doesn't matter if their credit is "co-mingled" or not.

Also search the threads on joint credit reports. You will find some recent discussion where the FDIC is writing up banks for Reg B violations for pulling and charging two credit reports on non-married applicants vs pulling and charging a joint credit report for married applicants.

Last edited by Dan Persfull; 08/16/10 08:54 PM.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.

Return to Top
#1429828 - 08/16/10 08:59 PM Re: NonMarried Applicants Dan Persfull
Doug Hendrickson Offline
Power Poster
Doug Hendrickson
Joined: Oct 2009
Posts: 3,927
Agreed. Although we were okay, an examiner did tell us that the FDIC was paying close attention to this very issue.
_________________________
I hear and I forget. I see and I remember. I do and I understand.--Confucius

Return to Top
#1429832 - 08/16/10 09:05 PM Re: NonMarried Applicants Doug Hendrickson
xerx Offline
100 Club
xerx
Joined: Jul 2010
Posts: 226
Do you think it's important to have unmarried co-borrowers (like brothers) fill out just one application?

Is this immaterial. Or does it establish a pattern and practice of discrimination?

(Sorry, if you already answered this. I'm just getting push back.)

Return to Top
#1429836 - 08/16/10 09:10 PM Re: NonMarried Applicants xerx
Dan Persfull Offline
10K Club
Dan Persfull
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
Do you have married joint applicants fill out separate 1003s?

If not then, regardless if the applicants brothers, sisters, co-habitors, etc., you are treating non-marred applicants differently based on their marital status. One of the prohibited factors found in ECOA and Reg B.

A search on this topic will bring up many post that have addressed this issue over the years.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.

Return to Top
#1429837 - 08/16/10 09:12 PM Re: NonMarried Applicants Dan Persfull
xerx Offline
100 Club
xerx
Joined: Jul 2010
Posts: 226
Thank you Dan. I guess it just seemed harmless, but I agree it seems to run afoul of the language of Regulation B.

I will review more past threads as well.

Return to Top
#1429869 - 08/16/10 10:56 PM Re: NonMarried Applicants xerx
xerx Offline
100 Club
xerx
Joined: Jul 2010
Posts: 226
Last edited by xerx; 08/16/10 11:22 PM.
Return to Top
#1429870 - 08/16/10 11:42 PM Re: NonMarried Applicants xerx
xerx Offline
100 Club
xerx
Joined: Jul 2010
Posts: 226
But, I would also point out that this old post may confuse people:

http://www.bankersonline.com/compliance/guru2006/gurus_cmp020606d.html

Return to Top
#1429871 - 08/16/10 11:59 PM Re: NonMarried Applicants xerx
Kathleen O. Blanchard Offline

10K Club
Kathleen O. Blanchard
Joined: Dec 2000
Posts: 21,293
When looking at older posts, it is important to look at the dates. The push on joint credit reports is very recent and that post is from 2006.

Things, including interpretations, change.
_________________________
Kathleen O. Blanchard, CRCM "Kaybee"
HMDA/CRA Training/Consulting/Mapping
The HMDA Academy
www.kaybeescomplianceinsights.com

Return to Top
#1429872 - 08/17/10 12:04 AM Re: NonMarried Applicants Kathleen O. Blanchard
xerx Offline
100 Club
xerx
Joined: Jul 2010
Posts: 226
Thx.
Last edited by xerx; 08/17/10 12:11 AM.
Return to Top
#1430477 - 08/17/10 11:31 PM Re: NonMarried Applicants Kathleen O. Blanchard
West Coast Comp Offline
Gold Star
West Coast Comp
Joined: Jun 2010
Posts: 350
Lost in the rain.
I wish bank management could understand that changes in interpretation happen even when there has been no change in the regulation. I hate having to explain repeatedly “no there has not been a change in the regulations, yes the requirements have changed.” smile
_________________________
Where I go there I am. smile

Return to Top
#1430504 - 08/18/10 12:34 PM Re: NonMarried Applicants West Coast Comp
Dani York, CRCM Offline
Power Poster
Dani York, CRCM
Joined: Apr 2005
Posts: 3,663
TN
Originally Posted By: West Coast Comp
I wish bank management could understand that changes in interpretation happen even when there has been no change in the regulation. I hate having to explain repeatedly “no there has not been a change in the regulations, yes the requirements have changed.” smile


Maybe try...."No the regulations haven't changed, and neither have the requirements. They have been clarified." laugh
_________________________
I can't herd the cats anymore, so I just set up the electric fences and let them fry when they stray out of bounds.

Return to Top
#1434392 - 08/26/10 02:17 AM Re: NonMarried Applicants Dani York, CRCM
xerx Offline
100 Club
xerx
Joined: Jul 2010
Posts: 226
First, I want to thank you all for the responses. Second, after reviewing and discussing with my loan department, I think it's important to remain flexible when taking applications.

If people live at the same address and have their stuff commingled, then one 1003 seems in order. If not, then not. This seems reasonable and I don't think it implicates Reg B.

It also happens to be consistent with what the 1003 application states:

VI. ASSETS AND LIABILITIES

This Statement and any applicable supporting schedules may be completed jointly by both married and unmarried Co-Borrowers if their assets and liabilities are sufficiently joined so that the Statement can be meaningfully and fairly presented on a combined basis; otherwise, separate Statements and Schedules are required. If the Co-Borrower section was completed about a non-applicant spouse or other person, this Statement and supporting schedules must be completed about that spouse or other person also.

Last edited by xerx; 08/26/10 03:10 AM.
Return to Top
#1434456 - 08/26/10 01:22 PM Re: NonMarried Applicants xerx
Dan Persfull Offline
10K Club
Dan Persfull
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
I, like Fannie and Freddie, can put any statement on the application I wish too however that doesn't make it compliant with the Regulation.

If you are charging them for individual credit reports vs joint credit reports you are going to run afoul with your examiners, especially if they are FDIC.

Search the threads over the last few months on "joint credit reports".

Also if you have a denial in this situation the reasons must be specific. From the 2004 changes to Reg B.

9(b) Form of ECOA notice and statement of specific reasons
9(b)(2) Statement of specific reasons

Section 202.9(b)(2), adopted as proposed, clarifies that whether a creditor’s denial of credit is based on the creditworthiness of the applicant, a joint applicant, or guarantor, the reasons for adverse action must be specific. For example, a general statement that “the guarantor did not meet the creditor’s standards of creditworthiness” is insufficient.

The legislative history of the requirement to provide specific reasons for adverse action indicates that the purposes of the disclosure are to help achieve the antidiscrimination goals of the ECOA and to educate and inform consumers. These dual purposes are served by the clarification in § 202.9(b)(2). For example, the disclosure may discourage a creditor from discriminating based on a co-applicant’s or guarantor’s
race, sex, age, or other prohibited basis. Also, the disclosure may help educate and inform applicants, co-applicants, or guarantors as to reasons for denial that are not apparent from looking at their credit report.

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.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.

Return to Top
#1434730 - 08/26/10 05:05 PM Re: NonMarried Applicants Dan Persfull
xerx Offline
100 Club
xerx
Joined: Jul 2010
Posts: 226
I was not entirely clear.

We will always charge married and unmarried joint applicants the same price for credit reports (even though this means we eat fees, as we are charged more by our consumer reporting agency for unmarried joint applicants). My underwriter said we if apply for "joint credit reports" on people who do not have commingled assets and liabilities, he thinks there may be issues with selling the mortgage in the secondary market (again we won't charge more for pulling separate reports).

But, I'm not forcing the loan officers to always use a single 1003 for joint applicants.

I'm not disagreeing that technically there is not a regulatory requirement for privacy when there are co-applicants. However, some applicants would prefer to fill out separate applications and sometimes doing so makes more sense (like when assets and liabilities are not sufficiently joined).

I can't imagine this being an issue. If there is a problem at some point, I will share it with you all.

Return to Top
#1434740 - 08/26/10 05:18 PM Re: NonMarried Applicants xerx
Dan Persfull Offline
10K Club
Dan Persfull
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
Quote:
My underwriter said we if apply for "joint credit reports" on people who do not have commingled assets and liabilities, he thinks there may be issues with selling the mortgage in the secondary market


We have been pulling joint reports on joint applicants whether married or not for years, even before all the recent fuss came about. We have yet had a loan refused to be purchased because of it and we have yet to be cited by any quality audit.

What has to be realized is in the last 18 months or so the regulatory environment is drastically changing. What was "overlooked" 3 or 4 years ago will most likely be more closely scrutinized in the very near future. The recent fuss over the joint reports is one sign of those changes coming (looking more closely at how FIs treat unmarried applicants vs married applicants) and coming sooner than later.

Those that aren't willing to make the adjustments are those that will later pay the penalties.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.

Return to Top
#1435652 - 08/27/10 05:53 PM Re: NonMarried Applicants Dan Persfull
xerx Offline
100 Club
xerx
Joined: Jul 2010
Posts: 226
Interesting. I got an amazing amount of push back on this issue. I will relay your information to management, and maybe we will revise our approach during my next review.

Thank you!!!
Last edited by xerx; 08/27/10 05:54 PM.
Return to Top
#1435662 - 08/27/10 06:03 PM Re: NonMarried Applicants xerx
Georgia Plum
Unregistered

Embrace the change, embrace the change

Return to Top
#1520778 - 03/11/11 06:12 PM Re: NonMarried Applicants Dan Persfull
villenbe Offline
Member
Joined: Jun 2010
Posts: 96
Originally Posted By: Dan Persfull
Quote:
My underwriter said we if apply for "joint credit reports" on people who do not have commingled assets and liabilities, he thinks there may be issues with selling the mortgage in the secondary market


We have been pulling joint reports on joint applicants whether married or not for years, even before all the recent fuss came about. We have yet had a loan refused to be purchased because of it and we have yet to be cited by any quality audit.

What has to be realized is in the last 18 months or so the regulatory environment is drastically changing. What was "overlooked" 3 or 4 years ago will most likely be more closely scrutinized in the very near future. The recent fuss over the joint reports is one sign of those changes coming (looking more closely at how FIs treat unmarried applicants vs married applicants) and coming sooner than later.

Those that aren't willing to make the adjustments are those that will later pay the penalties.


I apologize if this has been discussed, but I read through this thread and have one additional clarification question-

When married couples apply, they are pulled jointly and have commingled Debt to Income ratios and credit. In order to treat boyfriend/GF and engaged couples the same, our bank takes the same approach.

But, what if a father/son apply, is it a requirement to combine their credit and DTIs? What about if the father just wants to cosign? Is this essentially what Reg B means by not treating unmarrieds differently?

I may not be thinking about this correctly, but I am even more confused after reading through this. Thanks
Last edited by villenbe; 03/11/11 06:13 PM.
Return to Top
#1520831 - 03/11/11 07:10 PM Re: NonMarried Applicants villenbe
Dan Persfull Offline
10K Club
Dan Persfull
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
If the father and son are applying for joint credit then you must treat them as you would any other joint applicants.

The father applying as a co-signer is not the same as applying for joint credit. In this case we analyze the father's individual ability to repay the loan. If he does not have the capacity to pay the loan then he would not be worth much as co-signer if the son quit paying.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.

Return to Top
#1520845 - 03/11/11 07:20 PM Re: NonMarried Applicants Dan Persfull
villenbe Offline
Member
Joined: Jun 2010
Posts: 96
Thank you, that clears it up for me.

Return to Top
#2125352 - 04/06/17 07:16 PM Re: NonMarried Applicants xerx
Compliance NABW Offline
Diamond Poster
Joined: Oct 2015
Posts: 1,668
Just to add to this "older" topic. I was at an FDIC Bank where prior to my arrival they had a finding related to treating unmarried applicants differently because of a different price point for married joint credit reports vs. unmarried. So, this issue was still being kicked around as recent as 2014.

Return to Top
#2125386 - 04/06/17 10:10 PM Re: NonMarried Applicants xerx
Richard Insley Online
10K Club
Richard Insley
Joined: Oct 2000
Posts: 10,179
Toano, VA
Thanks for sharing this, Justin. You may be saving someone a big headache.

There are countless possibilities for what might be questioned as credit discrimination. Trying to figure it out on your own is like stumbling around the back yard in the dark looking for a rake.
_________________________
...gone fishing.

Return to Top

Moderator:  Andy_Z