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#179406 - 04/14/04 02:49 PM
Re: Intent - Which Box Should You Check?
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Gold Star
Joined: Sep 2001
Posts: 314
Midwest
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Me again! With all the attention focused on the joint intent issue I was hoping other people had already figured this out. Any answers out there?
I know the main point is to get the statement of intent from everyone that is applying, cosiging, or guaranteeing, but what exactly should they state their intent to be in each of these scenarios? Reg B doesn't actually define the terms joint applicant or individual applicant!
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All statements are my own and not necessarily those of my employer.
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#179407 - 04/14/04 03:26 PM
Re: Intent - Which Box Should You Check?
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Power Poster
Joined: Jan 2004
Posts: 3,626
State of confusion
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Our new forms for all applications from our vendors simply say 'this addendum supplements and is made a part of the ________ (type) loan application. We intend to apply for joint credit' and is has them both sign and date the form. This is of course a quick fix and may be modified after it is made clear exactly what is expected of us, and is in no way legal advice 
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#179408 - 04/14/04 03:38 PM
Re: Intent - Which Box Should You Check?
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Gold Star
Joined: Sep 2001
Posts: 314
Midwest
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But when do you consider an application to be for "joint credit"?
I know the basic scenario when two people walk up and say "we want to applying for a loan".
But what about one borrower and one cosigner - would you expect them to sign that they're applying for joint credit?
Similarly, what about a commerical loan to a corporation guaranteed by three people - would you expect the three guarantors to sign your form for joint credit or would you consider that to be an application for individual credit to the corporation?
Even if a bank used a form that doesn't have the third option everyone still needs to figure out what is supposed to be "joint credit".
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All statements are my own and not necessarily those of my employer.
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#179409 - 04/14/04 04:09 PM
Re: Intent - Which Box Should You Check?
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Anonymous
Unregistered
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Hi,
I just got out of a meeting today on this very issue. I think we all have the same issues. Does anyone have a quick link to the amendment? I've searched the hot topics forum and I could not find it. Thanks for the help.
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#179410 - 04/14/04 04:13 PM
Re: Intent - Which Box Should You Check?
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10K Club
Joined: Nov 2002
Posts: 20,656
The Swamp
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I agree with your concern, Terry. It is very difficult to know just how to go about those situations. Since the definition of applicant considers all of those "other" folks. I believe our intentions are to have all obligatory parties sign the intent. Maybe the line that says "we are applying for joint credit" should be modified to something like "we are applying for joint credit or co-signing/guaranteeing a loan for the primary borrower"...that might cure the problem of what is "joint" and what isn't.
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My opinion only. Not legal advice. Say you'll haunt me - Stone Sour
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#179411 - 04/14/04 05:01 PM
Re: Intent - Which Box Should You Check?
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Gold Star
Joined: Sep 2001
Posts: 314
Midwest
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Joker - I was thinking the same thing. I've already distributed a different version to be used for Commercial lending.
However, I just got clarification! I went to the Source and spoke with one of the attorneys at the Fed Board in Washington. The answer I received was based primarily on the second half of the Commentary to 202.7(d)(1) which says:
Paragraph 7(d)(1) 1. Joint Applicant. The term joint applicant refers to someone who applies contemporaneously with the applicant for shared or joint credit. It does not refer to someone whose signature is required by the creditor as a condition for granting the credit requested.
Based on the second sentence, the attorney told me:
1. An application for consumer credit by a person with a cosigner would be considered INDIVIDUAL credit.
2. A loan to a legal entity such as a corporation would be considered INDIVIDUAL credit regardless of how many people are providing personal guarantees.
The attorney told me that while the definition of "applicant" in 202.2(e) says that for purposes of 202.7(d) includes guarantors, etc., this is merely to state that those parties are protected by Reg B as "applicants". However, it does not make them "joint applicants" under the new requirement to obtain a statment of intent for joint credit.
I hope this helps everyone.
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All statements are my own and not necessarily those of my employer.
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#179412 - 04/14/04 07:49 PM
Re: Intent - Which Box Should You Check?
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10K Club
Joined: Nov 2002
Posts: 20,656
The Swamp
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Thanks for taking the time to clarify that...sure will make things easier and clearer.
_________________________
My opinion only. Not legal advice. Say you'll haunt me - Stone Sour
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#179413 - 04/17/04 07:30 PM
Re: Intent - Which Box Should You Check?
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Anonymous
Unregistered
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Terry,
Which attorney did you speak with?
Has anyone else gotten similar opinions from the regulators?
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#179414 - 04/17/04 07:42 PM
Re: Intent - Which Box Should You Check?
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Diamond Poster
Joined: Nov 2000
Posts: 1,830
District of Columbia
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We also are regulated by the Fed and received a similar response from our examiners. When someone applies for credit individually, and we tell them they need a co-signor to strengthen the loan, each applicant is considered as a separate individual entity. We have the co-signer complete a separate applicaton form, and we do not combine incomes or debt. we would most likely see this situation with a kid who just graduated from HS, moved in to an apartment with a buddy, and needs a car. The kid has a good job, no debt, but no credit history either. Enter Dad, who agrees to co-sign the loan. Dad has good credit and resonable debt. We would look at Dad and Jr separately - not as joint applicants. BC
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#179415 - 04/17/04 10:59 PM
Re: Intent - Which Box Should You Check?
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10K Club
Joined: Jul 2001
Posts: 85,059
Galveston, TX
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BC - What you're saying in your scenerio is that you orginally turned down junior - right?? Then Dad entered the picture as a co-signer.
I've seen too many banks jump immediately to this conclusion in father/mother - son/daughter scenerios.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com
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#179416 - 04/18/04 05:13 PM
Re: Intent - Which Box Should You Check?
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Diamond Poster
Joined: Nov 2000
Posts: 1,830
District of Columbia
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I guess you could say that we originally turned down Jr - although Jr may know his credit is weak and ask at the outset about having a co-signer. We don't specify who the co-signer should be-that's up to Jr., so no, we do not immediatly jump to a parent. The only point I was making was that we consider the co-signer as a separate applicant, not aj oint applicant, regardless of who the co-signer may be. BC
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#179417 - 04/18/04 07:44 PM
Re: Intent - Which Box Should You Check?
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10K Club
Joined: Jul 2001
Posts: 85,059
Galveston, TX
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BC - I agree with all you are saying. The situation that I was referring too is when a bank determines that it is a father/mother - daughter/son application and they automatically treat it as a co-signer situation or require the parent to act as a co-signer - even though the applicants may have intended to apply jointly.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com
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