I've been told I should not be collecting GMI for cosigners. All of the threads I’ve read here and our consulting company say that if they sign the note you are to collect GMI, whereas we would not collect GMI for guarantors that are only secondarily liable and only sign a guarantee agreement. I think they are saying that for HMDA purposes cosigners and guarantors are essentially treated the same, as opposed to co-borrowers and cosigners being the same and guarantors different.

Is there something we’re missing or misinterpreting or did the stance on this issue change and we didn't catch it?

If you missed it, so did I!
As far as I know, someone who signs the note is a borrower, be it primary or co, and you would collect and report GMI on them.
Which is just another way of saying "...co-borrowers and cosigners being the same and guarantors different" as you did above.

I'm going to go dig and see if I can find the hair whoever is telling you this is splitting that puts cosignors with guarantors.

If the person is on the note, GMI is to be collected, whether they are on the note because they initially applied or because the bank required a co-signer. I have never heard of such a thing. That could wreak havoc to a HMDA process.

If I had a examiner and higher ups stick with that, I would just get all co-signers (I imagine they mean when it is a required co-signer, not where they co-applied), as guarantors instead.

Thanks for the confirmation, Kathleen! I was in a mild panic about having to rescrub a large submission before I hit the 2014 button. :shudder:

bgehres, that means you've got a fight on your hands with that examiner who apparently went off on their own rogue tanget. Good luck proving them wrong and getting this 'violation' removed from your exam report.

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Ask for the specific regulatory language supporting this opinion. Then ask them if they consider co-signers the same as guarantors then why is the income of co-signers allowed to be used in the decision where guarantor's income are not.

You, IMO, have an examiner that has no idea what they are talking about.

This is totally off the wall with no basis whatsoever for the "violation".

FWIW, I agree that you should be collecting GMI on cosigners. They sign they note, they are a borrower, therefore, GMI is collected.

When it comes to income: It just depends on if the loan officer is using the co-signers income in the decision to make the loan.

One more thing: This is what is in our HMDA training outline that I teach at the ABA Compliance School (emphasis added):

Report the race, sex, and ethnicity of the applicant and co-applicant (if applicable). If the borrower is a non-person (corporation, entity), enter the code for “NA”. Applicants may choose more than one category for their race. The LAR will accommodate five selections.

A cosigner IS a co-applicant.

The examiner is siting that under Reg B a cosigner is not a co-applicant because a co-signer is required as a condition of credit and that the original first applicant is your only applicant, not both. My issue with this agrument is that as a co-signer, I still have to "apply" to make sure that I'm creditworthy. Also, if that were the case, you would then have to treat voluntary co-signers that come in at original application (ie-I know my child will need me to sign so I offer upfront) differently from subsequent ones after initial underwriting (ie-Sorry We can't make this loan, but with another qualified person we would). IMO they're not a co-borrower (unless getting a child to move out of ones basement is material benefit) and I want them primarily liable so I don't want them as guarantors instead.

Normally I would drop the issue, move on and hope the next group doesn't change their mind back to the correct way, but this is the difference between scrubbing and not.

The examiner is siting that under Reg B a cosigner is not a co-applicant because

The examiner may want to re-read the definition.

(e) Applicant means any person who requests or who has received an extension of credit from a creditor, and includes any person who is or may become contractually liable regarding an extension of credit. For purposes of §1002.7(d), the term includes guarantors, sureties, endorsers, and similar parties.

Wow! As Dan stated, ask them to read the regulation. Looks like someone needs to go back to compliance school or at least open the regulation and read it.

I'd print this string and show it to them. You aren't making these statements - Dan, Truffle, Kathleen & I are.

Agree with the experts.. I would definitely fight this!!! Yikes!!

Typical problem when you start mixing definitions between regulations. If they are citing you for a HMDA violation and quoting Regulation B to support it (heck why not cite Regulation AA at the same time ), you know they have not a clue what they are talking about. Kick it up the ladder and hold your ground.

Speaking of Reg AA... Is a guarantor considered a co-signer? (per Reg AA)

Yes. See 227.12(b).

A cosigner is anyone who assumes liability without receiving benefit. A guarantor meets that definition.