If a son wants to do a consumer loan and his credit score isn’t enough and his dad, who has consumer and commercial loans with us, says he will sign the note does he have to sign his son’s application as a co-borrower?

Loan officer, who is the President, is saying no and I keep saying yes.

If you're requiring a co-signer, and the dad is filling that role, then he shouldn't sign the application, as he isn't applying for credit. If the dad wouldn't be getting any benefit from the loan, then he also shouldn't be on the application, nor shown as a co-borrower.

It's a joint application because the son would not qualify for the loan without his dads credit score.

But that's what i'm saying.....if the son applies and you say "your credit performance won't allow us to make this loan; you need a co-signer" and the dad steps up and says he'll do it, he isn't an applicant...he's a co-signer/guarantor. It's not a joint application in that scenario.

1002.7(d)(1)

(d) Signature of spouse or other person —(1) Rule for qualified applicant. Except as provided in this paragraph, a creditor shall not require the signature of an applicant's spouse or other person, other than a joint applicant, on any credit instrument if the applicant qualifies under the creditor's standards of creditworthiness for the amount and terms of the credit requested. A creditor shall not deem the submission of a joint financial statement or other evidence of jointly held assets as an application for joint credit.

...snip

§1002.2(e)

(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.

2. 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.

says he will sign the note does he have to sign his son’s application as a co-borrower?


It comes down to that there is not a law on the books that requires anyone to sign a credit application. It comes down to whether or not he is applying jointly with his son which would trigger joint intent or is he agreeing and the bank is agreeing to allow him to guarantee the loan. Either way he will be a co-signer under Reg. AA regardless of what he signs.

You can set the loan up any way you want to.....label the father however you want to. But if you don't provide the father with a Reg AA co-signer notice, he may as well have not signed anything.

Reg AA - Sec. 227.12 Definitions.
For the purposes of this subpart, the following definitions apply:
(b)(1) Cosigner means a natural person who assumes liability for the obligation of a consumer without receiving goods, services, or money in return for the obligation, or, in the case of an open-end credit obligation, without receiving the contractual right to obtain extensions of credit under the account.
(3) A person who meets the definition in this paragraph is a cosigner, whether or not the person is designated as such on the credit obligation.

Let me summarize this and add my own view:
The co-signer is liable, therefore, the co-signer IS an applicant - per Reg B's definition.
If the bank wants the co-signer to fill out an application, they can require it. They don't have to, but can.
Joint intent is not technically required because the co-signer didn't contemporaneously apply. However, most banks have a procedure to get joint intent documentation in this case. It's not wrong.
No matter what you call the father, he is a co-signer and a co-signor notice is required to be given.

Thanks for the summary........includes everything!