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#2054114 - 12/14/15 10:48 PM Extension
ComplianceNewby Offline
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Louisiana
We have a loan that is about to mature. The co borrower on the note is ill. The loan officer wants to just extend the loan for another 3 year for the same rate. He thinks that in doing this, only the borrower has to sign. Am I wrong in telling him there is no way we can do this? THis is a consumer real estate loan.

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Lending Compliance
#2054185 - 12/15/15 03:42 PM Re: Extension ComplianceNewby
Truffle Royale Offline

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read this
Unless I'm misreading, if the loan hasn't yet matured, you can do a modification/change in terms and it won't be subject to TRID.
Hopefully someone with experience doing modifications will weigh in here.

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#2054187 - 12/15/15 03:46 PM Re: Extension ComplianceNewby
David Dickinson Offline
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You certainly can do a extension like you describe. Maybe there's a state law issue that I'm not aware of. Why do you say "there is no way we can do this"?

Just a reminder:
Since there is a co-borrower, you'll need joint intent documentation from all applicants again. The extension is not what they originally applied for, so this is a new request for credit - which triggers the joint intent issue.
Flood insurance will apply (MIRE event).
TIL/RESPA & HMDA doesn't apply to extensions.
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#2054408 - 12/16/15 03:56 PM Re: Extension David Dickinson
ComplianceNewby Offline
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Louisiana
Ok, I am sorry. I didn't finish my statement in my question. One of the borrower's is ill and the loan officer is thinking that if we extend the loan this way, only one of the borrowers has to sign.

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#2054411 - 12/16/15 04:03 PM Re: Extension ComplianceNewby
Rocky P Offline
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Florida
You better check state law. I do not know of too many cases where one person can unilaterally bind another
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#2054421 - 12/16/15 04:25 PM Re: Extension ComplianceNewby
David Dickinson Offline
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My point in my previous post is: Whether ill or not, all joint applicants will have to agree to the new debt obligation. You'll must have evidence of intent to apply for joint credit from the ill applicant, if they are going to be obligated on the extension.
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#2054445 - 12/16/15 05:14 PM Re: Extension ComplianceNewby
ComplianceNewby Offline
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ComplianceNewby
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Louisiana
Thanks.

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#2057581 - 01/08/16 07:31 PM Re: Extension ComplianceNewby
Eldon96 Offline
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Posts: 70
Hi David, quick follow-up question about your joint intent statement.

Could you provide the regulatory requirement for getting an updated joint intent form when changing the terms of an existing account?

Thank you

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#2057762 - 01/11/16 03:46 PM Re: Extension ComplianceNewby
Dan Persfull Offline
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Bloomington, IN
(j) Credit means the right granted by a creditor to an applicant to defer payment of a debt, incur debt and defer its payment, or purchase property or services and defer payment therefor.


Official Interpretation

2(j) Credit.

1. General. Regulation B covers a wider range of credit transactions than Regulation Z (Truth in Lending). Under Regulation B, a transaction is credit if there is a right to defer payment of a debt—regardless of whether the credit is for personal or commercial purposes, the number of installments required for repayment, or whether the transaction is subject to a finance charge.


You are extending debit, deferring payment, for an additional 3 years. Without a POA the joint obligor does not have the right to further extend the obligation of the other joint obligor without their consent.

I can assure you I would have you in court in a heart beat if you extended a credit I'm obligated on without my joint intent to extend that credit.
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#2057923 - 01/11/16 09:46 PM Re: Extension ComplianceNewby
David Dickinson Offline
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Central City, NE
What Dan said, but let me add:
I can't provide a regulatory reference about getting updated joint intent. There is none, because it's not needed. I can point you to the requirement to get joint intent on ALL applications involving more than 1 applicant. The extension described fits this requirement.

The definition of "application" is a request for credit. The scenario provided indicates the applicants did that when they applied for the original loan. Now, they are asking for something different. That's a new request for credit. Therefore, it's a new application. Anytime there is more than 1 applicant, §1002.7(d) requires you to get evidence of the intentions of all applicants that this is what THEY want.
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#2059884 - 01/21/16 10:15 PM Re: Extension Dan Persfull
Marnie Offline
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Nevada
For years, we have been requiring re-verification of joint intent on renewals. Realizing this could be done a couple of ways, we chose to require an updated application to ensure joint intent is noted as our re-verification procedure.

Now, once again, this is coming into question.The argument is where in REG B this is noted. I've used yours and David's comments both now (and for several years), referencing REG B 2(j) credit. The argument I am now getting is from 2(f), the section highlighted that says the definition of application "does not include an amount of credit within previously established credit limit."


(f) Application means an oral or written request for an extension of credit that is made in accordance with procedures used by a creditor for the type of credit requested. The term application does not include the use of an account or line of credit to obtain an amount of credit that is within a previously established credit limit. A completed application means an application in connection with which a creditor has received all the information that the creditor regularly obtains and considers in evaluating applications for the amount and type of credit requested (including, but not limited to, credit reports, any additional information requested from the applicant, and any approvals or reports by governmental agencies or other persons that are necessary to guarantee, insure, or provide security for the credit or collateral). The creditor shall exercise reasonable diligence in obtaining such information.


So, once again, having to defend the Compliance stance joint intent must be re-verified on loans coming up for renewal. Your opinions, please, and any other supporting info you have, Dan and David? Thanks in advance so much for your help.

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#2059895 - 01/21/16 11:52 PM Re: Extension ComplianceNewby
Kathleen O. Blanchard Offline

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The statement you have highlighted is referencing use of credit in a situation such as a draw on a line. Each use of the line is not a new application.

In the case of a matured loan, you need to ensure that all parties still want to be part of the transaction, which is essentially a new transaction.

While not specifically on point, this presentation from the FRB speaks to the concept:

"If an individual applicant does not qualify for credit, the bank may require an additional party, such as a co-signer or guarantor, but the creditor may not require that the additional party be the applicant’s spouse

–Note on Renewals: If the borrower’s creditworthiness is reevaluated when the credit is renewed, a creditor must determine whether the additional party is still warranted, and, if not, release the additional party."

https://consumercomplianceoutlook.org/ou...99ec6daa11.ashx
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#2059896 - 01/21/16 11:56 PM Re: Extension Kathleen O. Blanchard
Marnie Offline
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Posts: 437
Nevada
Thanks Kathleen. Appreciate your input.

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#2059897 - 01/21/16 11:57 PM Re: Extension ComplianceNewby
Kathleen O. Blanchard Offline

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Kathleen O. Blanchard
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Here is another reference with similar info on renewals and the need to take a fresh look and obtain fresh documentation.

https://www.hunton.com/files/News/d3ed35..._Regulation.pdf
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Kathleen O. Blanchard, CRCM "Kaybee"
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