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#2069853 - 03/17/16 07:51 PM Commercial Loan Applications
Kisha Offline
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Posts: 226
Our bank still requires written commercial applications as part of our policy. I thought about suggesting doing away with them since they are not required per the Reg. However, I'm leery as to how we would document certain dates and information as we seem to have a hard time getting some of our commercial lenders to understand the importance of compliance on the commercial side.

Do any of you still take written applications for commercial loans?

For those that don't can you give me a brief synopsis of your procedures for proper documentation throughout the process?

I appreciate any guidance. Thank you!

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#2069856 - 03/17/16 07:55 PM Re: Commercial Loan Applications Kisha
Skittles Offline
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TN
We have applications for all loans; however there is very little information on the commercial loan application.
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#2069927 - 03/18/16 03:03 PM Re: Commercial Loan Applications Kisha
fmissle Offline
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Pac NW
We use an app for commercial loans specifically for the date reasons you talked about. We want to be able to have that as our hard date for HMDA, Reg B Notices, etc.

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#2069929 - 03/18/16 03:04 PM Re: Commercial Loan Applications Kisha
fmissle Offline
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Pac NW
Oh, and our apps are very simple too.

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#2069930 - 03/18/16 03:04 PM Re: Commercial Loan Applications Kisha
David Dickinson Offline
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Central City, NE
A very good idea. The alternative is to have all loan officers document all applications in some way - including the date. Good luck with that.
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#2069936 - 03/18/16 03:15 PM Re: Commercial Loan Applications Kisha
swiggles Offline
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Ditto with David. Why would you want to get rid of a practice that many of the rest of us wish we had. I am jealous of anyone whose bank requires commercial loan applications.....seems like commercial lenders think such a thing is beneath them.
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#2069939 - 03/18/16 03:24 PM Re: Commercial Loan Applications Kisha
Rocky P Offline
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Florida
My 2 favorite apps over the years:

WC (working capital) - $500k by xx/xx/xx on the back of a golf-card (lucky it was dated)

Joe, $75,000 - 2 F-150's on the back of a Wendy's receipt
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#2069978 - 03/18/16 05:20 PM Re: Commercial Loan Applications Kisha
Kisha Offline
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Joined: Feb 2011
Posts: 226
Thank you all for your input! I like what I'm seeing here. It's making me rethink asking to have them taken away. I thought maybe we were doing things the old-fashioned way. We have had a few lenders that have come from big banks that think we are nuts for having paper commercial applications.

Maybe I just need to try and simplify ours. Ours is pretty lengthy and most of the same information gets transferred to our presentations (write-ups we use to present the loans to approving authorities).

So, my next question is how simplistic are some of the ones you all use? Ours is 5 pages long to encompass gathering HMDA data when applicable, borrower information, guarantor information, addresses, dates, term, rate, purpose, collateral, etc.

And do you have them signed? I know signatures are not required, just joint intent documentation/verification.

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#2069982 - 03/18/16 05:37 PM Re: Commercial Loan Applications Kisha
Iowa Compliance Gal Offline
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Joined: Nov 2015
Posts: 33
Iowa
Ours is called a Commercial Loan Contact Request...one page that includes the Date, Borrower Name, Purpose, Amount requested, Name of Contact, Method of contact, a comments box and officer signature line. If the officers is contacted via e-mail they attach a copy of the e-mail to this form. We do not get these signed as they are just an internal loan contact form to document our application date for Reg B and HMDA notices.

We went thru a state exam in October and they made no comment one way or another about our form. We just needed a way to document the application date and this seemed to be the simplest and consistent way to accomplish it on our commercial loans.

(I came from a big bank an year ago and they had a 5 page commercial all encompassing application...I actually miss that and tried to roll it out when I came here but got shot down!)

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#2070030 - 03/18/16 07:54 PM Re: Commercial Loan Applications Kisha
fmissle Offline
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Joined: Jul 2007
Posts: 989
Pac NW
Ours has:

Requested Amount
Collateral Offered
Requested Term
Loan Purpose
Borrower Name and Type (Individual, LLC, Corp, etc.)
Ownership Information
TIN
Address

Everything else we get via tax returns, PFS, Interim financials, etc.

We don't require it to be signed, but the loan officer has to note that it was taken verbally, via e-mail, etc.

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#2070072 - 03/18/16 11:14 PM Re: Commercial Loan Applications Kisha
Richard Insley Offline
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Toano, VA
Think about this from the fair lending perspective. Loan officer recollections and scribbled notes won't do you much good if you're in court or undergoing a critical supervisory examination. What if one or more of the spouses of the principals of that business swear they were forced to sign the note due to nothing more than marital status? Wouldn't it be REALLY NICE to pull out that signed short-form application showing that the signatures of the spouses in question were OFFERED, not demanded?
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#2070189 - 03/21/16 04:01 PM Re: Commercial Loan Applications Kisha
Kisha Offline
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Posts: 226
Very good point Richard. I appreciate your insight.

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#2070194 - 03/21/16 04:26 PM Re: Commercial Loan Applications Kisha
Tracey, CRCM Offline
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Gorham, ME
We just got rid of ours! Its working well so far! Kisha, if you send me a private message with your email, I will send you our procedures.
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#2070252 - 03/21/16 06:18 PM Re: Commercial Loan Applications Kisha
Richard Insley Offline
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Toano, VA
Kisha - What I described actually happened. Not many years after ECOA/Reg. B went into effect, my bank was sued by the wife of one of the principals of a commercial borrower.--an automobile dealership. The credit was a new car floor plan. She alleged that our lender had matter-of-factly demanded her signature simply because she was the spouse of a principal.

She was right on all counts and our lawyers advised that we had no defense. As luck would have it, we won on a technicality. Nevertheless, the top execs in our commercial loan division felt the heat and listened carefully to suggestions for process improvement. We all agreed that a short-form application was a simple, low-cost, and effective way to document the fact that there were no illegal spousal signature demands.
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#2070256 - 03/21/16 06:31 PM Re: Commercial Loan Applications Kisha
Kisha Offline
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Joined: Feb 2011
Posts: 226
Richard - I have expressed this same concern when it comes to our commercial loans. We have to be very careful in making sure we are following the regulations when it comes to joint intent/spousal signature, etc. It is very disturbing the lack of knowledge that commercial lenders have of the regulations that actually affect their loan requests.

Tracey - Thank you for you response.

I really think because of all the details that must be documented I am going to keep the applications and maybe simplify them so we are not gathering and copying repeat information throughout the process.

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#2070275 - 03/21/16 07:33 PM Re: Commercial Loan Applications Kisha
David Dickinson Offline
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Central City, NE
To tack on to what Richard stated (and I agree): I have been an expert witness in several commercial loan cases - trying to defend the banks. Without written applications you're probably also missing joint intent documentation. Not having written applications is a bigger deal for non-consumer loans than it is for consumer requests, because the dollar amounts are much higher on non-consumer lending. It's amazing to me that lenders don't want to protect their banks with a simply application.

At a minimum, lenders should always be asking:
Loan purpose
Who's applying
What collateral is being offered.
Who owns the collateral
(I don't disagree with anything fmissile presented either)
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#2070283 - 03/21/16 07:55 PM Re: Commercial Loan Applications Kisha
Kisha Offline
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Joined: Feb 2011
Posts: 226
Thank you David. Your insight is also greatly appreciated. I have a nice base to start with to get some internal discussion going about the importance of the information we gather for commercial applications. And also to let our commercial lenders know that we aren't living in the dinosaur era for still having paper applications.

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#2070320 - 03/21/16 11:19 PM Re: Commercial Loan Applications Kisha
Richard Insley Offline
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Toano, VA
If commercial lenders don't like the term "application form," then don't use that term. Title the document "Statement of Commercial Credit Request" or something else that emphasizes the nature of the thing. Include David's list of subjects plus anything else you find useful for business or legal purposes. Somewhere on your form, you probably want to ask the applicant to spell out the type of credit facility the borrower desires. In addition to a statement of the collateral being offered, I'd ask what signatures are being offered.
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#2070321 - 03/21/16 11:42 PM Re: Commercial Loan Applications David Dickinson
Darth HMDA, CRCM, CAMS Offline
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Darth HMDA, CRCM, CAMS
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CA
Originally Posted By David Dickinson
A very good idea. The alternative is to have all loan officers document all applications in some way - including the date. Good luck with that.


I live in David's example world of trying to get Commercial relationship managers to document things. it's a nightmare... literally. If I was an examiner that would be one of the first things I look for at a bank.

If it were my bank and we used an application and they wanted to get rid of it I would fight tooth and nail to keep it. You don't want to deal with what we deal with....
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#2070946 - 03/25/16 01:55 PM Re: Commercial Loan Applications Kisha
FNB Offline
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Joined: Feb 2014
Posts: 36
How do those not using an application disclose the ECOA notice and the right to receive a written statement of denial reasons if revenues are less than $1,000,00? Or do you 100% of the time send denial notices out?

We used to use commercial applications & it was great, had the denial notice info, ECOA notice, dates, HMDA & joint intent. Recently the bank decided to stop using these, unless the loan is HMDA or has guarantors that require proof of joint intent, however or in a review yesterday it was asked how we are delivering the ECOA notice & denials.

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#2070967 - 03/25/16 02:59 PM Re: Commercial Loan Applications Kisha
fmissle Offline
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Joined: Jul 2007
Posts: 989
Pac NW
We send AA letters on all transactions.

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#2071259 - 03/28/16 08:38 PM Re: Commercial Loan Applications Kisha
HRH Okie Banker Offline
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Joined: Jan 2003
Posts: 3,070
Oklahoma
To add my two cents this late in the game - if your lending staff is trained to require loan application for commercial credit I would never stop that practice. Many of us wish we had them. There are just many more pros than there are cons to obtaining commercial loan applications. Just my opinion.
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#2071497 - 03/29/16 08:49 PM Re: Commercial Loan Applications Kisha
Kisha Offline
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Joined: Feb 2011
Posts: 226
I truly appreciate everyone's input on this matter. I am in the works of revamping our current application to be more in line with what is absolutely needed for a commercial request. We are keeping them! After reading everyone's comments I feel good about that decision. Thank you again.

Any additional input from anyone else is always appreciated!

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