Is a joint intent required on an adverse action notice?
Where does it state you do or you don't?

Joint intent is required at the time of application. A denial has nothing to do with the requirement.

Exactly! Many banks don't get it until later and it's very evident when you look at denials and don't find joint intent documentation.

Agreed. When I do file reviews if it's not collected at the application I write it up as a violation. If the loan hasn't closed yet I still ask them to obtain but always tell them the error cannot be corrected after the fact.

But if the borrowers initial or sign the joint intent statement on the dated application, it will appear that they provided it at application.

I have lenders who take applications over the phone, ask the joint intent question and note it on the application form on the blanks designated for joint intent. But then, these officers were having the borrowers actually sign the statement at closing. I asked the officers to stop as that process serves no purpose whatsoever.

they are saying if two people sign the application, that we do not need a Joint Intent. I thought you had to have an application AND a joint intent, except for real estate apps which has a box for Joint Intent.

Official Interpretation

7(d) Signature of spouse or other person.

3. Evidence of joint application. A person's intent to be a joint applicant must be evidenced at the time of application. Signatures on a promissory note may not be used to show intent to apply for joint credit. On the other hand, signatures or initials on a credit application affirming applicants' intent to apply for joint credit may be used to establish intent to apply for joint credit. (See Appendix B.) The method used to establish intent must be distinct from the means used by individuals to affirm the accuracy of information. For example, signatures on a joint financial statement affirming the veracity of information are not sufficient to establish intent to apply for joint credit.

We provide an application packet that includes "intent to apply for joint credit" form. Many times applicants take the packets with them and return the "completed" packets the next day. In a lot of instances they did not complete the intent to apply for joint credit form even though it was provided. If the loan was denied, I don't count this as an exception.......

[they are saying if two people sign the application, that we do not need a Joint Intent. I thought you had to have an application AND a joint intent, except for real estate apps which has a box for Joint Intent.[/quote]
Where does it say that?

Randy quotes the regulation and you might infer that, but the FRB has also issued clarification that a signed application is sufficient evidence of joint intent. Here's a copy of an email sent to all FRB banks in the Kansas City Region on 6/30/2010. It went through the D.C. level. I bolded the part I am referencing about signed applications being sufficient.


From: Linda.Painter@kc.frb.org [mailto:Linda.Painter@kc.frb.org]
On Behalf Of fed.connections@kc.frb.org
Sent: Wednesday, June 30, 2010 2:48 PM
Subject: 2Q2010 Fed Connections message: Observations on Signature Rules
This email is directed to the compliance officers of banks supervised by the Federal Reserve Bank of Kansas City that participate in our Fed Connections Consumer Compliance Outreach program. Through that program, we provide timely communications regarding consumer compliance hot topics that we think warrant increased attention. For this second quarter of 2010, we offer these observations regarding the signature rule requirements of Federal Reserve Regulation B, 12 CFR 1002.7(d). In the last few months, our compliance examiners have observed situations in which a bank's procedures for obtaining signatures on loans did not fully conform with 12 CFR 1002.7(d) or which could present fair lending issues. These procedures are relatively easy to bring into compliance, while the potential penalties for not doing so can be quite significant. The information below should assist you with complying with the applicable signature policy requirements.
Regulation - According to Regulation B, 12 CFR 1002.7(d), 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.

• cannot ask for or require the signature of an applicant's spouse or any other party on a credit instrument if the applicant asks for individual credit and the applicant meets the creditor's lending standards of creditworthiness.

• may request a cosigner or guarantor on a loan if the applicant does not meet the creditor's creditworthiness standards, but the creditor cannot require the cosigner or guarantor to be the applicant's spouse.

• must determine a person's intent to be a joint applicant at the time of application for the credit.
These rules ensure that qualified applicants may obtain credit in their own name, which is important to their ability to establish a credit history and access other credit.
Issue - The signature requirements of Regulation B apply both to consumer credit and to signer/guarantors on commercial and agriculture loans. Examiners are finding spousal signatures on loans for which documentation of the signing parties' intentions regarding individual or joint credit is not adequate. For example, files do not contain an application signed by both parties or other documentation of the signors' intentions, yet the signatures obtained are those of spouses. At best, this is a documentation issue in which banks are not, in fact, requiring spousal signatures and for which examiners may cite a technical, rather than a discriminatory, violation of Regulation B. At worst, the signatures may indicate that a bank is illegally requiring spousal signatures, which is discrimination under the Equal Credit Opportunity Act (ECOA) and Regulation B and may create a situation in which a bank regulator is obligated to refer the situation to the Department of Justice for investigation.
How to comply - You have some options on how to determine a person's intent to be a joint applicant. Remember that the determination must be made at the time of the application for credit, or "contemporaneously", whether that application is in writing or verbal. Additionally, regardless of your method of determination, it is important that the determination is documented in the credit file. Your first option is to use written applications. Written applications with the applicants' signatures are strong evidence of joint intent. They become even stronger if, in addition to both signatures, the application form has a separate disclosure on which the applicants may overtly affirm their intention for joint credit.


In the absence of written applications, the second option is to simply provide the applicants, at time of application, with a joint intent disclosure on which they may indicate their intention to apply for joint credit. Finally, absent written applications or applicant acknowledgement on other joint intent disclosures, the loan officer may simply ask the applicants about their intentions. The loan officer may then document that via a note to the credit file. Having that note dated would help document that the intentions were determined contemporaneously with the application for the credit.
Permissible signature requirements - The following situations describe when you may require certain signatures:
• If you determine that an application for credit is a joint application of two or more people, you may require the signatures of the joint applicants on the credit instrument.

• If you determine that an application is for individual credit, but you require collateral to meet your underwriting standards, you may require the signature of a spouse or other person on the documents necessary under state law to give you access to the collateral in the event of default.

• If you determine that an application is for individual, unsecured credit and the applicant meets your standards for creditworthiness, you may not require additional signatures on the credit instrument.

• If you determine that an application is for individual, unsecured credit, and the applicant does not meet your standards for creditworthiness, you may require a qualified cosigner or guarantor, but you may not require that cosigner or guarantor be the applicant's spouse. Additionally, if the applicant for unsecured credit relies in part on property the that applicant owns with another person to satisfy your standards for creditworthiness, you may require the signature of the other person only on instruments necessary under state law that would allow you to reach the property in the event of death or default of the applicant.

• If your applicant is married and resides in a community property state, or if the applicant is relying on property located in such a state, you may require the spouse's signature, in certain circumstances, on any instrument necessary under state law to make the property available to satisfy the debt in the event of default.

What won't work - Here are some examples of methods that will not comply with the signature rules:
• Financial statements - Applicant signatures on financial statements that only attest to the accuracy of the financial information are not acceptable evidence of intent to apply for joint credit. Financial statements that also contain a separate disclosure regarding intention and that the applicants must separately sign or initial indicating their intent, are acceptable evidence, as long as those intentions are determined at the time of the application.

• Signatures on credit instruments - Absent any other documentation of intent, the fact that someone signs a promissory note is not evidence that they intended to apply for the credit, particularly if they are the spouse of the other signor, for their signature could have been illegally obtained.

If you have questions about the signature rules, please contact the examiner assigned to your bank. For 10th District state member banks, that examiner is identified in the cover letter to your last consumer compliance report of examination. Information about our third quarter Fed Connections communication will be forthcoming in August. Thank you for participating in Fed Connections!
Joint intent references:
• Regulation B, 12 CFR 1002.7(d)
• Regulation B, Official Staff Interpretations

First, JI should be obtained at the time of application; however, I successfully argued with auditors this point for commercial loans.

Technically, JI isn't required by regulation on a denial. There is no credit instrument; therefore, no requirement to obtain JI.

1002.7(d) 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 .

First, JI should be obtained at the time of application; however, I successfully argued with auditors this point for commercial loans.
What point did you argue successfully? That it isn't needed at the time of application on commercial loans?

Technically, JI isn't required by regulation on a denial. There is no credit instrument; therefore, no requirement to obtain JI.
I disagree. Joint Intent documentation is required on all applications where there are 2 or more applicants. If you took an application (with 2 or more applicants) and then denied it, you certainly need Joint Intent documentation.

I believe you're taking the "technicality" out of context. What .7(d) is referring to is liability documents. The term "credit" is defined in Reg B as debt. I can certainly make a non-applying person sign security documents. I can't make them become liable. If your statement was true, I couldn't make a spouse sign a security agreement when the other spouse pledges it as collateral.

I successfully contended that failure to obtain JI on a denial of a commercial loan was a procedural issue, not a compliance issue.

The regulation prohibits an FI from requiring a signature on a "credit instrument" other than a joint applicant. In a denial, there is no credit instrument (e.g., promissory note); therefore, my former FI was not requiring anyone to sign anything. Thus, it was impossible to violate the regulation.

David, with respect to the letter you posted, this was not the opinion of our Federal Reserve examiners. On an application handwritten, signed and dated by both applicants, we were cited a violation because the joint intent blanks were not initialed.

swiggles: I can understand how a field examiner can have a different opinion but that doesn't make them right. This memo was produced by a Regional Office and was "blessed" by the FRB in D.C. IOW, it's nation wide. Whether your examiner buys that or not is a different story. The point is the FRB put this in writing after a legal review. Your examiner has vocalized an opinion - their own. You can accept that, but it doesn't make it correct.

Loynograd: Your logic makes no sense. Reg B specifically applies to the entire application to closing process. If your logic was correct, a lender could illegally discriminate against applicant and argue that until the loan is signed, there is no illegal discrimination. For example, I tell a married woman to "go home and get your husband and then we'll look at your application". You don't think that's covered by §1002.7(d)? You can believe what you want, but I'd advise anyone reading your post to dismiss it all.

David,

Telling a spouse to get another spouse to guarantee a transaction is clearly a violation and that was not my position.

Your approach is overly cautious for certain larger commercial transactions with non-spousal guarantors. For example a multi-million LLP's managing partner discusses a loan with a Commercial Lender. The commercial lender tells the managing partner that the Bank isn't interested. An Adverse Action is warranted. If it is early in the process, the lender isn't going to obtain Joint Intent from the other partners just to turn down the loan. It is insulting and a waste of time.

The application in that scenario wasn't joint. It was an application from the partnership. So the issue of "joint intent" isn't in play. Further, if the bank had proceeded with the application and required the partners to guarantee individually, it would still not be a joint application.

John, I like this logic, but my Corporate bosses disagreed.

As John correctly points out, your scenario does not trigger Joint Intent documentation. If your Corporate bosses disagree, they are wrong. A partnership is an entity and represents one applicant. IF your institution required partners to guaranty the loan, then joint intent still doesn't' apply as they aren't applying - you're making them sign a guaranty. §1002.7(d) is about demonstrating applicants are voluntary.

This also doesn't address your position that until a loan is signed, "there is no credit instrument (e.g., promissory note)" as you stated in your 2/8/17 post.

Joint intent is to all about not twisting people's arms to make them liable. It is to be applied early - not later. Read the preamble to the changes in 2003 (effective 4/15/04). In fact, the rules emphasize it is not to be done at closing as there is "too much duress" on the applicants at that point. It also was added to specifically combat non-consumer loans, so your comment that I am "cautious for certain larger commercial transactions" is totally off base. That's what it was designed for - cases where there typically isn't an application form.

Who is talking about getting JI at closing? That practice went by the wayside 10 to 15 years ago as you pointed out.

We didn't get JI when the guarantors owned more than 20/25% of the organization as there guarantee was required by our credit policy FYI...A nationally respected Compliance firm signed off on the approach of treating smaller owners as joint applicants, when their guarantee was provided.

I am comfortable with what we did in declining to write up commercial lenders for regulatory violations when the Credit Action was an Adverse Action. We are just going to disagree on this point.

You are. You said you don't have a credit instrument until a note is signed. Your last post on 2/8/17 stated:
The regulation prohibits an FI from requiring a signature on a "credit instrument" other than a joint applicant. In a denial, there is no credit instrument (e.g., promissory note);
Your "logic" stated, If you don't have a credit instrument (a note), you don't trigger this requirement.


That doesn't make them or you right. You need to know what the regulation says and requires for yourself. Don't rely on "so and so told us . . . ." I own a small business. I'm a director, officer, shareholder. If my company applies, I am not applying, nor can you presume I'm applying [that in itself violates §1002.7(d)]! If the bank makes me guaranty the loan, I'm still not a joint applicant per this regulation. I'm not applying. I'm be required to guaranty.

Furthermore, there's no distinction in Reg B about large or small owners. Where would you draw the line for this made up interpretation?


I'm okay with you being comfortable and that you disagree. My job is to ensure others don't follow your advise. It's wrong and will lead to violations.