Hello,

Does anyone know if Co-applicants GMI (Ethnicity, Race, Sex) should be ‘Not Applicable’ for Entities (ie: LLC’s) or like it was prior to 1-1-18 ‘No co-applicant’ ?

Thanks much!!!

No co-applicant . Well, unless it's withdrawn, and then it's up in the air right now.

Why would it be No Co-Applicant? Appendix B says:

You must report that the requirement to report the applicant's or co-applicant's ethnicity, race, and sex is not applicable when the applicant or co-applicant is not a natural person (for example, a corporation, partnership, or trust). For example, for a transaction involving a trust, you must report that the requirement to report the applicant's ethnicity, race, and sex is not applicable if the trust is the applicant. On the other hand, if the applicant is a natural person, and is the beneficiary of a trust, you must report the applicant's ethnicity, race, and sex.

Maybe I misunderstood the question. Most loans to LLC's would not have a co-applicant and that's why I answered as I did.

That was the way I understood it, too. In the extremely rare situations in which we actually have had a co-applicant natural person, we have completed the GMI as normal for natural persons.

I read the question to be pretty clearly aimed at a co-applicant LLC, why else would the options discussed include "No Co-Applicant"?

If there is a natural person that is co-applying with an entity, you need to collect & report their Demographic Information.

I've gone back and read the OP question about 20 times. I'm not really sure what is being asked. I don't recall there ever being an answer of 'no coapplicant' if there WAS a co-applicant, even if that co-applicant was an entity. It would have been NA.

II remain potentially confused.

Let me clarify: prior to 1-1-18, even if it was a single entity loan in the name of an LLC, examiners advised us to indicate 'no co-applicant' for GMI instead of NA. We submitted hundreds of these, this was the rule. GMI on the LAR read 457845 (across the board) we never got called on it - we did it for decades.

My question is: has anyone received guidance to keep it like this ? do we continue to indicate no co-applicant; whereas NA makes more sense ?

I'm still not entirely sure I understand the question, but if you were reporting code 4 (NA) for the appliant (the business) and code 5 (no co-applicant) when there was not a co-applicant, this was the correct way of reporting this. Basically, a business loan with no co-applicant would have been reported as 4-5, 7-8, 4-5 for ethnicity, race, and sex. Over the years, I have seen many banks incorrectly report a loan with a single business applicant as 4-4, 7-7, 4-4, which is not correct because reporting this way implies that you have two businesses as both the applicant and the co-applicant, which you do not.

It is my understanding that you will report it the same way you always did. If there is only one applicant (individual or business) then you don't have a co-applicant. If you have two applicant's and they are both businesses, then you list NA twice. If your first applicant is a business and the second is an individual, you report NA for the business and collect and report the DI for the individual. This is the same as what it was under the old rules.

Now, just to clarify, if your question relates to the visual observation field, that would be an entirely different discussion.

Thanks, Adam. You took the words right out of my fingers. !

It's amazing how many times that happens, isn't it?

Thank you Adam, that was the answer i was hoping for!
So....do you want to discuss visual observation because i had a question on that too ??
Obviously, in the case of the applicant it would be 'NA', but should the co-applicant visual observation -- in the case of a business loan with no co-applicant -- be ‘NA’ or ‘No Co-applicant’.
This makes my head hurt!!!
Thank you all for responding, what would I do without this forum ???

QuestSoft and/or the CFPB is having issues with this right now.....

Per the CFPB Reference Chart:

"Code 4—No co-applicant
NOTE: Use Code 4 in the co-applicant field if there are no coapplicants or co-borrowers."

IMHO, I think it is clear to list code 4 for visual observation if there is not a co-applicant.

The waters get muddy, however, when you do have a co-applicant but you don't see them in person. There have been reports (like raitchjay referenced) that some vendors have edits for visual observation go one way while other vendors have edits that go the other way. The point is that the visual observation field is probably still somewhat of a moving target at this point.

QuestSoft (well, i should say here...i'm currently one update behind, so maybe this gets fixed on the last update) has an issue with the whole NA or no co-applicant thing right now. It's just sorta jacked up.

It is within WIZ as well. It is supposed to be corrected tonight. We shall see

I guess I have always gone back and forth on this topic. The Regulatory language is similar to that which is used for the "Income" field. I believe the general understanding is that as long as you have at least one organizational borrower, then "Income" is reported "Not Applicable." Would you consider that not accurate, or do you just treat Sex, Ethnicity, and Race different (and Age), even though the language is the same for both?

7. You must report that the requirement to report the applicant's or co-applicant's ethnicity, race, and sex is not applicable when the applicant or co-applicant is not a natural person (for example, a corporation, partnership, or trust). For example, for a transaction involving a trust, you must report that the requirement to report the applicant's ethnicity, race, and sex is not applicable if the trust is the applicant. On the other hand, if the applicant is a natural person, and is the beneficiary of a trust, you must report the applicant's ethnicity, race, and sex.

7. Income data - non-natural person. A financial institution reports that the requirement is not applicable when the applicant or co-applicant is not a natural person (e.g., a corporation, partnership, or trust). For example, for a transaction involving a trust, a financial institution reports that the requirement to report income data is not applicable if the trust is the applicant. On the other hand, if the applicant is a natural person, and is the beneficiary of a trust, a financial institution is required to report the information described in § 1003.4(a)(10)(iii).

I think this allows that you just report "Not Applicable" for the applicant and the co-applicant whenever organizational credit is involved and the other applicant is a natural person.

I agree that the "applicant's or co-applicant's" language is similar for both income and DI, but keep in mind one important variable: DI has separate fields for the applicant and co-applicant while income is a combined field. In other words, I view the DI of the applicant separately from the DI information of the co-applicant meaning that the "or" relates differently than it would for a combined field like income.

Another similar conversation on this relates to DTI as the rules say this:
"5. Non-natural person. A financial institution complies with § 1003.4(a)(23) by reporting that the requirement is not applicable when the applicant and co-applicant, if applicable, are not natural persons."

In other words, DTI is reported unless all applicants are non-natural persons.

So:
-Income: If any of the co-applicants are non-natural persons, list NA. If all are natural persons, report it (if used).
-DI for applicant: If the applicant is a non-natural person, list NA. If a natural person, report it.
-DI for co-applicant: If the co-applicant is a non-natural person, list NA. If a natural person, report it.
-DTI: If all of the applicants are non-natural persons, list NA. Otherwise list DTI (if used).

That is similar to a conclusion I came to previously because of some differences (I thought) in the language used. The differences do exist for DTI, as you aptly noted, but when I went to check the GMI language, I noticed it wasn't as different than I remembered, in fact it was the same. Understood they have separate fields, I think that may be why I also had the same outline as you. Thanks for the reminder for my prior reasoning . With all that being said, they should have made it clearer what to do, as one could still be led to believe that "Not Applicable" works in these situations for all applicants.

I agree and like Adam's summary:


Let me emphasize something here in case some missed it:
Income: If ANY of the applicants are non-natural persons (an entity/organization), then you list NA for income.
DTI: If ALL of the applicants are non-natural persons, then you list NA for income.
IOW, if there's a natural person and an entity, you have to list the DTI, but not the income. Odd, but that's what the regulation says.