The rule on Joint Intent states "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". This has always been how we have evidenced joint intent, however would it be sufficient to only mark the joint intent box and not have the initials in the space below the box?

I think all joint intent forms /apps I have ever seen have ever had an initial line, or a line for signatures.

The reg commentary states:

"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." §1002.7(d)(1) - 3

Note, "signatures or initials". This is how it is laid out on all the Reg B model applications, and such, I would conclude as necessary to demonstrate the customer checked the box and is confirming their intent to apply jointly.

So in the event of an online application where they do not sign an application, would checking the box be sufficient?

Frankly, I would recommend that the online application include a spot next to the checkbox for the initials of the applicants. It may seem ridiculous, but it's what the regulation tells us is expected.

The best practice for face-to-face applications is to have the applicants sign or initial a separate "joint intent" section of an application. Obtaining a signature or initials, however, is not an absolute requirement of Regulation B, meaning there are other ways to document an applicant's intent to apply jointly. For example, creditors need to have established procedures as to how they document joint intent for phone applications. I can't tell you how many denied phone applications I have seen over the years where a phone application did not evidence an applicant's intent to apply jointly. While an applicant can't easily sign or initial the joint intent section of the application during a telephone interview, the lender taking the phone application can easily 1) ask the applicant if they intend to apply jointly and then 2) document the applicant's intent (by checking the box themselves and possibly initialing the application or making a note of who they talked to).

I see no reason why checking a separate joint intent box during an online application process would be insufficient. The key with that method is that the applicant is providing a distinct affirmation that they intend to apply jointly, which is the requirement of the rules. In addition, this method clearly documents the applicant's intent as the applicant is the one completing this.

That said, if a lender were to just check a joint intent box without talking to an applicant - or, if the online box was pre-checked/hard coded, then that would not be in compliance with the requirements under Regulation B.

From the commentary:
"The method used to establish intent must be distinct from the means used by individuals to affirm the accuracy of information."

I have the same problem, especially since most of our mortgage applications are submitted on line. The software does not have an option for the applicant to, for example, check a box that the applicant wishes to apply jointly. The only solution I have been able to come up with is that the officer who receives the application must call the applicants and ask the question and then note the response on the application form in the area for joint intent. This seems highly inefficient and cumbersome, though the officers tell me that the first thing they do anyway, is contact the applicant for other reasons. But when you think about it, the joint intent is then not really received "at application" but rather subsequent to receipt. Plus, my guess (from a reliable source.. ) is that the officers just immediately write "contacted by phone" when they don't really perform the task.

John beat me to it as I got a little long-winded.

I agree that obtaining initials would be the best practice, but I don't believe they are absolutely necessary if you can establish that the applicant made a distinct and separate affirmation that they intend to apply jointly. The key, of course, is to effectively document this.

My 2¢ is if someone completes an online application and marks the "Applying Joint" box and both sign the application, you're done. The boxes and signature lines are "best practices" as Adam points out.

My suggestions is that Loan Officers always clarify 3 things at the time of application:
1. Who is applying (establishes joint intent);
2. What collateral is being offered; and
3. Who owns that collateral (allows you to determine who you can sign security documents vs. liability documents).

If you're contacting applicants, ask them these 3 and document their answers. This will provide clarity and proof to the joint intent issues.

Will a guru please clarify 1002.7(d)(2-3)

Applicant applied solely. Loan process is nearing origination. Applicant is requesting to have wife added as co-borrower.
Does this need to be treated as a new credit request?
The way I read 7(d)-2, I believe the co-applicant will need to apply with the applicant for a joint application to take place...?


Thoughts/Advice?

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.

You can add her once you get joint intent. No real reason to start over.

Thank you, Randy.

Let's say a particular software offers web/mobile application with the checkboxes and/or initials specifically for joint intent but the software does NOT maintain the selection for future viewing or have the ability to pull a report or such specific to the applicant's action. The institution can only demonstrate a process of joint intent and cannot pull “evidence” or documentation showing intent on a particular applicant. Is this acceptable for meeting regulation or litigation?

What good is a web/mobile application if you can't capture the information submitted?

I have always used this mantra when dealing with examiners (and even auditors): If I can't prove it, it didn't happen.

In other words, examiners/auditors are eventually going to want to test the joint intent requirements and if you can't prove that applicants are in fact providing their intent to apply jointly, the assumption will essentially be that it didn't happen. Trying to prove joint intent compliance by only "demonstrat(ing) a process" is an up-hill battle at best - and one that will be very difficult to convince an auditor/examiner.

Furthermore, the commentary makes it clear that an applicant's intent to apply jointly must be "evidenced" at the time of application. I you can't produce the information submitted (as Randy mentions), then I'm not sure how this is "evidenced."

From the commentary to 1002.7:
"3. Evidence of joint application. A person's intent to be a joint applicant must be evidenced at the time of application."

So let me ask - has anyone actually been cited for not obtaining joint intent? And if so, what were the repercussions?

A creditor shall not require the signature or guarantee 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.

Without evidence of joint intent, it could lead to a fair lending investigation, which then triggers an automatic referral to the DOJ. Do you really want to use a system that provides for a systemic violation. That is a whole different issue than one-off violations that you normally might expect to see when someone fails to check an available box occassionally.

It is a Regulation B violation - and yes, we have had this come up during exams. Luckily it's rare.

Not obtaining joint intent is a frequent "hot topic" when examiners discuss fair lending. This is a very common citation with auditors and does happen with examiners. As Randy stated, a systemic violation relating to joint intent would most likely trigger a referral to the Department of Justice, which is as big of a repercussion as you could get as the settlements are both a PR mess as well as costly from a fine perspective.

Not only have I seen LOTS of banks cited for this, I've been an expert witness in a court case in which one spouse claimed she was required to sign the loan. The husband had died so the bank looked to her for repayment. She won and the bank lost over $2 million.

Joint intent is not a minor issue.

rlcarey and Adam thank you for your response regarding software not maintaining evidence of intent. After getting a response that other clients did not raise the concern, which seems to be a standard response by PMs when they just want you to move on, I put a hard stop on the implementation and low and behold a resolution is now pending.