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#2158189 - 12/22/17 01:08 PM Joint Intent- Commercial Loans
Dcomply Offline
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Hi- Is it required to have a Business sign Joint Intent on a Commercial Loan or only individuals? It seems like maybe the regulation was written broad enough to including obtaining a signed Joint Intent from a Business but it seems like in practice a lot of Banks and Regulators don't require it. Only required for individuals. Any insight would be helpful. Thanks

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#2158191 - 12/22/17 01:30 PM Re: Joint Intent- Commercial Loans Dcomply
burke116 Offline
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If you have 2 businesses apply jointly, you must evidence joint intent. There is no requirement that they must "sign" though.

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.

(x) Person means a natural person, corporation, government or governmental subdivision or agency, trust, estate, partnership, cooperative, or association.

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#2158350 - 12/26/17 03:51 PM Re: Joint Intent- Commercial Loans Dcomply
David Dickinson Offline
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DComply: To help you understand, the Joint Intent requirement was actually targeted at business/commercial purpose loan applicants because they commonly don't complete written applications. Joint Intent documentation is required anytime there are 2 or more applicants - no matter who/what they are.

For example, if ABC Co. and I apply for credit, joint intent applies. If ABC and XYZ applies, joint intent applies.

As a consultant representing hundreds of banks, I can tell you examiners do cite this - and quite frequently.
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#2158366 - 12/26/17 04:46 PM Re: Joint Intent- Commercial Loans Dcomply
John Burnett Offline
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And lenders, auditors and compliance officers continue to raise the question -- quite frequently.
Last edited by John Burnett; 12/26/17 04:48 PM.
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#2158376 - 12/26/17 06:53 PM Re: Joint Intent- Commercial Loans John Burnett
Rocky P Offline
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ECOA covers everyone - it is not just a consumer compliance regulation.

From the Authority section of ECOA

Official Interpretation
1(a) Authority and scope.
1. Scope. The Equal Credit Opportunity Act and Regulation B apply to all credit—commercial as well as personal—without regard to the nature or type of the credit or the creditor . . . . .

From the definitions:
(e) Applicant means any person who requests or who has received an extension of credit from a creditor, and includes any person who is or may become contractually liable regarding an extension of credit. For purposes of §1002.7(d), the term includes guarantors, sureties, endorsers, and similar parties.

(x) Person means a natural person, corporation, government or governmental subdivision or agency, trust, estate, partnership, cooperative, or association.
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#2183962 - 07/03/18 03:39 PM Re: Joint Intent- Commercial Loans Dcomply
TeamComply Offline
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In the case of an application in which an LLC applies for credit to purchase a rental property, would we need evidence of joint intent for the two members (non-spouse) signing on behalf of the LLC? Thanks.

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#2184041 - 07/03/18 07:55 PM Re: Joint Intent- Commercial Loans Dcomply
David Dickinson Offline
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No. They are simply signing on behalf of the 1 applicant - the LLC - per the LLC Resolution. They are not personally liable.

If they were signing the loan as individuals (personally liable) - which you cannot require - then you would need joint intent documentation.
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#2184044 - 07/03/18 08:14 PM Re: Joint Intent- Commercial Loans David Dickinson
TeamComply Offline
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Ok, thanks for the response David.

And what about a situation where we have an individual who owns 100% of an incorporated business, and a second individual plans to co-sign (but doesn't have any ownership)? Is joint intent required in this type of situation? Thanks.

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#2184050 - 07/03/18 08:29 PM Re: Joint Intent- Commercial Loans Dcomply
David Dickinson Offline
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Yes. You have the corporation (represented by the individual) and you have the cosigner. Therefore, you have 2 applicants (co-signers are applicants per Reg B's definition).
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#2184437 - 07/06/18 09:56 PM Re: Joint Intent- Commercial Loans Dcomply
raitchjay Online
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OK
David, doesn't it depend on whether the bank required the co-signer? If the person just volunteers to co-sign, then you need the intent for joint credit, but if the bank is requiring a co-signer, then no joint intent...right?
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#2184438 - 07/06/18 09:57 PM Re: Joint Intent- Commercial Loans Dcomply
raitchjay Online
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OK
Sorry....if TeamComply's line of "plans to co-sign" led you down the path of 'this person is volunteering to co-sign', then i get why you answered the way you did......just trying to confirm here.
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#2184492 - 07/09/18 02:22 PM Re: Joint Intent- Commercial Loans Dcomply
David Dickinson Offline
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You must have joint intent documentation for voluntary applicants. But let me ask, how can you require someone (specific) to be a co-signer. Aren't all co-signers voluntary? IOW, I can say "you need a co-signer" but I can't specifically name "you need to bring in your spouse" (or any other person).

Now, there is an exemption from joint intent rules for someone that didn't contemporaneously apply. IOW, if I tell you "bring in a qualified co-signer and we'll reconsider" and you do, then the co-signer wasn't on the original application. Thus, they didn't contemporaneously apply. I always encourage lenders to still get the joint intent documentation as it can be difficult to prove the co-signer was added later and I think it's just good business to make it clear that you're not making them apply - they are volunteering to apply.

I read TeamComply's post to say the co-signer applied at the same time as the LLC. That would be two liable parties (the LLC and the individual co-signer). If they applied contemporaneously, joint intent documentation would be required.
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#2184503 - 07/09/18 02:58 PM Re: Joint Intent- Commercial Loans Dcomply
raitchjay Online
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OK
I didn't mean that the bank required a specific co-signer (i know that isn't allowed)....just that they required that the borrower have a co-signer. And i thought that's how you read the post, as applying contemporaneously. Thanks for the clarification.
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#2194929 - 10/09/18 02:28 PM Re: Joint Intent- Commercial Loans Dcomply
Gertie Offline
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When making a loan to a legal entity, with owners/members of the entity personally guarantying the loan, is evidence of joint intent required?

We have a few legal entity borrowers to whom we frequently make loans. Currently we are requiring evidence of joint intent from each guarantor even when the guarantors are owners/members of the entity. I'm just wondering if we are "over achieving". Thanks.

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#2194935 - 10/09/18 02:50 PM Re: Joint Intent- Commercial Loans Dcomply
Adam Witmer Offline
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Originally Posted By Gertie
When making a loan to a legal entity, with owners/members of the entity personally guarantying the loan, is evidence of joint intent required?


It depends. If they apply "contemporaneously" with the applicant (at the time of application), then you (probably) need their joint intent. If, however, the application went to underwriting and you required their guarantee, then it technically isn't require - though you would need to prove that they didn't apply "contemporaneously" with the applicant and that you required guarantees. That said, if it is your policy to require owners to guarantee every commercial loan, you also wouldn't technically need it since the guarantee is your requirement.

As this can get complicated, some just require the joint intent and move on.
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#2195021 - 10/09/18 07:20 PM Re: Joint Intent- Commercial Loans Dcomply
David Dickinson Offline
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Adam's right that this can get complicated. Let me ask a clarifying question:
You say the owners/members of the entity are personally guarantying the loan. Did they volunteer to do this or is this a requirement of the lender?

A creditor may require the personal guarantee of the partners, directors, or officers of a business, and the shareholders of a closely held corporation , even if the business or corporation is creditworthy. The requirement must be based on the guarantor's relationship with the business or corporation, however, and not on a prohibited basis. For example, a creditor may not require guarantees only for women-owned or minority-owned businesses. Similarly, a creditor may not require guarantees only of the married officers of a business or the married shareholders of a closely held corporation. [Commentary to §1002.7(d)(6) #1]
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