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#2158189 - 12/22/17 01:08 PM
Joint Intent- Commercial Loans
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Member
Joined: Aug 2012
Posts: 57
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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
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Platinum Poster
Joined: Jun 2014
Posts: 562
Petersburg, VA
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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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#2158366 - 12/26/17 04:46 PM
Re: Joint Intent- Commercial Loans
Dcomply
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10K Club
Joined: Oct 2000
Posts: 40,086
Cape Cod
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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
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Power Poster
Joined: Jun 2003
Posts: 7,650
Florida
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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
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Platinum Poster
Joined: Aug 2016
Posts: 540
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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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#2184044 - 07/03/18 08:14 PM
Re: Joint Intent- Commercial Loans
David Dickinson
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Platinum Poster
Joined: Aug 2016
Posts: 540
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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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#2184437 - 07/06/18 09:56 PM
Re: Joint Intent- Commercial Loans
Dcomply
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Power Poster
Joined: Oct 2009
Posts: 9,088
OK
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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
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Power Poster
Joined: Oct 2009
Posts: 9,088
OK
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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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#2184503 - 07/09/18 02:58 PM
Re: Joint Intent- Commercial Loans
Dcomply
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Power Poster
Joined: Oct 2009
Posts: 9,088
OK
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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
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Member
Joined: Jan 2016
Posts: 83
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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
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Power Poster
Joined: Sep 2010
Posts: 2,658
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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? 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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Adam Witmer, CRCM All statements are my opinion, not those of my employer, and should not be taken as legal advice. www.compliancecohort.com
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#2195021 - 10/09/18 07:20 PM
Re: Joint Intent- Commercial Loans
Dcomply
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10K Club
Joined: Nov 2000
Posts: 18,762
Central City, NE
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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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