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#270019 - 09/02/05 01:59 PM Re: Reg B Joint Intent
complianceman Offline
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complianceman
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New Albany, IN
Jim,

I would like to jump up onto your soap box and briefly discuss a communication that I recently had with our FDIC examiner concerning "Notice of Joint Intent". He stated thje following: It is really up to the bank and their policies and procedures. You can go to any lengths to make it crystal clear that there was joint intent by having every customer sign a notice. If you feel your policy and procedures are clear, training has occurred for loan officers, monitoring is good, audits are conducted - you may choose to only use a notice of joint intent when there is no application. I would recommend all bank's have notices signed if there is not an application.



There is nothing in the regulations that will spell it out for you. You will have to make a decision as a bank, what risk level you are comfortable with.

So with that being said, we are being conservative until our next FDIC examination and will address Joint Intent issues at that time.

"Off the Soap Box".
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#270020 - 09/02/05 04:47 PM Re: Reg B Joint Intent
David Dickinson Offline
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Well said Magic. I think you stated the "enforcement vs. intentions" arguement well.

This has been a great discussion. One that was obviously needed. We haven't heard the counter points from Raymond, GreatRiver or others for over a week. Any more discussion?
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#270021 - 09/03/05 08:24 PM Re: Reg B Joint Intent
Princess Romeo Offline

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IMHO - the whole thing has gotten very silly. It's one thing to have a spousal signature on a FINANCIAL STATEMENT where the only indication for the signer is their verification of the veracity of the information on the statement.

It's a whole other kettle of fish to have an APPLICATION FORM where you have "Applicant" and "Co-Applicant" right above or below the signature lines on the form. If my signature on the "Co-Applicant" line is not sufficient to document my intention of BEING a Co-Applicant, then I have no CLUE what another little box with my initials would prove.

BTW - It's a helluva lot easier to forge someone's initials than it is their signature.
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#270022 - 09/04/05 01:01 PM Re: Reg B Joint Intent
Richard Insley Offline
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Toano, VA
Quote:

And GenerousLife has the true risk figured out; the true risk lies in a disgruntled spouse and the Shark, Esq. that want to sue Deep Pockets National Bank!



I agree totally with GreatRiver's assessment above. In response to David's "show me the cases" challenge, I'm happy to share the details of the only lawsuit my former bank ever had to defend in its 23 years dealing with ECOA.

In this 1983 case, bank had extended a floor-plan line to an auto dealership that subsequently failed. Like all good commercial lenders, we had obtained guarantees from all the dealership's principals and their spouses. As cited above, our normal application procedures for this type of loan were to obtain personal financial statements on all guarantors, but no application forms ("forms are for retail lenders, not for us!")

After the dealership tanked, we sued all guarantors for collection. At this point, the wife of a principal countersued us, alleging MS discrimination under ECOA. She claimed that the bank forced her to become liable because she had the bad fortune (a separate, but familiar story) to be married to a principal of the dealership.

In fairness to David and the rest of the "where's the beef" crowd, the ECOA case was dismissed, however, it was decided on a technicality. Going into this case, both inside and outside counsel believed we had no chance if the case were decided on its merits. Their opinions were based in part on the total absence of any evidence of Mrs. Principal's intent to become liable. MANY hours were spent in vain searching the credit file for anything that would substantiate our claim that she intended to be liable.

Narrowly escaping with our wallet and reputation intact, bank counsel and the commercial lenders created the unthinkable--an application form to be used for all commercial credit applications! Less than half a page in length, this form's exclusive purpose was the recite the basis of the application and get the original signatures of all parties who would sign in any capacity - as evidence of their intent to become liable.
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#270023 - 09/05/05 03:21 PM Re: Reg B Joint Intent
DDB Offline
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Quote:

Going into this case, both inside and outside counsel believed we had no chance if the case were decided on its merits. Their opinions were based in part on the total absence of any evidence of Mrs. Principal's intent to become liable. MANY hours were spent in vain searching the credit file for anything that would substantiate our claim that she intended to be liable.




I agree. But the merits of that case where based on the fundamental requirement that the bank is prohibited from requiring guarantees from anyone other than the principals of the business if that business qualifed for the credit without them. So the only way a bank could have proven that the spouses (non-principals) weren't required to sign guarantees would be to get documenation that they volunteered to do so up front before the bank asked for them.

We still have two problems.

1. Concerns were raised earlier in this thread that we need to protect spouses from each other. We still can't prove that the principal didn't tell his/her spouse that they are going to have to sign something showing that they volunteered, either by claiming that the bank would require it or by telling them that it's the only way their business (that puts bread on the spouse's table) would get the credit it needed.

2. The definition of "applicant" for this section or Reg B does not include guarantor. So according to the reg and commentary, the requirement to evidence intent to apply jointly doesn't even apply to guarantors. If the Fed's intent was to stop banks and business principals from forcing spouses into guaranteeing a loan that's not what they actually did.
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#270024 - 09/05/05 06:01 PM Re: Reg B Joint Intent
David Dickinson Offline
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Quote:

2. The definition of "applicant" for this section or Reg B does not include guarantor. So according to the reg and commentary, the requirement to evidence intent to apply jointly doesn't even apply to guarantors. If the Fed's intent was to stop banks and business principals from forcing spouses into guaranteeing a loan that's not what they actually did.




Guarantors certainly are "applicants" for the joint intent issue [§202.7(d)]. Please read the definition of "Applicant" at §202.2(e).
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#270025 - 09/06/05 12:26 PM Re: Reg B Joint Intent
DDB Offline
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Thanks for setting me straight. I was working from memory and should have looked it up. Actually the section that I should have referenced wasn't the definition of "applicant", it was the definition of "joint applicant" in the commentary to 202.7(d) which specifically relates to the requirement to evidence the intent of joint applicants. Comment #2 states that guarantors are not "joint applicants".

7(d) Signature of spouse or other person.

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.

Then comment #3 from the same section explains that the requirement to evidence intent only applies to "joint applicants". So this means that it doesn't apply to guarantors.

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.

So, while I agree that the Fed was trying to keep banks from requiring people to become joint applicants just because their spouses provided joint financial statements, it doesn't require us to document evidence of their intent to become guarantors. In the end, it's probably a good policy to document the intent of non-principal guarantors to protect against claims that spouses were forced by the bank, but the absence of evidence regarding guarantors would not be a Reg B violation.
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#270026 - 09/06/05 02:12 PM Re: Reg B Joint Intent
David Dickinson Offline
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Quote:

Then comment #3 from the same section explains that the requirement to evidence intent only applies to "joint applicants". So this means that it doesn't apply to guarantors.



Maybe, maybe not. If I walk in with my son and say "he wants to buy a car. I'll guaranty the loan, but I don't want to sign the loan", then I am definitely an applicant, I am a guarantor and I am contemporaneously applying with the applicant for shared or joint credit. Therefore, I do believe that the "evidence of intent" rules apply to me in this situation. You, the creditor, did not require that I guarantee the loan as a condition. I volunteered myself.

While I agree that this is rare (maybe it is purely academic), this is an example of where a guarantor is an applicant.

I agree with you that directors, officers, shareholders and partners that are required to guaranty a business loan are not "applicants" for the joint intent issue.

BTW, this is EXACTLY the kind of thing that we will be discussing in the upcoming webinar on Applications, Prequalification and Preapprovals (9/22/05). We will dive into Regs B, C (& others) and explore the differences between applications and inquiries as well as what defines a cosigner, guarantor, co-borrower, co-applicant, etc.
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#270027 - 09/06/05 02:31 PM Re: Reg B Joint Intent
Raymond Offline
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Quote:

We haven't heard the counter points from Raymond, GreatRiver or others for over a week. Any more discussion?




Don’t take my silence as agreement or capitulation. In my opinion, we had simply reached a point where we needed to agree to disagree.

You are right, it was a good discussion and it was well needed. And at this point, only time will tell how the regulators interpret and apply the change.

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#270028 - 09/06/05 10:09 PM Re: Reg B Joint Intent
David Dickinson Offline
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Central City, NE
Quote:

Don’t take my silence as agreement or capitulation. In my opinion, we had simply reached a point where we needed to agree to disagree.

You are right, it was a good discussion and it was well needed. And at this point, only time will tell how the regulators interpret and apply the change.



I'm saddened by your response. I can't understand why you would want to "agree to disagree." You can have any procedures you want, but there is a right answer to this issue. You can see that Richard, MagicBanker, Dan & other Guru's agree with what I have presented. Why can't you?

I'm not saying that I'm right. I'm asking you to point out where I'm wrong. I have answered all of your questions and presented the regulatory "logic" to everything that you have pointed out, but yet you still say that you disagree. Why?

This is not new. It has been in affect since 4/04 - over a year. Examiners have been mis-interpreting this - I don't argue with that. The point is we need to straighten them out.
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#270029 - 06/01/06 03:32 PM Re: Reg B Joint Intent
02bonne Offline
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Reading 202.7b it provides a defition of a "joint applicant" as 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." To my understanding of the requirement to show intent for joint applicants, if they are a co-borrower where we rely on income and credit to support the loan approval, we must get their signature on the application to show intent. If we have a really strong customer who we have an excellent relationship with and their kids applies and we get the parent's (our good customer) signature and don't pull a CB or run a DTI a signature is not required. Is this a correct assumption? I'm just trying to understand for whom we need to show intent at application and whom we dont.

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#270030 - 06/01/06 03:37 PM Re: Reg B Joint Intent
Truffle Royale Offline

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To use your parent/kid example...you ARE depending on the "...strong customer who we have an excellent relationship..." with as part of your credit decision, right? If the kid came in alone and the parent wasn't signing the note, you wouldn't do the loan. So, whether you pull a CB on the parent or not, he IS an applicant. Therefore his signature in the joint intent section of the application gives you permission to consider his banking relationship with your FI when granting his kid a loan.

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#270031 - 06/01/06 05:57 PM Re: Reg B Joint Intent
02bonne Offline
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But according to the definition of a joint applicant, if we required the parent to sign, they would be exempted as being a "joint applicant" according to my understanding. In what cases would a cosigner, coborrower or other person who would need to sign the note not be required to evidence intent by signing the application?

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#270032 - 06/01/06 08:25 PM Re: Reg B Joint Intent
Truffle Royale Offline

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My daughter, husband and I own our home. Hubby & I apply for a mortgage. Daughter will NOT sign the Note but she must sign off on mortgage because she is an owner. She would NOT sign the joint intent because she is not a borrower and her credit will not be considered as part of granting the loan.

I think your confusion is coming from WHAT you're talking about having the non-borrower sign. Any one who signs the NOTE is an applicant/borrower and is responsible for repayment of the debt.

Everyone who signs the MOTGAGE is NOT necessarily a borrower. My daughter acknowledges a debt is being placed against property she owns but she is not agreeing to pay the debt.

If you're using the parent's income and credit to qualify the kid and the parent is signing the note, you need the parent's signature on the joint intent.

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#2136198 - 06/28/17 02:50 PM Re: Reg B Joint Intent ahou
RockChucker, CAMS Offline
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The Country
Reviving this beauty of a thread.

I got the following by email today: "We only need evidence of Joint Intent when we are dealing with spouses. We do not need evidence of joint intent when the deal involves multiple people who are not spouses."

I haven't found anywhere where it indicates this only applies to spouses but I could have easily missed something.

Thoughts?
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#2136201 - 06/28/17 02:52 PM Re: Reg B Joint Intent ahou
raitchjay Online
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OK
You haven't found anything because there isn't anything. Spouses, not spouses, doesn't matter---if you have 2 or more people applying together, you need joint intent.
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#2136207 - 06/28/17 02:58 PM Re: Reg B Joint Intent raitchjay
Truffle Royale Offline

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Have whoever wrote that email read the top of the 1003 form where you're supposed to be getting the joint intent signatures.
I says:
Quote:
...the income or assets of a person other than the Borrower (including the Borrower's spouse) will be used as a basis for loan qualification.

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#2136218 - 06/28/17 03:14 PM Re: Reg B Joint Intent ahou
RockChucker, CAMS Offline
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Thanks for the quick responses. It is always so reassuring to hear from people who have been around the block on these issues. Sometimes I doubt myself even when I feel confident I know the answer.
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#2136268 - 06/28/17 05:07 PM Re: Reg B Joint Intent ahou
Skittles Offline
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And remember - people also means businesses.
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#2136281 - 06/28/17 06:00 PM Re: Reg B Joint Intent ahou
Dan Persfull Offline
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I'm not going t be quite as nice. If the person sending this email works in compliance they need to be reassigned or if they are new to compliance then the person training them needs to be reassigned.

(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.

(d) Signature of spouse or other person. (1) Rule for qualified applicant. 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 if the applicant qualifies under the creditor's standards of creditworthiness for the amount and terms of the credit requested. A creditor shall not deem the submission of a joint financial statement or other evidence of jointly held assets as an application for joint credit.

(d) Signature of spouse or other person. (1) Rule for qualified applicant. 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 if the applicant qualifies under the creditor's standards of creditworthiness for the amount and terms of the credit requested. A creditor shall not deem the submission of a joint financial statement or other evidence of jointly held assets as an application for joint credit.

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.
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#2136324 - 06/28/17 07:21 PM Re: Reg B Joint Intent ahou
David Dickinson Offline
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You've heard it already, but I'll jump on the pile to drive the point. Spouses are often the ones that are required to sign, so Reg B specifically mentions them, but .7(d) [Joint Intent] applies to all application in which there are two or more applicants (including business loans, voluntary guarantors, cosigners, etc.] There are a few exceptions (required guarantors and cosigners added after the initial application), but very few.
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#2224018 - 10/18/19 08:27 PM Re: Reg B Joint Intent ahou
SonnyGirl Offline
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Reviving this thread! We are in the process of changing loan origination systems. The system we are going to does not have a commercial application (much to my chagrin). A disclosure package has been created including Intent to Apply for Joint Credit. Those creating procedures for the new system have included these instructions for accessing/printing the disclosures:
"Select .............and print the Commercial Disclosure package to complete. If joint credit applies this can be completed on the form prior to printing."
I do not believe that should be completed prior to printing in face to face applications and want to let them know that should be clarified for use only in phone applications. Am I asking too much?

Thanks!!!!!

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#2224097 - 10/22/19 03:12 AM Re: Reg B Joint Intent ahou
David Dickinson Offline
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I’m not sure I understand. Joint intent documentation must be created at the time of application. That doesn’t matter if it’s a phone application, in person, internet, etc.
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#2224337 - 10/24/19 05:40 PM Re: Reg B Joint Intent ahou
SonnyGirl Offline
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Thank you David. Sorry for just now replying and I'll try to explain better.

Since there is no commercial application (our current app has the Notice of Intent to Apply Jointly on the app), disclosures were created to provide to loan applicants when applying for a loan. Users will have to access and print those disclosures when starting the loan request by clicking a specific option. In procedures, the instructions state "Select .............and print the Commercial Disclosure package to complete. If joint credit applies this can be completed on the form prior to printing." When training is conducted on using the new system, users will have to access and print. Included in these forms is Notice of Intent to Apply Jointly. For in person applications, we believe the disclosure should be printed for applicants to complete. The current instructions state that if joint credit applies, that agreement can be indicated before printing. That would work for phone applications but not in person applications, correct? We have asked that the instructions be changed to reflect that.

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#2224705 - 10/29/19 06:53 PM Re: Reg B Joint Intent ahou
David Dickinson Offline
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Sorry for my delay. I didn't see your post until today.

First, you don't have to have applicants sign a disclosure to prove joint intent. It is "nice" if the disclosure is printed and then completed by the applicant, but not a requirement - even in person applications.

Maybe this will help. In January 2018, the FRB of Kansas City put out this memo. I bolded a key sentence in this memo. You can also find this memo here:
https://www.kansascityfed.org/en/ba...%20compliance%20witih%20reg%20b%201-3-18


Ensuring Compliance with Regulation B's Signature Provisions
Complying with the signature provisions set forth in Regulation B and the Equal Credit Opportunity Act (ECOA) may prove challenging for banks. The requirement to document applicants' intent to apply for joint credit applies to all credit requests, including consumer, commercial, and agricultural credit. While no recent changes in the signature provisions have occurred, examiners frequently note spousal signatures on loans for which documentation of the signing parties' intentions to apply for individual or joint credit is inadequate. While the lack of appropriate joint intent documentation does not necessarily mean that a bank is requiring spousal signatures, it raises fair lending risk. Banks that improperly require a spouse's signature on credit instruments could be referred to the Department of Justice for further investigation.

Bankers have some options on how to determine an individual's intent to be a joint applicant. Remember that the determination must be made contemporaneously with the application for credit and properly documented in the credit file. This can be accomplished by requiring the use of written applications for all credit transactions, with a separate disclosure on which the applicants overtly affirm their intention to apply for joint credit. Refer to the sample form in the Appendix to Regulation B. Another option is to provide applicants, at the time of the 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 and document it via a note to the credit file. By dating the loan officer's note, banks may be able to document that the applicants' intentions were determined contemporaneously with the application for the credit.

The following situations describe when it is appropriate to require certain signatures:
If it is determined that an application for credit is a joint application containing two or more people and each applicant has provided initials or signature confirming that intent, bankers may require the signatures of the joint applicants on the credit instrument.

If it is determined that an application is for individual secured credit, bankers may require the signature of a spouse or other person on the documents necessary under state law to provide access to the collateral in the event of default.
If it is determined that an application is for individual credit and the applicant meets the standards for creditworthiness, bankers may not require additional signatures on the note or credit instrument (unless allowed by state law).
If it is determined that an application is for individual credit and the applicant does not meet the standards for creditworthiness, bankers may require a qualified cosigner or guarantor. However, bankers are not allowed to require the spouse as the cosigner or guarantor.

If the applicant for unsecured credit relies in part on property that the applicant owns with another person to satisfy the standards for creditworthiness, bankers may, in certain circumstances, require the signature of the other person, but 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 it is determined that the applicant is married and resides in a community property state or if the applicant is relying on property located in such a state, bankers 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. With respect to state law, reasonable belief as to what instruments need to be signed by a person other than the applicant should be supported by a thorough review of the law or an opinion of the state attorney general. This opinion should be obtained before requiring the signature (and not, for example, just in the context of an examination).

For additional information about Regulation B's signature provisions, refer to the Compliance Outlook article, "Regulation B and Marital Status Discrimination: Are You in Compliance?". Your designated Consumer Affairs contact may also answer any questions regarding this topic.
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