Thread Options
#2243425 - 10/01/20 01:39 PM Joint intent - Entity + Guarantor
NoJustNo Offline
100 Club
Joined: Oct 2013
Posts: 188
Midwest
How do you handle commercial lenders + joint intent. I understand that Reg. B requires joint intent when a guarantor applies contemporaneously with an entity. It's a battle to try to get lenders to document this. Do most of you actually get joint intent in this situation? I've never seen an examiner question this -- but thought I'd try to see what others are doing!

Return to Top
Lending Compliance
#2243430 - 10/01/20 02:08 PM Re: Joint intent - Entity + Guarantor NoJustNo
rlcarey Offline
10K Club
rlcarey
Joined: Jul 2001
Posts: 77,215
Galveston, TX
Whether they apply with a guarantor or not - it is not a requirement in your credit policy:

Paragraph 7(d)(6).

1. Guarantees. A guarantee on an extension of credit is part of a credit transaction and therefore subject to the regulation. 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.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top
#2243433 - 10/01/20 02:21 PM Re: Joint intent - Entity + Guarantor NoJustNo
NoJustNo Offline
100 Club
Joined: Oct 2013
Posts: 188
Midwest
So you're saying it's not a requirement to get joint intent if you have this as a requirement in your policy?

Return to Top
#2243435 - 10/01/20 02:28 PM Re: Joint intent - Entity + Guarantor NoJustNo
rlcarey Offline
10K Club
rlcarey
Joined: Jul 2001
Posts: 77,215
Galveston, TX
If you require the guarantee under your policy on business loans - there is no intent to apply necessary, as it is a loan requirement - they have no choice in the matter. So they sign or they do not get the loan.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top
#2243486 - 10/01/20 08:12 PM Re: Joint intent - Entity + Guarantor NoJustNo
David Dickinson Offline
10K Club
David Dickinson
Joined: Nov 2000
Posts: 18,762
Central City, NE
Randy's right: Reg B allows you to require guarantees but only from the "principals" of an entity [as he quoted in .7(d)(6)].
Imagine, my corporation applies for a business operating loan. I'm the president so you require me to guaranty the loan. If you then wanted me to sign a joint intent form, I might say "I'm not applying. You're making me sign the guaranty." (Hopefully you see the problem with your current practice - assuming guarantors actually read the joint intent form you hand them).

One BIG twist: Let's say my wife (who is not an officer, director, shareholder or partner) volunteers to guaranty the loan. In that case, you DO need evidence of her intent to apply jointly. This is why many banks get joint intent documentation on all business loans even when they require the guaranty - to keep it simple.
_________________________
David Dickinson
http://www.bankerscompliance.com

Return to Top

Moderator:  Andy_Z