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#2281461 - 02/23/23 03:30 PM Required to be a co-borrower
Likes to Comply Offline
Diamond Poster
Joined: Nov 2008
Posts: 1,078
In the mountains
Our bank does a lot of commercial lending for investments of overnight rentals. Many of these loans are to entities. Is it ok to require the owner of an entity to be a co-borrower on this type of loan solely because it is a loan secured by an overnight rental? Even if the entity would qualify on it's own?

Or do we really only have the right to require the owner to be a guarantor?

Thanks in advance!
Always learning something new...

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Lending Compliance
#2281474 - 02/23/23 05:26 PM Re: Required to be a co-borrower Likes to Comply
rlcarey Online
10K Club
Joined: Jul 2001
Posts: 82,124
Galveston, TX
Why would you make them a co-borrower?

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:

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