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#2243425 - 10/01/20 01:39 PM Joint intent - Entity + Guarantor
NoJustNo Offline
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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!

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#2243430 - 10/01/20 02:08 PM Re: Joint intent - Entity + Guarantor NoJustNo
rlcarey Offline
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rlcarey
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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.
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#2243433 - 10/01/20 02:21 PM Re: Joint intent - Entity + Guarantor NoJustNo
NoJustNo Offline
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Midwest
So you're saying it's not a requirement to get joint intent if you have this as a requirement in your policy?

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#2243435 - 10/01/20 02:28 PM Re: Joint intent - Entity + Guarantor NoJustNo
rlcarey Offline
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rlcarey
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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.
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#2243486 - 10/01/20 08:12 PM Re: Joint intent - Entity + Guarantor NoJustNo
David Dickinson Offline
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David Dickinson
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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.

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#2301689 - 09/13/24 09:18 PM Re: Joint intent - Entity + Guarantor NoJustNo
Tarhe Offline
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California
Kind of a twist - if the loan is to the husband & wife, can we require their closely-held corporation to guaranty? (Their CPA does not want the business to be a borrower; the individuals do qualify on their own but we want the guaranty. Does that run afoul of Reg B?

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#2301693 - 09/14/24 11:41 AM Re: Joint intent - Entity + Guarantor NoJustNo
rlcarey Offline
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rlcarey
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Galveston, TX
Well, if " the individuals do qualify on their own" why do "we want the guaranty.". It really cannot be both ways. How many other loans to do you have in the bank to individuals where you have asked their business to guarantee the loan for fair lending comparisons? Besides, if they personally own the business, the business is already an asset of the borrowers. What are you gaining?
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#2301698 - 09/16/24 12:40 PM Re: Joint intent - Entity + Guarantor NoJustNo
Inherent_Risk Offline
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I think the short answer is, yes, that does run afoul of Reg B if the individuals qualify on their own.

(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.

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#2301702 - 09/16/24 01:47 PM Re: Joint intent - Entity + Guarantor NoJustNo
Rocky P Offline
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Posts: 7,770
Florida
Tarhe, a brief history of why the regulation came about. (paraphrased)

Before the Consumer Compliance Regs came out, the lending was at the discretion of the bank/loan officer, in many cases without guidance. "Friend of the loan officer" was often the reason for the loan. Also, some banks had a loan policy where a married woman could not borrow unless their husband signed. From my understanding, this was not only prevalent in rural America, but also in cities. Hence the guidance, if you met the qualifications to borrow in your own, the lender cannot require for someone else to sign along with you.
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#2301703 - 09/16/24 01:57 PM Re: Joint intent - Entity + Guarantor NoJustNo
rlcarey Offline
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rlcarey
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Galveston, TX
Rocky - or even around 2004 from a local Credit Union, who made me sign the note for a loan to my wife, whom we promptly sued.
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#2301706 - 09/16/24 03:16 PM Re: Joint intent - Entity + Guarantor NoJustNo
Tarhe Offline
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California
Thank you all so much!

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#2303832 - 12/05/24 04:56 PM Re: Joint intent - Entity + Guarantor NoJustNo
Mel in WA Offline
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Joined: Mar 2013
Posts: 1,321
We recently created two separate documents for a small business loan - a credit application and a personal financial statement. They were previously combined into one document which included joint intent verbiage.

After seeing this conversation, should we have the intent to apply for joint credit on the personal financial statement only? At the time of application, we may not know about the guarantors.

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#2303845 - 12/05/24 08:02 PM Re: Joint intent - Entity + Guarantor NoJustNo
rlcarey Offline
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rlcarey
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Galveston, TX
Why would any intent statement be on a financial statement? The intent is whether or not they are an applicant, which would appear on the application. Do you not have a policy on who you require to guarantee a loan? If you do, then no intent statement is required.
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