If a loan applicant (in a noncommunity state) requests credit and intends to rely on spousal income as a source of repayment, but the spouse is not an applicant and will not sign the note, how do we verify income and debts on the spouse? My understanding is that we can ask about income and debt, but do not have a permissable purpose to pull a credit report.

I am in a community property state and may not understand noncommunity rules. But how can you use that income if the person is neither obligated on the note or related to it, per se, via any community property rules? What liability would thay have causing you to consider the income?

We are trying to develop some Reg B training and we're looking at 202.5(c)(2)(iii) and not sure we're understanding it. Say I have full use of my husband's income and I want a loan in my name only. On the credit application I list my husband's income as a source of repayment. The loan officer,then as I understand it, can ask any questions about my husband as would be allowed to ask about me. But how far can the loan officer go in verifying the income/debts. I'm thinking if a credit report is wanted by the loan officer, we would then have to look at FCRA for a permissible purpose - which as far as I can see is obtained only be getting permission from my husband.

I am in a non-community property state and we have never allowed a spouse's income to be considered if that spouse is not a party to the loan. And I don't believe this is a community or non-community issue. I would be very careful about asking any questions concerning anyone who is not planning to be a co-borrower, co-signer or guarantor. I would say that if you do want to be able to consider this type of income under these circumstances, state it in your loan policy and take it at face value without asking questions or documenting further. You can, as a matter of bank policy, allow the spouse's $$ to be included in a D/I ratio, but I don't believe you can verify this the same way you would if the spouse were planning to sign the note.

Reg. B tells me this is possible, but the spousal signature may be required if the bank so desires. I don't read that this is a requirement upon you to do the deal without a spousal signature/obligation. But you can't require that it be a spouse.

§202.7 Rules concerning extensions of credit.
2. Reliance on income of another person--individual credit. An applicant who requests individual credit relying on the income of another person (including a spouse in a noncommunity property state) may be required to provide the signature of the other person to make the income available to pay the debt. In community property states, the signature of a spouse may be required if the applicant relies on the spouse’s separate income. If the applicant relies on the spouse’s future earnings that as a matter of state law cannot be characterized as community property until earned, the creditor may require the spouse’s signature, but need not do so--even if it is the creditor’s practice to require the signature when an applicant relies on the future earnings of a person other than a spouse. (See §202.6(c) on consideration of state property laws.)

The Bank sets its own policy on whether to accept and consider the spouse's income. The lender may refuse to consider income of a non-applicant (in community property states the rule is VERY different) or consider it subject to verification. If you consider the income, you should have procedures to verify it.

As for checking the credit, federal law does not prohibit this because you would have a legitimate business purpose -- extending credit -- for getting the credit report. However, some states would prohibit it. You should be aware of the state laws on obtaining credit reports in any state where you are lending.