Jumping in on this thread with a related question on "joint intent" - if we have a consumer credit application, in which the box is marked next to the statement: "If you are applying for joint credit with another person, complete sections A and B. We intent to apply for joint credit.", but the line directly following for the applicant and co-applicant to initial is not completed on the application form, however both applicant and co-applicant signed the bottom of the application form. Do we have "joint intent" issues/violations with this scenario? Directly above the credit application signature at the bottom of the page, it states: "by signing below, you certify that you have read and agree to the terms and disclosures on all pages of this application."

Paragraph 7(d)(1).


3. Evidence of joint application.

The method used to establish intent must be distinct from the means used by individuals to affirm the accuracy of information.

So without considering the statement above the application signature, would just marking the "joint credit" box be sufficient?

On a one off situation, I would not get really concerned about it, but there is a reason that there are lines to initial. LOs/employees should be checking the completeness of the application at the time of acceptance.

From the same citation: 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.

We have indirect loan applications that come through with "joint" box marked that indicates the applicants "intend to apply for joint credit". When we deny loans, we do not have a signature on the application or initials on the space provided for the applicants as the dealer submits this to us through a software program. Is this an instance where we should update our procedures and obtain a copy of the written application or accept the risk that the box is marked and the dealer is doing their job as long as the joint intent box is correctly marked?

Are you not doing QC with your dealers under your dealer agreement, such as periodic testing since this appears to be a gap? If you are doing periodic testing without any issues, I am not sure you need to obtain a signed application in every instance.

We don't typically QC because there aren't issues when we review the files. Our compliance consultant wrote us up in a review because "checking the joint intent box is not sufficient to document joint intent". In a few of the files, we denied the original applicant and then they added a co-applicant on at the dealer to see if they could qualify together. Trying to figure out if I'm losing it or need to look for a new consulting firm.

I am confused - you don't QC but you review the files. What files? Does that include the signed applications by the borrowers?

We don't QC to the level of requesting the signed applications at the dealership. We review a % of the loan files that close each quarter. Those will have signed apps in there, no issues on those. Sorry that was a poor first attempt at explaining the process.

Do those include resubmitted applications with a second borrower that is added that are eventually approved? If so, then how are you not QC'ing this process?

Yes.

Then that is your response to your auditor. You already test for that.