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#269994 - 08/19/05 07:41 PM Re: Reg B Joint Intent
Anonymous
Unregistered

Last Anon - I agree. The OCC said the same thing. How else can you evidence someone's intent to apply jointly if you don't see them or specifically talk to them.

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#269995 - 08/19/05 08:48 PM Re: Reg B Joint Intent
David Dickinson Offline
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David Dickinson
Joined: Nov 2000
Posts: 18,762
Central City, NE
Quote:

BTW, I applied for a loan today and told them that David was my co-borrower. That's OK with you isn't it? (I love you David.)



First, I have to address this comment:
Not only did I laugh, I was told that I was loved! Man, you can't beat that.

We may disagree, but we love each other. Life is good!

Quote:

Our FDIC regulator just left; they said that we WOULD have to speak with each applicant to verify intent to apply for a phone application. Clearly the regulation does not require this, but has any agency come out with some specifics? If not, how can I convince my regulator otherwise?



Tell your regulatory to read the final INTER AGENCY rule (that goes for the next Anon's comment about their OCC regulator). The preamble explicitly states that the Joint Intent rules did NOT change the application requirements of Reg B. In fact, you will not see anything about a requirement to take an application in §202.7. I agree that many examiners are struggling with this.

I agree that it seems silly to require some type of evidence without having an application requirement, but that's how the regulators did it. §202.4(c) requires applications for home loans [those covered by §202.13(a)], but not all types of loans covered by Reg B. Even on home loans, the Commentary to §202.4(c)#1 states that the applications don't have to be signed or even completed by the applicants.

Quote:

Why did this change to Reg B come about in the first place? Because there were situations where unwilling spouses were obligated on loans, either by a loan officer assuming that both were applicants or by a spouse who did not consult the unwilling spouse until it was time to sign the note.



This isn't quite true. The main purpose was to stop loan officers from assuming that a joint financial statement was a joint application for credit. IOW, an attestation is not an application. That's why Reg B was changed.

Quote:

In our institution, if the application does not reflect both borrowers in their own hand, or it is a verbal application, we accomplish this with a quick phone call to the possible co-borrower and document in the file.



OK, I'll take one more stab at coming at this from a real life situation: How would you do this with an internet application? If I complete an internet application and represent my wife by providing all of her information and indicate that we are applying jointly, are you going to call us both and talk to us?

I noticed that no one addressed my last comment (in my last post). Here it is again:
Quote:

Are you going to say that you haven't received an application until you hear or see an individual attestation from my wife? If so, I believe your bank is not in compliance with Regulation B and the definition of "application". Applications can certainly be verbal.



If you don't consider the application received until you talk to all applicants, you are going to have some serious issues to deal with. What if you can't get a hold of all applicants? Do you consider it not received? You could run into some problems with the 30 day requirement - see the Commentary to §202.9(a)(1)#1.
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#269996 - 08/19/05 09:14 PM Re: Reg B Joint Intent
GenerousLife Offline
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Joined: Feb 2002
Posts: 1,466
USA
Hugs and squeezies to one of my favorite posters (David you know who you are. ) (Don't be jealous John.)

We don't do Internet applications, so we do not have an issue.

Real life, we don't have a problem getting the information. We take lots of Ag loan apps over the phone. With cell phones, you can reach just about anyone you want to reach.

We consider the application received when the original request comes in. We can gather all the information (including the joint borrower acknowledgement) within a day or so. The 30-day clock has not been an issue.
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#269997 - 08/19/05 09:46 PM Re: Reg B Joint Intent
David Dickinson Offline
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David Dickinson
Joined: Nov 2000
Posts: 18,762
Central City, NE
Quote:

We don't do Internet applications, so we do not have an issue.



Wait . . . imagine that you do. Apply the Reg (and the "requirement" that you must somehow get acknowledgment from each applicant) to this situation. How would you do it?

Quote:

We consider the application received when the original request comes in. We can gather all the information (including the joint borrower acknowledgment) within a day or so. The 30-day clock has not been an issue.



Glad to hear that. I was concerned for you that this might be a problem.

Hugs and squeezes back. (I sure hope my wife doesn't read BOL)
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#269998 - 08/19/05 09:57 PM Re: Reg B Joint Intent
GenerousLife Offline
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Joined: Feb 2002
Posts: 1,466
USA
David, it is 4:55 on Friday and my imaginary internet application just went *poof*. We'll have to save this one for another day, cause I just don't know how we would do it.
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#269999 - 08/22/05 01:52 PM Re: Reg B Joint Intent
Great River Offline
Member
Joined: Feb 2004
Posts: 64
Iowa
I think GenerousLife has this pretty well figured out. Just a little ahead of the game. If you read the related article in today's weekly briefing: Reg B: The Signature Conundrum I think you'll see where this is heading. We're already protecting the consumer from ID thieves and the U.S. from terrorists, what makes you think the next Reg B revision won't make us protect spouses from spouses?

I usually think David Dickinson walks on water, but Dave, I think your being too technical on this one. Many, but not all, examiners that I have met look for definitive proof. Most of the examiners that have graced the Seidman Center or its predecessors have come away chomping at the bit to find a crook or a thief. Prove that your not!

And GenerousLife has the true risk figured out; the true risk lies in a disgruntled spouse and the Shark, Esq. that want to sue Deep Pockets National Bank!

I'm sorry, but the jury doesn't want to hear that the Regulation does not technically require the Bank to verify the intent of each of the applicants. The jury panel was just too full of folks whose spouses and ex-spouses obligated them for credit they didn't want to be obligated for. "You bought a WHAT!"


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#270000 - 08/22/05 02:37 PM Re: Reg B Joint Intent
David Dickinson Offline
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David Dickinson
Joined: Nov 2000
Posts: 18,762
Central City, NE
Quote:

I think GenerousLife has this pretty well figured out. Just a little ahead of the game. If you read the related article in today's weekly briefing: Reg B: The Signature Conundrum I think you'll see where this is heading. We're already protecting the consumer from ID thieves and the U.S. from terrorists, what makes you think the next Reg B revision won't make us protect spouses from spouses?



My point is not that GenerousLife has a bad/good system of internal controls. My point is that this is not the regulatory requirement. As you even say, this may be where it is headed, but it is not required.

By the way, how would you handle an internet application GreatRiver?

Quote:

I usually think David Dickinson walks on water, but Dave, I think your being too technical on this one.



Thank you for the compliment. I am being technical. I am trying to VERY technical. I don't like adding anything to a regulation. It may be in your best interest to add something to a requirement - for internal controls, but as a consultant I want to careful about doing that.

Quote:

Many, but not all, examiners that I have met look for definitive proof. Most of the examiners that have graced the Seidman Center or its predecessors have come away chomping at the bit to find a crook or a thief. Prove that your not!



This is exactly why I'm being technical. The examiners are wrong if they are adding to the regulation and you should point that out to them. Regulation B does ask to "show me the proof" but it doesn't have to be proof by the applicant. That is not the requirement of the regulation.

Quote:

And GenerousLife has the true risk figured out; the true risk lies in a disgruntled spouse and the Shark, Esq. that want to sue Deep Pockets National Bank!



On what basis would a spouse sue the bank? That the husband misrepresented the wife? Sue him - not the bank. If you think I'm being too lax, show me a civil case where this has ever happened.

Good discussion - let's keep it up.
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#270001 - 08/22/05 03:50 PM Re: Reg B Joint Intent
Great River Offline
Member
Joined: Feb 2004
Posts: 64
Iowa
Good points all David! In the case of Internet applications, I have the privilege of pleading ignorant and refusing to speculate. We are still small enough that no loans are closed without a little face time. Yes, I know it's a cop-out. I'm just more realist than philosopher. I need to know what my examiner will beat me up about, what they will accept challenges on, and when I need to tuck tail for the benefit of my company. Not all examiners accept challenges readily. And does my management really want me to agitate an examiner over this? Not likely.

Lastly, I don't think you're being too lax. But, if I could show you a civil case where this has ever happened, I wouldn't have made the Shark, Esq. crack. Does that mean it never has? Or never will? How about contributory negligence? Collusion? Does it have to have merit to be filed and require at least some defense? How can someone sue a tobacco company when they've never smoked? But they have! Have you never seen a news article about a lawsuit and wondered how someone could possibly blame one of the defendants?

Ok, I'll concede that I over-reached on the lawsuit side of my argument. But reality stills stands. Part of the scope of the FDIC examination one of my banks had last month was looking for our compliance with this aspect of Reg B. And they were satisfied because most of our files have a separate form that spells out the intent of the applicants. On paper. Signed. Dated the date of the application. Presto, irrefutable.

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#270002 - 08/22/05 04:06 PM Re: Reg B Joint Intent
Anonymous
Unregistered

202.7(d)(3)

3. Evidence of joint application. A person's intent to be a joint applicant must be evidenced at the time of application.

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#270003 - 08/22/05 04:09 PM Re: Reg B Joint Intent
Anonymous
Unregistered

I'm sorry, I hit the submit button too soon, but based on the above - if you do not talk to, or get each applicant's signed confirmation - how do you know the intent of each applicant?

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#270004 - 08/22/05 04:11 PM Re: Reg B Joint Intent
Raymond Offline
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Raymond
Joined: Jul 2004
Posts: 517
The Land of OZ
I have thought about this long and hard and here is my take on the matter.

Can one person evidence the intent of anther? Yes. One borrower could evidence the intent of the other.

Can one person establish the intent of another? No. I cannot establish another’s intent. That is something they need to do for themselves.

I think the question is then, “Who do you believe?” If a borrower brings in, or calls with, a joint application and says that they intent to be joint applicants do you believe the individual? Is that sufficient?

I do not believe that it is.

While one borrower could evidence it, they cannot establish it. Each borrower needs to establish their own intent. How it gets evidenced from there is up to the bank and/or the borrower.

This may seem like a play on words or adding something that the reg doesn’t say; and you might be right. But I do not believe that you can evidence something that has not already been established. Establishing their intent is implied in evidencing their intent. The Staff Interpretation actually says that “The method used to establish intent must be distinct from the means used by individuals to affirm the accuracy of information”.

So then what? If you cannot establish the intent of both borrowers to be joint applicants what do you do? Well, IMHO, you would proceed as though it were a single application from the borrower whose intent you were able to establish by providing you with the application.

Just my two cents.

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#270005 - 08/22/05 08:16 PM Re: Reg B Joint Intent
David Dickinson Offline
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David Dickinson
Joined: Nov 2000
Posts: 18,762
Central City, NE
Quote:

202.7(d)(3)

3. Evidence of joint application. A person's intent to be a joint applicant must be evidenced at the time of application.

I'm sorry, I hit the submit button too soon, but based on the above - if you do not talk to, or get each applicant's signed confirmation - how do you know the intent of each applicant?



You base the information on what is presented. I say that my wife and I are applying, provide her SSN, information, etc. How can you NOT say that she is applying? Reg B doesn't require written applications (except for some home loans). It doesn't require signed applications. It certainly doesn't require that loan officers talk to all applicants.

Please re-read the Commentary to 202.7(d)(3) - that you quoted. It says AT THE TIME OF APPLICATION. If I call and ask for a loan, you have a oral request for credit. That is an application [read §202.2(f)]. Now, you have to establish intent AT THAT TIME. If my wife is not home right now, but I tell you she wants to apply jointly with me, how are you going to do that?

Answer: The loan officer documents what was said.

Quote:

I need to know what my examiner will beat me up about, what they will accept challenges on, and when I need to tuck tail for the benefit of my company. Not all examiners accept challenges readily.



Can't argue with that! I'm not suggesting that you have to take a single applicants word for it. I'm suggesting that talking to all applicants is not what the regulation requires.

I am suggesting that if you don't document the intent (that was presented by 1 person on the phone) that you are not complying with the "at the time of application" requirement.

Quote:

While one borrower could evidence it, they cannot establish it. Each borrower needs to establish their own intent. How it gets evidenced from there is up to the bank and/or the borrower.



Again, apply this logic to an internet application - or email application. First, how would you do that? Second, is your answer a procedural issue or a regulatory requirement?

Quote:

This may seem like a play on words or adding something that the reg doesn't say; and you might be right. But I do not believe that you can evidence something that has not already been established. Establishing their intent is implied in evidencing their intent. The Staff Interpretation actually says that “The method used to establish intent must be distinct from the means used by individuals to affirm the accuracy of information”.



I do think this is a play on words. I agree that an attestation is not an application. What this is referring to is banks that take joint financial statements and then assume that everyone that signed the FS is applying.

Quote:

So then what? If you cannot establish the intent of both borrowers to be joint applicants what do you do? Well, IMHO, you would proceed as though it were a single application from the borrower whose intent you were able to establish by providing you with the application.



Not a bad procedural, but not what Reg B requires.
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#270006 - 08/22/05 08:36 PM Re: Reg B Joint Intent
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 46,645
Bloomington, IN
FWIW, I agree with David - the regulation only requires that you establish the intent - if you ask the person you are talking to if they are applying as an individual or as a joint applicant with another person and they respond they are applying as a joint applicant with X, then you have established joint intent.

We too require a form signed by the applicants - however this is our procedure - not a regulatory requirement.
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#270007 - 08/22/05 08:52 PM Re: Reg B Joint Intent
SamIAM Offline
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Joined: Nov 2004
Posts: 212
Our applications (including the 1003)indicate above the signature lines that "I/We apply for the loan indicated...". Would we also have to have a Notice of Intent?

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#270008 - 08/22/05 08:56 PM Re: Reg B Joint Intent
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 46,645
Bloomington, IN
No. Those sections would substitute for the separate intent form.
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#270009 - 08/22/05 09:04 PM Re: Reg B Joint Intent
David Dickinson Offline
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David Dickinson
Joined: Nov 2000
Posts: 18,762
Central City, NE
Quote:

If you read the related article in today's weekly briefing: Reg B: The Signature Conundrum I think you'll see where this is heading.



I wanted to come back to this article. It is very well written. Please let me quote a few sentences from this article:

From the 3rd paragraph:
Quote:

"Many in the industry are treating the examples as requirements. This is a mis-interpretation of the rule and the examples.




This comes from the "Documentation" section:
Quote:

The big question is whether certain types of applications or other forms are required to prove the applicants' intent. The answer to this is a clear and resounding no.




This is from the next paragraph. I inserted some extra words in bold.
Quote:

Clearly, an excellent way (but not the ONLY way) to document the applicant's intent is to have the applicant fill out and sign an application. When applicants request joint credit, it is a good idea to have that indicated somewhere on the application form (but this isn't a regulatory requirement).




Finally, this is from the 2nd to last paragraph before the "Action Steps":
Quote:

You can also maintain internal documentation, such as loan officers' notes. If you establish and follow a clear procedure to note, for each new application, who the borrowers are, then the procedures become a consistent method of documentation. Consistent procedures speak for themselves, along with a pattern of signatures that match the loan officers' notes.



I agree 100% with this.
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#270010 - 08/22/05 09:42 PM Re: Reg B Joint Intent
Anonymous
Unregistered

In my brief stint as a loan officer I was a stand-by witness to another loan officer's losing a loan because of this. The lo did not talk with the spouse or get spouse's permission to pull credit. Docs got to signing table, spouse freaked, refused to sign and said she was going to sue because credit was pulled without her permission. Husband had history of refi'ing home and spending the money. Bad situation. I say ounce of prevention is worth a pound of cure. IMHO:)

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#270011 - 08/22/05 10:30 PM Re: Reg B Joint Intent
David Dickinson Offline
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David Dickinson
Joined: Nov 2000
Posts: 18,762
Central City, NE
Do you have a court case you can reference? I would bet that it was an empty threat (to sue the bank), but maybe she did sue her husband.

I don't disagree with the "ounce of prevention / pound of cure" idea, I'm trying to point out what the regulation says. Also, no one seems to want to address the issue about not proceeding with the application until you've talked to all applicants (or had them sign some type of proof) and how this might cause a violation of Reg B as it states you must have evidence at the time of application. This may also cause violations of TIL and RESPA if you aren't considering the application "recieved" until later. Be sure to check out this string about Internet applications and Dan's response.
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#270012 - 08/23/05 02:59 PM Re: Reg B Joint Intent
Raymond Offline
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Raymond
Joined: Jul 2004
Posts: 517
The Land of OZ
David:

In the FRB Final Rule notice, they said (Page 17) “The proposed rule bars a creditor from presuming that the submission of joint financial information constitutes an application for joint credit. ... Evidence of intent to apply for joint credit requires more than the submission of joint financial information. The fact that a credit applicant owns property with another and submits information concerning property and the joint owner in order to establish creditworthiness does not mean that both owners intended to be obligated for the extension of credit; other evidence must expressly reflect that intent.”

IMO, “submits information concerning property AND the joint owner” is key. I believe the Board felt that both applicants needed to express their intent to be obligated for the extension of credit. “;other evidence must expressly reflect that intent.” Just because I submit information on my wife does not necessarily mean that she intends to be obligated for the credit.

At page 31 of the notice is says “While creditors are required to have documentation evidencing intent to apply for joint credit, creditors have the flexibility to determine the methods used to establish intent. ... First, the comment clarifies that evidence of intent must be provided at the time of application.” Then they went on to say that they modified their model forms to reflect this guidance.

We were given flexibility in how the applicant established their intent, but they still needed to establish their intent. That is my point in a nut-shell. Each applicant needs to establish their intent to be obligated, and we, or they, need to evidence that intent.

As far as your argument about potential violations with other regulations and not proceeding with the application until you have spoken to all applicants, that’s a procedural argument. Those violations are avoidable with the right procedures. You should proceed with the application. But I would argue that it is an individual application, not a joint, until you have the expressed intent of both applicants.

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#270013 - 08/23/05 10:18 PM Re: Reg B Joint Intent
David Dickinson Offline
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David Dickinson
Joined: Nov 2000
Posts: 18,762
Central City, NE
Quote:

In the FRB Final Rule notice, they said (Page 17) “The proposed rule bars a creditor from presuming that the submission of joint financial information constitutes an application for joint credit. ... Evidence of intent to apply for joint credit requires more than the submission of joint financial information. The fact that a credit applicant owns property with another and submits information concerning property and the joint owner in order to establish creditworthiness does not mean that both owners intended to be obligated for the extension of credit; other evidence must expressly reflect that intent.”



I bolded my point. When the loan officer talks with an applicant, OTHER EVIDENCE (other than a financial statement) is presented.

Quote:

I believe the Board felt that both applicants needed to express their intent to be obligated for the extension of credit. “;other evidence must expressly reflect that intent.” Just because I submit information on my wife does not necessarily mean that she intends to be obligated for the credit.



Your correct. When you submit a joint financial statement with your wife's info, she is not necessarily applying. That's exactly what Reg B is saying. But when you submit a joint financial statement AND say that "we are both applying", then I have evidence of the applicants intent.

Quote:

At page 31 of the notice is says “While creditors are required to have documentation evidencing intent to apply for joint credit, creditors have the flexibility to determine the methods used to establish intent. ... First, the comment clarifies that evidence of intent must be provided at the time of application.” Then they went on to say that they modified their model forms to reflect this guidance.



But you need to read carefully. It doesn't say that this is the ONLY way to demonstrate intent - it was one way. This was the biggest problem that I had when Reg B was modified. There is an inference that I have to have a written application with the "joint" box marked. Yet Reg B does not require written applications.

The regulators announced (after the American Bankers Association pushed them) that this was one way that intent could be demonstrated. You may find this previous BOL string interesting. It started in January 2004, when we were first gearing up for this change.

Quote:

We were given flexibility in how the applicant established their intent, but they still needed to establish their intent. That is my point in a nut-shell. Each applicant needs to establish their intent to be obligated, and we, or they, need to evidence that intent.



No where does the reg say that EACH applicant must establish their own intent. You're reading into the regulation. You can do that, but you don't have to.

Quote:

As far as your argument about potential violations with other regulations and not proceeding with the application until you have spoken to all applicants, that’s a procedural argument. Those violations are avoidable with the right procedures. You should proceed with the application. But I would argue that it is an individual application, not a joint, until you have the expressed intent of both applicants.



You have the right answer for your procedures. I can't argue with you about proceeding as an individual application. I have seen a few bankers that won't proceed until they "verify" the applicants. That practice may lead to violations of disclosures or denials not within the proper time.

However, your procedures are not "customer friendly". Just as you bring up someone might be upset that they were misrepresented by a spouse, I can see a spouse saying "What's your problem? My wife said we were applying. What's taking so long?" Or "why isn't my name on this loan? My husband said that WE were applying? Do you have a problem making loans to women?"

Here's one more previous BOL string that would be good if everyone read. It shows the "evolution" of thinking when this requirement first came out. If you read the entire string you will see a post from me on 3/30/04 where I quote the ABA and another post from me on 4/14/04 where I copied and pasted a letter from the ABA addressing this issue. Later, ALL regulatory agencies signed this ABA letter stating that they agreed with it. I have a copy of this letter and on a few occasions, I have had to show it to examiners.
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#270014 - 08/30/05 09:55 PM Re: Reg B Joint Intent
Anonymous
Unregistered

What about indirect lending? Some instances we get an unsigned application submitted by the dealership and no joint intent is evidenced and the application is denied. Is this a violation?

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#270015 - 08/30/05 11:48 PM Re: Reg B Joint Intent
RVFlyboy Offline
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RVFlyboy
Joined: Oct 2000
Posts: 5,976
Soaring over Georgia
On a denied application the joint intent issue is irrelevant since the provision only relates to extensions of credit and requiring the signature of the spouse on the credit instrument. But if you approve and purchase an indirect contract and there is no joint intent evidenced, I believe you have a violation. If you look at Reg B definitions, the definition of creditor includes a creditor's assignees who participate in the credit decision.
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#270016 - 08/31/05 09:22 PM Re: Reg B Joint Intent
Anonymous
Unregistered

I understand it to say that the joint intent must be evident at application. I don't find anything that says otherwise.

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#270017 - 09/02/05 02:57 AM Re: Reg B Joint Intent
RVFlyboy Offline
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RVFlyboy
Joined: Oct 2000
Posts: 5,976
Soaring over Georgia
I think you have to look at the section of the regulation where it appears. The regulation itself says you cannot require a spouse to sign a credit instrument unless the spouse was a joint applicant. The commentary then clarifies that the intent for it to be a joint application must be evident at application. Therefore, not having the co-borrower show joint intent is not in and of itself a violation. Having the co-borrower sign the note without evidence at application of joint intent is a violation. But such a violation does not occur in a denial.

Admittedly, its slippery ground and I certainly would want ot encourage dealers to ALWAYS get joint intent evidenced in joint applications. As such failing to get the joint intent on denied applications may be a violation of your operating procedures, but it is not a violation of Regulation B. In my opionion, anyway.

As a side note, I don't necessarily agree with the way this is currently being enforced and I think the current interpretation has lead to significant overkill. The commentary was put in place to address the issue of commercial loans with individual guarantees where there is generally no application at all, perhaps just a joint financial statement. Banks were trying to make the argument that the joint financial statement gave them the right to request the spouse's signature on the guarantee. It was not intended (at least in my opinion) to address a specific application form that is signed by both parties to say that in addition to both parties signing the application, they also needed to sign a separate statement that says we intend for this to be a joint application. That, in my opinion, is overkill. But that is the way it is currently being interpreted and enforced.

And if you go back even farther, this whole provision has gotten skewed from the original intent of ECOA in the first place. This provision originated because prior to ECOA banks would be unwilling to lend to a female applicant without her husband also being on the loan, even if the woman was qualified for the credit herself. This was both gender and marital status discrimination. The current "abusive" practice of requiring both parties to sign a guarantee when there is jointly owned assets that support the guarantee is discriminatory on neither of these bases whether or not there is a joint-intent application. But again, that's the theory, not the reality.

OK, I'll now stand down from my soapbox.
Last edited by MagicBanker; 09/02/05 03:09 AM.
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#270018 - 09/02/05 12:28 PM Re: Reg B Joint Intent
rlcarey Online
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rlcarey
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Posts: 78,649
Galveston, TX
I see that Fannie and Freddie have acquiesced and added intent boxes on the 1003.
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