If "applicant A" applies for a loan and offers another person's, "non-applicant B", income as the source of repayment, can we require "non-applicant B" to sign the note (i.e. a co-signer/joint applicant)? Otherwise, applicant A will not qualify. Note: We did not suggest that applicant A use anyone else's income, much less non-applicant B's to qualify.

I know I've over simplified here but for good reason.

How can someone offer a non-applicant's income (outside of a married individual in a community property situation) as a source of repayment? Next time I apply for a loan - can I use yours?

Well, they are married applicants but I didn't want the marital discrimination to be the issue. And yes, I'm in TX too so it is community property state.

One spouse applies, uses the other spouse's income as "other sources" of income. Can we require both be on the note? We also have situations where roomates, friends, cousins, live-ins, etcs., want to pledge each others income? Are we in trouble if it is our policy to only consider income of applicants?

Go ahead, you may use my income but I'm afraid its pretty severly leveraged already.

An exert from the Official Staff Interpetations 202.7(d)(5):

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. . . . .

Thanks Dan. I knew I saw that somewhere.!!!!

Keep in mind this "other" person would be a co-signer under Reg. AA definitions and require the Notice to Cosigner.

Yes, sir.

However, it is not as simple as that in a community property state. You most likely should consult an attorney who is very well versed in both Regulation B and Texas community property laws. While what Dan quoted is true in non-community property states and for non-spouses, the same may not be true in Texas for spouses.

It is my understanding that salaries, wages, or pay for services of either or of both spouses during marriage are considered community property. It is also my understanding that each spouse has the sole management, control, and disposition of the community property that the spouse would have owned if single, for example, I have the right to pledge community property (which would include my spouse's income) to satisfy debts incurred by the community. IMHO - you would not be able to make my spouse sign the note.

I would also look toward OSC 202.7(d)(2) where the Fed talks about the valuation of the applicant interest - while that is talking about property - it is easily extrapolated to the ability of a spouse to pledge community income and a creditor cannot consider the impact of a possible divorce.

rlcarey, I agree with you. We are in WI, marital property state and we have to use the wages of spouse even if they are not signing as it is marital property. The point is to protect the 'stay at home wife' from being unable to obtain individual credit. Be very careful if you are requiring the signature. We can only require it if it is necessary to perfect the collateral. (s/a sign mortgage or chattel/dmv forms if co-owner of vehicle)

Beagle...in the community property state....for the non working spouse, if you use the income of the working spouse, should the debts of the working spouese also be considered?
Thanks

We do. Just remember this is how we do it and I can't SWEAR that you have to include their debt but we certainly do for underwriting purposes. The problem is you can only use what they write on the non-applicant section of the application because you really can't pull credit on the non applicant.