What is the difference in joint applicants (Intent statement) and co-makers. When would you deny a co-maker situation and not if they had applied jointly, and visa versa?

None. If you read the definition of "applicant" in Reg B it says (I'm quoting from memory) "anyone that is or may become liable". Then it even adds that for 202.7(d) (the Joint Intent requirement), it includes guarantors. IOW, co-makers, guarantors, co-signors and plain old joint applicants are all "applicants".

I can't think of a situation pertaining to your second question.

so if two people sign one apoplication, the joint intent statement is clarifying only whether they are co-makers/joint applicants, or guarantors/co-signers? I remembers something about joint applicants meant income/expenses were combined and co-makers were analyzed as two individuals?

The Joint Intent statement simply clarifies that they are willing to apply jointly. It doesn't indicate in what capacity (co-signor, guarantor, etc.).


I'm not sure where that's coming from. This isn't a Reg B issue.

An old worn out confused brain.

Thanks.

Actually not.

Some financial institutions do underwrite the applicant and the co-signer separately. Generally the co-signer is looked at to repay the debt if the borrower cannot or will not. Also genearlly a co-signer is taken as a mitigation to offset the lack of credit or some poor past credit history on the part of the applicant or maybe the lack of sufficient collateral. IMO, and I stress IMO, if the applicant's D to I ratio shows they cannot afford the payments, then a co-signer is really of no benefit, especially if they can't afford the payment either.

I guess the question is thi - are there two, three or four different types of signers. Two meaning that joint/co-marker are one type and co-signer/guarantor are the second. Or, is it Joint, Co-Maker, Co-Signer and Guarantor (4 types). The question came up that if two people complete one application and do not complete the joint intent statement, and the two people sign the face of the note, what else could they possibly be but joint debtors, even if they did not sign the intent. And that joint and co-makers are the same.

I believe I got this from what use to be BankerSystems Web site:


Co-applicant vs. Co-signer

Question: Could you clear up something for us? Our lenders are confused about the difference between a co-applicant and a co-signer. When the loan is for consumer purposes, when do we give the co-signer notice?

Answer: This is a confusing area. Various laws and regulations, both federal and state, use terms such as co-applicant and co-signer without really distinguishing between them. There are three areas where there may be a difference. The first is state law. You should know, for each state in which you do business, whether the state law uses special definitions and/or creates special rules for co-applicants and for co-signers.

A second area is Regulation B. For purposes of deciding whether or not discrimination has occurred, it is important to know whether the applicant requested individual credit, failed to qualify, and needed a co-signer, or whether two or more people jointly applied for credit. Regulation B doesn't contain any specific definitions but instead looks to the process of how the second individual came into the transaction.

The third area is the Credit Practices Rule, or Regulation AA. This rule actually contains a definition of co-signer. A co-signer, for purposes of Regulation AA, is a person who will be liable on the credit contract but does not receive the benefit of the loan. The Co-signer is one who enables the primary applicant to obtain the loan but does not receive or use the loan proceeds or goods purchased with the loan.

The definition exists to trigger the Co-signer Notice which warns co-signers that they are about to become liable on the debt instrument they are signing and may be called upon to repay the debt. The purpose of the notice is to make sure that the co-signer understands their risks and obligations in signing the contract.

I agree. However, Reg B [specifically, §202.7(d)] requires some type of documentation concerning ALL applicants that they want to apply jointly. The catch is that it must be documented AT THE TIME OF APPLICATION, not at closing. So having them sign the face of the note won't suffice.

I'm not sure where that's coming from. This isn't a Reg B issue. [/quote]

I think I read somewhere that if the husband brings in a financial statement that includes combined assets and incomes, it is considered a joint application and an intent for joint application must be signed. I could be way off and talking out my posterior. Please correct me if i'm wrong.

The Commentary to §202.7(d) specifically says a joint financial statement is NOT to be considered a joint application. Just because we both attest to assets owned does not mean that we both want to apply for credit. This is the whole purpose of this section of Reg B.

That's right. Thank you. I guess my brain had checked out for the weekend.

We've been having similar discussions. If I'm understanding David's statement, if two people come in together (let's assume they are not married) to apply for a loan, they are considered joint applicants even if they do not indicate intent. Reg B now requires applicants to declare intent and our procedure provides for them to place their initials on our application form at the time of where it indicates that they intend to apply jointly. The question today was what is the difference between a joint application and two people applying together. It appears there is no difference. From a violation standpoint, if the application does not have intent indicated and other documentation can show it is "joint" (other than signatures on the note), then is this more of a technical violation or would it even be a violation?

Halito: I'm going to dissect your comments, offer some of my own and try to answer your questions. I'm also taking advantage of your post to ask other questions (many are not the intent of your post, I'm sure).


Correct. If two people "apply for a loan" they are joint applicants. They don't have to say "we are joint applicants".


Maybe I'm being technical, but Reg B doesn't require applicants to declare their intent. It requires LO's to document the intent of the applicants.


What if you don't have a written application? What if it's a phone application or through the mail?


I agree. I'm not sure how there can ever be a difference. It also makes me wonder how this question came up? Did your LO's ever treat two people that came in together and applied for a loan not as joint applicants?


The boxes on the application form are not required. They are one way to evidence the intent of the joint applicants. If your bank's procedures say they must be completed, then this must be done or else it is a violation of your procedures. It would not be a violation of Reg B, however.

I would encourage you to reconsider your procedures to always have these boxes marked. Again, what are you doing for phone applications? Or other applications not taken in person? You must have documentation of the applicants intent to apply for joint credit. You don't have to have boxes marked. You must also have this evidence at the time of application. If you're requiring boxes to be marked, I would bet it's often being done at closing, or after application.

This has gotten complicated. The original question was; "What is the difference in joint applicants (Intent statement) and co-makers?" As dumb as it might sound, joint applicnants are individuals who apply for a credit together. We've always asked the prospective applicant(s) if he, she or they are applying for individual or joint credit, documented the reply (including phone apps) and underwrote the application accordingly. Don't assume because 2 people are at your desk or a person provides a joint f/s, that they (or he or she in the case of the f/s) are applying for joint credit; or if 1 person is at your desk that he or she is applying for individual credit - Ask and document.

Regarding cosigners or guarantors, to look to Reg. AA for the definition of cosigner (Cosigner means a natural person who assumes liability for the obligation of a consumer without receiving goods, services...). And, it does get a bit complicated in that Reg. AA states that a person fitting the definition of a cosiger is a cosigner regardless of what they call themselves. My understanding is, although a lender is under no obligation to determine status, if it becomes apparent in the interview that one of the individuals fits the definition of a cosigner, the lender must provide the required disclosure.

The important issues are: 1) Ask all applicants' intent (individual or joint credit); 2) Document their reply; 3) Use the same standards to underwrite joint applicants whether married to each other or not; 4) Don't require additional signers if the applicant or applicants qualify for credit in his, her or their names; 5) define circumstances (and underwriting guidelines) underwhich you will accept a cosigner or guarantor; 6) and (if you do accept cosigners) never require a specific cosigner.

Merely my opinion, but I've been there.

Very well put Carl. I like your summary.

Is is possible for a bank to institute a policy of "no Co-signers" and always treat additional signers as co-applicants? They sign the application, note, etc. and no notice to co-signer.

Appreciate your input.

Co-signers already sign an application and note. If they meet the definition in Reg. AA then they are a co-signer, regardless what title you give them.

I want to second what Dan is saying. You can call them what you want, but they are still a cosigner. Reg AA makes it clear in §227.12(b)(1)(3):
A person who meets the definition in this paragraph is a cosigner, whether or not the person is designated as such on the credit obligation.
http://www.bankersonline.com/regs/227/227-12.html

This is exactly the type of topic discussed in the "Applicants and Applications" webinar I conducted early this year. More info can be found here:
http://www.bankersonline.com/bankerstore/index.php?main_page=product_info&products_id=1103

Thanks guys, that is what I was thinking, but sometimes those pesky lenders want to know that the question was very specific. It's always nice to have validation.