Reg B Joint Intent

Posted By: ahou

Reg B Joint Intent - 11/02/04 08:16 PM

For credit card applications we seldom see the applicants. The applicants are not checking the box for intent to file jointly/not file jointly. Is anyone else having problems with this? If so, what are you doing to comply?
Posted By: Anonymous

Re: Reg B Joint Intent - 11/04/04 10:05 PM

I am not signed in because of what I am about to write. The lenders at the bank I work at seem to not understand the importance of having their customers initial that they are applying jointly. We then give them the opportunity to send the customers a form to intital to fulfill that requirement. This is done AFTER the loan closes. I don't think what we are doing is OK. I think I would rather they not have it than do it this way. Any thoughts?
Posted By: ahou

Re: Reg B Joint Intent - 11/04/04 10:10 PM

It's probably not ok, but I don't have any better suggestion.
Posted By: David Dickinson

Re: Reg B Joint Intent - 11/05/04 02:43 AM

Quote:

I am not signed in because of what I am about to write. The lenders at the bank I work at seem to not understand the importance of having their customers initial that they are applying jointly. We then give them the opportunity to send the customers a form to intital to fulfill that requirement. This is done AFTER the loan closes. I don't think what we are doing is OK. I think I would rather they not have it than do it this way. Any thoughts?



Evidence of intent to apply must be done at the time of application.
Posted By: ahou

Re: Reg B Joint Intent - 11/05/04 01:41 PM

What do we do if the applicant does not complete that portion of the application? Do we have to call? If so, do we have to talk to each person on the application?
Posted By: Richard Insley

Re: Reg B Joint Intent - 11/05/04 02:52 PM

I would halt processing of the application until you know who's applying. If you're going to call, you would need to speak to each party who's listed as an applicant but who has not signed or initialed an "I'm an applicant" statement.
Posted By: David Dickinson

Re: Reg B Joint Intent - 11/05/04 07:53 PM

Quote:

What do we do if the applicant does not complete that portion of the application? Do we have to call? If so, do we have to talk to each person on the application?



There is no requirement to get the applicant to sign an application or evidence form. The loan officer can document how the applicants wish to apply. How else would you do this at the time of application for phone applications. You also do not need to talk to each applicant.
Posted By: Patsy Cline

Re: Reg B Joint Intent not intialed - 12/09/04 05:38 PM

So... if the loan gets all the way to set-up and there is no evidence of joint intent... what are you doing? Nothing?
Posted By: Anonymous

Re: Reg B Joint Intent - 08/18/05 08:05 PM

I agree that if you did not get the evidence of intent to apply jointly at application it is a violation, and cannot be "fixed" after the fact. My question is if this is cited in an examination, what can the examiners require the bank to do for a loan that does not the evidence on the application? Could they force the bank to release the coapplicant from the loan? Would this be dependent on who the examiner is (Fed, OCC, FDIC)?
Posted By: GenerousLife

Re: Reg B Joint Intent - 08/18/05 09:23 PM

The intent of the change to Reg B was to affirmatively KNOW that the joint applicants agree to be joint applicants, how can you know this without hearing that from each borrower? One person cannot attest for the other, that's how we got this rule in the first place.

When our lenders fail to collect the information, they receive a Compliance Exception that is reported to the Board of Directors for the life of the loan. Same report that examiners see when they come in.
Posted By: David Dickinson

Re: Reg B Joint Intent - 08/18/05 09:40 PM

Quote:

The intent of the change to Reg B was to affirmatively KNOW that the joint applicants agree to be joint applicants, how can you know this without hearing that from each borrower? One person cannot attest for the other . . .



I believe that this is incorrect. One person CAN attest for another.

Are you telling me that if you receive a phone application from me and I say "my wife and I would like to apply for a car loan" and give you all of the necessary information, you would say "please put down the phone and put your wife on the phone. I must hear her say that she wants to apply before I can process your application"?

Since §202.7(d)(1) requires the evidence of intent to apply . . .at the time of application . . .", you must have some type of evidence when I call. How are you going to do that?

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.
Posted By: Anonymous

Re: Reg B Joint Intent - 08/19/05 01:02 PM

Even though a technical Reg B violation like the ones being discussed here cannot be completely "fixed" after the fact and once it is cited in an examination, are there any steps that can be taken to mitigate the potential damage done by the citation, such as obtaining such documentation directly from the co-borrowers after the fact, to minimize the extent of the examiner's scrutiny?
Posted By: DDB

Re: Reg B Joint Intent - 08/19/05 01:16 PM

I agree with David. I spoke with one of the attorneys at the Federal Reserve Board back when the change was implemented. He told me that one applicant can initial the evidence of intent on behalf of the other applicants. He also said that, in the case of a phone application, one applicant can state the intent verbally on behalf of the others.
Posted By: GenerousLife

Re: Reg B Joint Intent - 08/19/05 02:38 PM

To those who advocate that one applicant can attest for another, I respectfully disagree.

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.

Hence, Reg B changes. This provision protects a less-than-willing spouse from getting caught up in the circumstances.

A creditor might assume (in error), based on submission of a joint balance sheet, or from the statements from the applicant, that the applicant's spouse (who is absent) intends to be a co-borrower. (Same applies in a phone application situation.)

When the creditor calls the borrowers to appear at the closing, the absent spouse learns for the first time that he or she is expected to show up and sign. A spouse who is not assertive or not very sophisticated financially might actually sign the documents (without wanting to do so), believing that if he/she has been summoned to the closing, there is no other choice.

You used to see this happening most often in the Ag Lending area, where Farmer John, says "Me and my wife want to buy this new tractor." When Mrs. John is called to the closing, it is the first she's heard of the new tractor (which is being delivered the same day). She's been planning to leave her jerk of a husband (maybe because of this very attitude) and she doesn't want to be obligated on one more loan.

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.

(Portions of my response taken from an article written by Charles Cheatham, VP and General Council of the Oklahoma Bankers Association.)

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.)
Posted By: Anonymous

Re: Reg B Joint Intent - 08/19/05 02:45 PM

If our online applications require the applicant(s) to select "single" or "joint" does that indicator if Joint suffice? Also, since we will probably not have direct contact with the borrowers until the signing of the note, should the file contain any other evidence? Should we require the applicants to sign the application indicating their intent like is required by the bank for all direct (face-to-face) applications?
Posted By: rainman

Re: Reg B Joint Intent - 08/19/05 03:01 PM

Generous, I'll respectfully disagree with your respectful disagreement. I think you're mixing two different issues: evidence of intent (which the Reg. requires) and verification of intent (which the Reg. does not require).

The point of the changes is that the Bank can't simply rely on the fact that it's looking at a joint financial statement and assume that both persons shown on the financial statement are asking for credit. As you point out, this problem was seen most clearly and often in the context where applicants are not filling out an "application" but are simply supplying the bank with financial statements. But where you do have an application that specifically states "we're applying for joint credit," you have the necessary evidence.

The Reg. was not intended to "police" dishonest applicants by requiring lenders to have actual contact with each applicant at the time of application. It is intended to ensure that if the spouse is surprised that he/she has to sign loan docs at closing, it's because the other spouse was hiding it, and not because the bank simply made a bad assumption.
Posted By: DDB

Re: Reg B Joint Intent - 08/19/05 03:18 PM

I'll second Rainmain's statements. The change in the commentary to Reg B which required better evidence of the applicants' intent was to protect customers from banks, not to protect customers from each other. While it would certainly be better to get evidence from all joint applicants when you can, I still don't believe you are required by Reg B when the initial contact is with one applicant. In those cases the one applicant can answer on behalf of the others.
Posted By: Anonymous

Re: Reg B Joint Intent - 08/19/05 03:45 PM

Face it guys, Generous is right.
Posted By: rainman

Re: Reg B Joint Intent - 08/19/05 04:33 PM

Quote:

Face it guys, Generous is right.




well spoken, a logical argument
Posted By: Anonymous

Re: Reg B Joint Intent - 08/19/05 04:55 PM

Quote:

I agree that if you did not get the evidence of intent to apply jointly at application it is a violation, and cannot be "fixed" after the fact. My question is if this is cited in an examination, what can the examiners require the bank to do for a loan that does not the evidence on the application? Could they force the bank to release the coapplicant from the loan? Would this be dependent on who the examiner is (Fed, OCC, FDIC)?



I appreciate the comments that have been made but I'm afraid that my original question has not even been addressed. I was asking if once it has been established that there is a violation, can a regulator make the bank release the comaker on the loans where the notice was not given. Does anyone have any personal experience in this situation?
Posted By: rainman

Re: Reg B Joint Intent - 08/19/05 05:08 PM

I'm sure there are examiners who think they could do this, but that would be grossly inappropriate. They could write you up and (if they wanted to take it that far) impose penalties for violations. But if you had examiners who actually want you to release coborrowers because of this error, I would definitely push back, and take it "up the chain" if necessary.
Posted By: GenerousLife

Re: Reg B Joint Intent - 08/19/05 05:15 PM

I have no experience with what happens when a violation has been established. (Thank goodness.)

Reg B allows for fines and civil redress. CMP of $25,000 per occurrence per day by the regulator. If proven willful, then it goes up to $1,000,000 per violation per day. Civil liability awards include actual and punitive damages as well as possible Class Action Suits. (This is for Reg B violations as a whole, not just this particular subject.) You might find it easier to release the co-borrower and stop the flow of blood.
Posted By: DDB

Re: Reg B Joint Intent - 08/19/05 05:52 PM

Quote:

Quote:

Face it guys, Generous is right.




I can certainly agree with the spirit of Generous Life's comments, and I wouldn't want our lenders to be involved in transactions where one of the borrowers was not signing of his or her own free will. But I still stand behind my earlier statements that the federal banking regulatory structure in general, and Reg B in particular, are not designed to protect people from their own spouses or anyone else other than the financial institution. Reg B prohibits the bank from requiring a spouse or other party to become obligated on the note when the other applicant qualifies for the loan on his/her own. But Reg B does not require the bank to make sure one spouse doesn't pressure the other into a transaction, especially if they do so someplace other than in our presence where we could explain whose signature is and isn't needed to qualify for the loan.
Posted By: rlcarey

Re: Reg B Joint Intent - 08/19/05 05:57 PM

The regulators have and will make you release borrowers if they uncover spousal signature violations. Been there - done that personally with the FRB, OCC and OTS. If you uncover a signature violation, I would recommend that you be proactive and automatically release the party who's signature was obtained illegally.
Posted By: Anonymous

Re: Reg B Joint Intent - 08/19/05 06:19 PM

Quote:

What do we do if the applicant does not complete that portion of the application? Do we have to call? If so, do we have to talk to each person on the application?



There is no requirement to get the applicant to sign an application or evidence form. The loan officer can document how the applicants wish to apply. How else would you do this at the time of application for phone applications. You also do not need to talk to each applicant.




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?
Posted By: Anonymous

Re: Reg B Joint Intent - 08/19/05 07:41 PM

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.
Posted By: David Dickinson

Re: Reg B Joint Intent - 08/19/05 08:48 PM

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.
Posted By: GenerousLife

Re: Reg B Joint Intent - 08/19/05 09:14 PM

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.
Posted By: David Dickinson

Re: Reg B Joint Intent - 08/19/05 09:46 PM

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)
Posted By: GenerousLife

Re: Reg B Joint Intent - 08/19/05 09:57 PM

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.
Posted By: Great River

Re: Reg B Joint Intent - 08/22/05 01:52 PM

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!"

Posted By: David Dickinson

Re: Reg B Joint Intent - 08/22/05 02:37 PM

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.
Posted By: Great River

Re: Reg B Joint Intent - 08/22/05 03:50 PM

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.
Posted By: Anonymous

Re: Reg B Joint Intent - 08/22/05 04:06 PM

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.
Posted By: Anonymous

Re: Reg B Joint Intent - 08/22/05 04:09 PM

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?
Posted By: Raymond

Re: Reg B Joint Intent - 08/22/05 04:11 PM

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.
Posted By: David Dickinson

Re: Reg B Joint Intent - 08/22/05 08:16 PM

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.
Posted By: Dan Persfull

Re: Reg B Joint Intent - 08/22/05 08:36 PM

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.
Posted By: SamIAM

Re: Reg B Joint Intent - 08/22/05 08:52 PM

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?
Posted By: Dan Persfull

Re: Reg B Joint Intent - 08/22/05 08:56 PM

No. Those sections would substitute for the separate intent form.
Posted By: David Dickinson

Re: Reg B Joint Intent - 08/22/05 09:04 PM

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.
Posted By: Anonymous

Re: Reg B Joint Intent - 08/22/05 09:42 PM

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:)
Posted By: David Dickinson

Re: Reg B Joint Intent - 08/22/05 10:30 PM

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.
Posted By: Raymond

Re: Reg B Joint Intent - 08/23/05 02:59 PM

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.
Posted By: David Dickinson

Re: Reg B Joint Intent - 08/23/05 10:18 PM

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.
Posted By: Anonymous

Re: Reg B Joint Intent - 08/30/05 09:55 PM

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?
Posted By: RVFlyboy

Re: Reg B Joint Intent - 08/30/05 11:48 PM

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.
Posted By: Anonymous

Re: Reg B Joint Intent - 08/31/05 09:22 PM

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

Re: Reg B Joint Intent - 09/02/05 02:57 AM

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.
Posted By: rlcarey

Re: Reg B Joint Intent - 09/02/05 12:28 PM

I see that Fannie and Freddie have acquiesced and added intent boxes on the 1003.
Posted By: complianceman

Re: Reg B Joint Intent - 09/02/05 01:59 PM

Jim,

I would like to jump up onto your soap box and briefly discuss a communication that I recently had with our FDIC examiner concerning "Notice of Joint Intent". He stated thje following: It is really up to the bank and their policies and procedures. You can go to any lengths to make it crystal clear that there was joint intent by having every customer sign a notice. If you feel your policy and procedures are clear, training has occurred for loan officers, monitoring is good, audits are conducted - you may choose to only use a notice of joint intent when there is no application. I would recommend all bank's have notices signed if there is not an application.



There is nothing in the regulations that will spell it out for you. You will have to make a decision as a bank, what risk level you are comfortable with.

So with that being said, we are being conservative until our next FDIC examination and will address Joint Intent issues at that time.

"Off the Soap Box".
Posted By: David Dickinson

Re: Reg B Joint Intent - 09/02/05 04:47 PM

Well said Magic. I think you stated the "enforcement vs. intentions" arguement well.

This has been a great discussion. One that was obviously needed. We haven't heard the counter points from Raymond, GreatRiver or others for over a week. Any more discussion?
Posted By: Princess Romeo

Re: Reg B Joint Intent - 09/03/05 08:24 PM

IMHO - the whole thing has gotten very silly. It's one thing to have a spousal signature on a FINANCIAL STATEMENT where the only indication for the signer is their verification of the veracity of the information on the statement.

It's a whole other kettle of fish to have an APPLICATION FORM where you have "Applicant" and "Co-Applicant" right above or below the signature lines on the form. If my signature on the "Co-Applicant" line is not sufficient to document my intention of BEING a Co-Applicant, then I have no CLUE what another little box with my initials would prove.

BTW - It's a helluva lot easier to forge someone's initials than it is their signature.
Posted By: Richard Insley

Re: Reg B Joint Intent - 09/04/05 01:01 PM

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!



I agree totally with GreatRiver's assessment above. In response to David's "show me the cases" challenge, I'm happy to share the details of the only lawsuit my former bank ever had to defend in its 23 years dealing with ECOA.

In this 1983 case, bank had extended a floor-plan line to an auto dealership that subsequently failed. Like all good commercial lenders, we had obtained guarantees from all the dealership's principals and their spouses. As cited above, our normal application procedures for this type of loan were to obtain personal financial statements on all guarantors, but no application forms ("forms are for retail lenders, not for us!")

After the dealership tanked, we sued all guarantors for collection. At this point, the wife of a principal countersued us, alleging MS discrimination under ECOA. She claimed that the bank forced her to become liable because she had the bad fortune (a separate, but familiar story) to be married to a principal of the dealership.

In fairness to David and the rest of the "where's the beef" crowd, the ECOA case was dismissed, however, it was decided on a technicality. Going into this case, both inside and outside counsel believed we had no chance if the case were decided on its merits. Their opinions were based in part on the total absence of any evidence of Mrs. Principal's intent to become liable. MANY hours were spent in vain searching the credit file for anything that would substantiate our claim that she intended to be liable.

Narrowly escaping with our wallet and reputation intact, bank counsel and the commercial lenders created the unthinkable--an application form to be used for all commercial credit applications! Less than half a page in length, this form's exclusive purpose was the recite the basis of the application and get the original signatures of all parties who would sign in any capacity - as evidence of their intent to become liable.
Posted By: DDB

Re: Reg B Joint Intent - 09/05/05 03:21 PM

Quote:

Going into this case, both inside and outside counsel believed we had no chance if the case were decided on its merits. Their opinions were based in part on the total absence of any evidence of Mrs. Principal's intent to become liable. MANY hours were spent in vain searching the credit file for anything that would substantiate our claim that she intended to be liable.




I agree. But the merits of that case where based on the fundamental requirement that the bank is prohibited from requiring guarantees from anyone other than the principals of the business if that business qualifed for the credit without them. So the only way a bank could have proven that the spouses (non-principals) weren't required to sign guarantees would be to get documenation that they volunteered to do so up front before the bank asked for them.

We still have two problems.

1. Concerns were raised earlier in this thread that we need to protect spouses from each other. We still can't prove that the principal didn't tell his/her spouse that they are going to have to sign something showing that they volunteered, either by claiming that the bank would require it or by telling them that it's the only way their business (that puts bread on the spouse's table) would get the credit it needed.

2. The definition of "applicant" for this section or Reg B does not include guarantor. So according to the reg and commentary, the requirement to evidence intent to apply jointly doesn't even apply to guarantors. If the Fed's intent was to stop banks and business principals from forcing spouses into guaranteeing a loan that's not what they actually did.
Posted By: David Dickinson

Re: Reg B Joint Intent - 09/05/05 06:01 PM

Quote:

2. The definition of "applicant" for this section or Reg B does not include guarantor. So according to the reg and commentary, the requirement to evidence intent to apply jointly doesn't even apply to guarantors. If the Fed's intent was to stop banks and business principals from forcing spouses into guaranteeing a loan that's not what they actually did.




Guarantors certainly are "applicants" for the joint intent issue [§202.7(d)]. Please read the definition of "Applicant" at §202.2(e).
Posted By: DDB

Re: Reg B Joint Intent - 09/06/05 12:26 PM

Thanks for setting me straight. I was working from memory and should have looked it up. Actually the section that I should have referenced wasn't the definition of "applicant", it was the definition of "joint applicant" in the commentary to 202.7(d) which specifically relates to the requirement to evidence the intent of joint applicants. Comment #2 states that guarantors are not "joint applicants".

7(d) Signature of spouse or other person.

2. Joint applicant. The term “joint applicant” refers to someone who applies contemporaneously with the applicant for shared or joint credit. It does not refer to someone whose signature is required by the creditor as a condition for granting the credit requested.

Then comment #3 from the same section explains that the requirement to evidence intent only applies to "joint applicants". So this means that it doesn't apply to guarantors.

3. Evidence of joint application. 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. (See Appendix B). The method used to establish intent must be distinct from the means used by individuals to affirm the accuracy of information. For example, signatures on a joint financial statement affirming the veracity of information are not sufficient to establish intent to apply for joint credit.

So, while I agree that the Fed was trying to keep banks from requiring people to become joint applicants just because their spouses provided joint financial statements, it doesn't require us to document evidence of their intent to become guarantors. In the end, it's probably a good policy to document the intent of non-principal guarantors to protect against claims that spouses were forced by the bank, but the absence of evidence regarding guarantors would not be a Reg B violation.
Posted By: David Dickinson

Re: Reg B Joint Intent - 09/06/05 02:12 PM

Quote:

Then comment #3 from the same section explains that the requirement to evidence intent only applies to "joint applicants". So this means that it doesn't apply to guarantors.



Maybe, maybe not. If I walk in with my son and say "he wants to buy a car. I'll guaranty the loan, but I don't want to sign the loan", then I am definitely an applicant, I am a guarantor and I am contemporaneously applying with the applicant for shared or joint credit. Therefore, I do believe that the "evidence of intent" rules apply to me in this situation. You, the creditor, did not require that I guarantee the loan as a condition. I volunteered myself.

While I agree that this is rare (maybe it is purely academic), this is an example of where a guarantor is an applicant.

I agree with you that directors, officers, shareholders and partners that are required to guaranty a business loan are not "applicants" for the joint intent issue.

BTW, this is EXACTLY the kind of thing that we will be discussing in the upcoming webinar on Applications, Prequalification and Preapprovals (9/22/05). We will dive into Regs B, C (& others) and explore the differences between applications and inquiries as well as what defines a cosigner, guarantor, co-borrower, co-applicant, etc.
Posted By: Raymond

Re: Reg B Joint Intent - 09/06/05 02:31 PM

Quote:

We haven't heard the counter points from Raymond, GreatRiver or others for over a week. Any more discussion?




Don’t take my silence as agreement or capitulation. In my opinion, we had simply reached a point where we needed to agree to disagree.

You are right, it was a good discussion and it was well needed. And at this point, only time will tell how the regulators interpret and apply the change.
Posted By: David Dickinson

Re: Reg B Joint Intent - 09/06/05 10:09 PM

Quote:

Don’t take my silence as agreement or capitulation. In my opinion, we had simply reached a point where we needed to agree to disagree.

You are right, it was a good discussion and it was well needed. And at this point, only time will tell how the regulators interpret and apply the change.



I'm saddened by your response. I can't understand why you would want to "agree to disagree." You can have any procedures you want, but there is a right answer to this issue. You can see that Richard, MagicBanker, Dan & other Guru's agree with what I have presented. Why can't you?

I'm not saying that I'm right. I'm asking you to point out where I'm wrong. I have answered all of your questions and presented the regulatory "logic" to everything that you have pointed out, but yet you still say that you disagree. Why?

This is not new. It has been in affect since 4/04 - over a year. Examiners have been mis-interpreting this - I don't argue with that. The point is we need to straighten them out.
Posted By: 02bonne

Re: Reg B Joint Intent - 06/01/06 03:32 PM

Reading 202.7b it provides a defition of a "joint applicant" as someone who applies contemporaneously with the applicant for shared or joint credit. It does not refer to someone whose signature is required by the creditor as a condition for granting the credit requested." To my understanding of the requirement to show intent for joint applicants, if they are a co-borrower where we rely on income and credit to support the loan approval, we must get their signature on the application to show intent. If we have a really strong customer who we have an excellent relationship with and their kids applies and we get the parent's (our good customer) signature and don't pull a CB or run a DTI a signature is not required. Is this a correct assumption? I'm just trying to understand for whom we need to show intent at application and whom we dont.
Posted By: Truffle Royale

Re: Reg B Joint Intent - 06/01/06 03:37 PM

To use your parent/kid example...you ARE depending on the "...strong customer who we have an excellent relationship..." with as part of your credit decision, right? If the kid came in alone and the parent wasn't signing the note, you wouldn't do the loan. So, whether you pull a CB on the parent or not, he IS an applicant. Therefore his signature in the joint intent section of the application gives you permission to consider his banking relationship with your FI when granting his kid a loan.
Posted By: 02bonne

Re: Reg B Joint Intent - 06/01/06 05:57 PM

But according to the definition of a joint applicant, if we required the parent to sign, they would be exempted as being a "joint applicant" according to my understanding. In what cases would a cosigner, coborrower or other person who would need to sign the note not be required to evidence intent by signing the application?
Posted By: Truffle Royale

Re: Reg B Joint Intent - 06/01/06 08:25 PM

My daughter, husband and I own our home. Hubby & I apply for a mortgage. Daughter will NOT sign the Note but she must sign off on mortgage because she is an owner. She would NOT sign the joint intent because she is not a borrower and her credit will not be considered as part of granting the loan.

I think your confusion is coming from WHAT you're talking about having the non-borrower sign. Any one who signs the NOTE is an applicant/borrower and is responsible for repayment of the debt.

Everyone who signs the MOTGAGE is NOT necessarily a borrower. My daughter acknowledges a debt is being placed against property she owns but she is not agreeing to pay the debt.

If you're using the parent's income and credit to qualify the kid and the parent is signing the note, you need the parent's signature on the joint intent.
Posted By: RockChucker, CAMS

Re: Reg B Joint Intent - 06/28/17 02:50 PM

Reviving this beauty of a thread.

I got the following by email today: "We only need evidence of Joint Intent when we are dealing with spouses. We do not need evidence of joint intent when the deal involves multiple people who are not spouses."

I haven't found anywhere where it indicates this only applies to spouses but I could have easily missed something.

Thoughts?
Posted By: raitchjay

Re: Reg B Joint Intent - 06/28/17 02:52 PM

You haven't found anything because there isn't anything. Spouses, not spouses, doesn't matter---if you have 2 or more people applying together, you need joint intent.
Posted By: Truffle Royale

Re: Reg B Joint Intent - 06/28/17 02:58 PM

Have whoever wrote that email read the top of the 1003 form where you're supposed to be getting the joint intent signatures.
I says:
Quote:
...the income or assets of a person other than the Borrower (including the Borrower's spouse) will be used as a basis for loan qualification.
Posted By: RockChucker, CAMS

Re: Reg B Joint Intent - 06/28/17 03:14 PM

Thanks for the quick responses. It is always so reassuring to hear from people who have been around the block on these issues. Sometimes I doubt myself even when I feel confident I know the answer.
Posted By: Skittles

Re: Reg B Joint Intent - 06/28/17 05:07 PM

And remember - people also means businesses.
Posted By: Dan Persfull

Re: Reg B Joint Intent - 06/28/17 06:00 PM

I'm not going t be quite as nice. If the person sending this email works in compliance they need to be reassigned or if they are new to compliance then the person training them needs to be reassigned.

(e) Applicant means any person who requests or who has received an extension of credit from a creditor, and includes any person who is or may become contractually liable regarding an extension of credit. For purposes of §1002.7(d), the term includes guarantors, sureties, endorsers, and similar parties.

(x) Person means a natural person, corporation, government or governmental subdivision or agency, trust, estate, partnership, cooperative, or association.

(d) Signature of spouse or other person. (1) Rule for qualified applicant. Except as provided in this paragraph, a creditor shall not require the signature of an applicant's spouse or other person, other than a joint applicant, on any credit instrument if the applicant qualifies under the creditor's standards of creditworthiness for the amount and terms of the credit requested. A creditor shall not deem the submission of a joint financial statement or other evidence of jointly held assets as an application for joint credit.

(d) Signature of spouse or other person. (1) Rule for qualified applicant. Except as provided in this paragraph, a creditor shall not require the signature of an applicant's spouse or other person, other than a joint applicant, on any credit instrument if the applicant qualifies under the creditor's standards of creditworthiness for the amount and terms of the credit requested. A creditor shall not deem the submission of a joint financial statement or other evidence of jointly held assets as an application for joint credit.

3. Evidence of joint application. 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. (See Appendix B.) The method used to establish intent must be distinct from the means used by individuals to affirm the accuracy of information. For example, signatures on a joint financial statement affirming the veracity of information are not sufficient to establish intent to apply for joint credit.
Posted By: David Dickinson

Re: Reg B Joint Intent - 06/28/17 07:21 PM

You've heard it already, but I'll jump on the pile to drive the point. Spouses are often the ones that are required to sign, so Reg B specifically mentions them, but .7(d) [Joint Intent] applies to all application in which there are two or more applicants (including business loans, voluntary guarantors, cosigners, etc.] There are a few exceptions (required guarantors and cosigners added after the initial application), but very few.
Posted By: SonnyGirl

Re: Reg B Joint Intent - 10/18/19 08:27 PM

Reviving this thread! We are in the process of changing loan origination systems. The system we are going to does not have a commercial application (much to my chagrin). A disclosure package has been created including Intent to Apply for Joint Credit. Those creating procedures for the new system have included these instructions for accessing/printing the disclosures:
"Select .............and print the Commercial Disclosure package to complete. If joint credit applies this can be completed on the form prior to printing."
I do not believe that should be completed prior to printing in face to face applications and want to let them know that should be clarified for use only in phone applications. Am I asking too much?

Thanks!!!!!
Posted By: David Dickinson

Re: Reg B Joint Intent - 10/22/19 03:12 AM

I’m not sure I understand. Joint intent documentation must be created at the time of application. That doesn’t matter if it’s a phone application, in person, internet, etc.
Posted By: SonnyGirl

Re: Reg B Joint Intent - 10/24/19 05:40 PM

Thank you David. Sorry for just now replying and I'll try to explain better.

Since there is no commercial application (our current app has the Notice of Intent to Apply Jointly on the app), disclosures were created to provide to loan applicants when applying for a loan. Users will have to access and print those disclosures when starting the loan request by clicking a specific option. In procedures, the instructions state "Select .............and print the Commercial Disclosure package to complete. If joint credit applies this can be completed on the form prior to printing." When training is conducted on using the new system, users will have to access and print. Included in these forms is Notice of Intent to Apply Jointly. For in person applications, we believe the disclosure should be printed for applicants to complete. The current instructions state that if joint credit applies, that agreement can be indicated before printing. That would work for phone applications but not in person applications, correct? We have asked that the instructions be changed to reflect that.
Posted By: David Dickinson

Re: Reg B Joint Intent - 10/29/19 06:53 PM

Sorry for my delay. I didn't see your post until today.

First, you don't have to have applicants sign a disclosure to prove joint intent. It is "nice" if the disclosure is printed and then completed by the applicant, but not a requirement - even in person applications.

Maybe this will help. In January 2018, the FRB of Kansas City put out this memo. I bolded a key sentence in this memo. You can also find this memo here:
https://www.kansascityfed.org/en/ba...%20compliance%20witih%20reg%20b%201-3-18


Ensuring Compliance with Regulation B's Signature Provisions
Complying with the signature provisions set forth in Regulation B and the Equal Credit Opportunity Act (ECOA) may prove challenging for banks. The requirement to document applicants' intent to apply for joint credit applies to all credit requests, including consumer, commercial, and agricultural credit. While no recent changes in the signature provisions have occurred, examiners frequently note spousal signatures on loans for which documentation of the signing parties' intentions to apply for individual or joint credit is inadequate. While the lack of appropriate joint intent documentation does not necessarily mean that a bank is requiring spousal signatures, it raises fair lending risk. Banks that improperly require a spouse's signature on credit instruments could be referred to the Department of Justice for further investigation.

Bankers have some options on how to determine an individual's intent to be a joint applicant. Remember that the determination must be made contemporaneously with the application for credit and properly documented in the credit file. This can be accomplished by requiring the use of written applications for all credit transactions, with a separate disclosure on which the applicants overtly affirm their intention to apply for joint credit. Refer to the sample form in the Appendix to Regulation B. Another option is to provide applicants, at the time of the application, with a joint intent disclosure on which they may indicate their intention to apply for joint credit. Finally, absent written applications or applicant acknowledgement on other joint intent disclosures, the loan officer may simply ask the applicants about their intentions and document it via a note to the credit file. By dating the loan officer's note, banks may be able to document that the applicants' intentions were determined contemporaneously with the application for the credit.

The following situations describe when it is appropriate to require certain signatures:
If it is determined that an application for credit is a joint application containing two or more people and each applicant has provided initials or signature confirming that intent, bankers may require the signatures of the joint applicants on the credit instrument.

If it is determined that an application is for individual secured credit, bankers may require the signature of a spouse or other person on the documents necessary under state law to provide access to the collateral in the event of default.
If it is determined that an application is for individual credit and the applicant meets the standards for creditworthiness, bankers may not require additional signatures on the note or credit instrument (unless allowed by state law).
If it is determined that an application is for individual credit and the applicant does not meet the standards for creditworthiness, bankers may require a qualified cosigner or guarantor. However, bankers are not allowed to require the spouse as the cosigner or guarantor.

If the applicant for unsecured credit relies in part on property that the applicant owns with another person to satisfy the standards for creditworthiness, bankers may, in certain circumstances, require the signature of the other person, but only on instruments necessary under state law that would allow you to reach the property in the event of death or default of the applicant.
If it is determined that the applicant is married and resides in a community property state or if the applicant is relying on property located in such a state, bankers may require the spouse's signature, in certain circumstances, on any instrument necessary under state law to make the property available to satisfy the debt in the event of default. With respect to state law, reasonable belief as to what instruments need to be signed by a person other than the applicant should be supported by a thorough review of the law or an opinion of the state attorney general. This opinion should be obtained before requiring the signature (and not, for example, just in the context of an examination).

For additional information about Regulation B's signature provisions, refer to the Compliance Outlook article, "Regulation B and Marital Status Discrimination: Are You in Compliance?". Your designated Consumer Affairs contact may also answer any questions regarding this topic.
Posted By: TeamComply

Re: Reg B Joint Intent - 11/01/19 05:13 PM

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."
Posted By: rlcarey

Re: Reg B Joint Intent - 11/01/19 05:24 PM

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.
Posted By: TeamComply

Re: Reg B Joint Intent - 11/01/19 07:08 PM

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

Re: Reg B Joint Intent - 11/01/19 07:14 PM

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.