Reg B Who Can You Make Sign & What

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Hi, it's Dave Dickinson with Banker's Compliance Consulting. And I want to talk about Reg B, joint intent signature requirements. Who can you make sign what, is kind of what I'm after. So first off, any time an applicant comes in, there's really three questions that every loan officer should be able to answer or try to extract from them. And I'm not talking about the safety and soundness and the underwriting and all that, but who's applying here? Because just because I walk in, it could be that I'm saying. "My wife and I" or, "My friend and I want to apply." So who am I representing? Maybe I'm representing my company as the Banker's Compliance Consulting president. I might not be applying, but I'm saying, "The business needs to get a loan." So who is applying, figuring out that. What collateral is being offered? We need to know what collateral is offered so we can then ask the third question of who owns that collateral.

Now let me explain a little bit to you about this. Reg B prohibits lenders from requiring anyone to sign any kind of liability document, that's the key, liability documents, unless they're applying. So let's just say that I have a harebrained idea that I need a new bass boat. My wife's against that, and so I say, "Well, gosh darn it, I'm going to go to the bank and get a loan by myself anyway." And so I come into the bank and I say, "I want to get a bass boat." "Who is applying?" "Me." "Okay, what collateral are you offering?" "Well, I'm going to give you our house." "Okay, who owns that house?" "Well, my wife and I do together." So can you make my wife sign that loan or any kind of guarantee or liability document? The answer's no. I don't do romanette very often, but 1002.7(d) as in dog says you can't cross that line.

You can say, "Dave, you're not credit-worthy on your own. If brought in a qualified co-signer, co-maker, whatever, we might be able to consider this." But you can't say, "You need to go home and get your wife." That would be illegal. That'd be a big time violation. But I offered the house that we owned together. You could say, "Your wife will need to sign a deed of trust or mortgage, depending on your state, for security documents." Can't make her sign liability documents. You can make her sign security documents to perfect. And if she won't sign those security documents, then you don't have to make me a loan, because in a sense you cannot perfect.

So make sure that you understand who's applying. Who am I representing? What collateral is being offered? Who owns that collateral? Tell you what, if I was the king of the bank that you worked in, I would probably have a notepad and that had some things written down like purpose and date. But I would have these three questions, because when you get phone applications, our loan officers are often writing down notes on our note pad, right? They're doodling, maybe some things. If we can capture this information, in a sense there's where we start our whole joint intent.

In fact, joint intent is triggered ... the documentation to prove join intent, triggered at the time of application. So that phone call might be the application. And if the loan officer's writing down, "Dave called and said he wants to get a loan or he and his wife want to get a loan," et cetera, that's going to be helpful to prove the joint intent documentation. It's a procedure you might want to think about adopting. I hope you clearly understand who can you make sign and what can you make them sign. If not, give us a call. We'd love to discuss it with you. Thanks for listening.