Ok, the little B has surfaced again. In all that discussion, the answer to the question about the Freddie/Fannie Uniform Residential Application (form 1003) was not addressed. At a seminar we were told the model "intent" language should be on the residential application. Our forms vendor said they were not putting it on the residential app. Now, is the model language with initials or signature needed or not????

I, for one, literally jumped on the opportunity to "encourage" management to implement application procedures for our commercial lending and (especially) private banking departments! In addition to revising our consumer app to capture information for the new HMDA data fields & and joint app intentions, we developed two new business loan applications. These include a sig line for "intent to apply jointly" PLUS the new business apps hit on other issues which have been creating audit exceptions for years. We have a "short form" business application - a one pager for existing customers; plus a longer business application for new relationships which serves to gather more indepth info about the company, its principals, etc.

I believe it is key to have this come from Lending Management - not compliance. Convince them of the benefits. This was not presented with the "you have to do this because compliance said so" hammer. I have been dinging lenders for the last years on HMDA reporting exceptions, Reg. B notification, etc. Almost all resulted from lack of file documentation. On the porfolio side of the bank, the majority of our HMDA reporting comes from our business and private banking lenders (we don't report HELOCs) - they also make the majority of HMDA exceptions. Last November I sat down with our SVP of Lending, showed him the existing and new HMDA data fields I needed supporting file documentation for, plus the Reg.B revisions. We had always used the PFS as an application (shudder). My SVP actually said, "if we had a business application couldn't we just add this stuff?" HE suggested having a written application...OK, OK, I might have said a little something to steer him in that direction! Anyway, to make a short story longer, we formed a small task force that included a business lender, loan review, audit and compliance. This may not work for everyone - but it seems to be working for us. I'll let you know after my first 2004 audit!

According to the Official Staff Commentary on Appendix B - Model Application Forms - of Regulation B, use of the FNMA/FHLMC application form "may be used by creditors without violating this act." That would seem to indicate that the "We intend to apply for joint credit" line need not be added to the model form.

However, the staff commentary specifically refers to the October 1992 version of the FNMA/FHLMC application form. That form has been modified effective January 2004 with the Regulation C mandated changes. Since I'm reading this staff commentary off of BOL's Alphabet Soup, I'm assuming that it is the most recent version of the regulation. But the reference to the 1992 form gives me pause.

If the text as found on BOL's web site is the current text of Regulation B, with its attendant Official Staff Commentary, then I would opine that using the FNMA/FHLMC model application form without modification would be in compliance.

Can, or would, any of the BOL gurus confirm that BOL does have the most up to date version of the regulation on the site?

For those of you looking for a sample way to show the Intent without having an official application (those that posted 4, 5 & 6 above this post), scroll all the way to the top of this string. Read my first post (the second post in this string). Here is your example wording.

Would we need to get non-individual applicants to sign this form also (such as a corporation)since entities are considered to be a person under Reg B? For example, ABC Corp and the owner will either apply jointly or the owner will guarantee the credit.

For the last 5 years, our Personal Financial Statement (PFS) has always had boxes at the top to indicate if credit was being requested Individually, Jointly with Spouse, or Jointly with another person whose statement is attached. The signature lines are for "Applicant" and "Co-Applicant Spouse."

A couple of years ago, we created a PFS Certification form for use when the customer wants to simply hand us their Accountant prepared Financial Statement, or the print out from Quicken or Peachtree, or the copy of one they filled out from another bank.

The PFS Certification has the boxes at top and a signature line at the bottom for the spouse to sign as co-applicant, and another line for the spouse to indicate they are only signing to certify accuracy of the information.

All of our commercial loans must have either the PFS or the PFS Certification. We won't pull a credit report without it.

The OTHER benefit to these forms is they have a space for the SSN, DRIVERS LICENSE #, and DATE OF BIRTH for good ol' (new) CIP.

(And we are working on revising the older PFS form to include that second "spouse" signature line.)

I would like to request srom "advice" and thought who better than the folks here at BOL. Just really need someone to help me think this through as I don't want to have to take any action or approach anyone needlessly. Here's my situation: consumer loan made to a husband and wife. The loan is a refinance of an automobile loan and the car is the collateral. The title to the car is in the husband's name. Both the husband and wife were credited scored and the loan was approved - no problem. The wife appears to be the primary applicant. Her individual credit score was a little over 700. It appears she could have possibly been approved on her own merit without her husband. However he owns the collateral. I am a little concerned that this looks like the husband was added for the wrong reason. What else should I be asking about this and does anyone see an issue or am I making too much of this? Thanks as always for your thoughts.

Just another scenario here. We take applications via an automated system using either the telephone or internet. The data we receive is what we receive. Therefore, if the person dialing in or logging on provides information on more than one person, we assume it must be an application for joint credit. How should we handle this, especially if the loan is declined? The automated system is provided by a third party vendor, so we do not have the luxury of being able to amend the series of questions that are posed during the automated process.

There is an application in file and it shows the wife as primary applicant and husband as "co-applicant". But that is the standard form layout. I guess it concerns me because he owns the collateral and I am just not sure of the "intent" of why he is an applicant. Also I don't know if he is a cosigner?? Our note contract has the cosigner language included on the back of the contract document and they both initialed that page. Just would like to know if I need to ask some further questions. Thanks!

About the 1003...since it uses the headings "borrower" and "co-borrower" doesn't completing the sections with those headings demonstrate the intent to apply for credit, i.e. borrow?

Yes, I think the headings "borrower" and "co-borrower" show who is applying for credit. Financial statements would not include these headings so this is where I think you need to find a way to document who is applying.

I asked our forms provider Greatland about why there was not a space at the top of the Fannie/Freddie Universal Residential Loan Application for initials evidencing intent to apply for joint credit. Here is the response I got:

"The URLA is a Fannie Mae/Freddie Mac Uniform Instrument. Greatland reproduces it exactly as the agencies produce it. Greatland has direct communicaitons with both of these agencies which have responded to our questions as to whether they intend to revise the URLA to add an initial
line. Their answer is no.

Subsequent to the March 18th, 2003 Reg B changes, the the Federal Reserve Board reviewed the 1/04 version of the URLA and did not require the agencies to make that change. On September 11, 2003 (68 FR 53491) the Board published a technical amendment to Reg B adding the revised 1/04 URLA as a model format. Other formats in the Reg B Appendix contain the initial lines, but the URLA does not. Greatland produces the URLA as the agencies present it and as it is presented as a model format in Reg B."

Since we just revised our PFS to comply with USA Patriot Act we decided to print a sticker with the joint credit intent and room for initials. We will place this on other applications that don't have the verbiage until we need to reorder again.

We don't have a commercial application, either. But we do place a box to check for joint application on our financial statement form. That way we do not need a separate form.

What about the Fannie or Freddie applications, which have not been changed to add "evidence of joint intent" language, or a place for initials or signatures? FDIC informs us that either they amend their application, or we must create another form to comply. We called FHLMC and they said they did not see any issue and have not planned any changes - that their application is fine as it is.

I have looked and looked at this:

Reg B states that a creditor may not require the signature of a person other than the applicant or joint applicant.....
That's what this change is all about.

It also states that the definition of an application means an ORAL or written request for an extension of credit that is made in accordance with procedures used by a creditor for the type of credit requested.....

Our loan policy does not require a written application unless it is for consumer credit. If it's business credit no written application is required.

Now, my point and question: This change does NOT requirement us to obtain an application but it DOES require us to have the joint applicant sign something stating they are applying for credit......isn't that the same as an "application"?

If our loan policy does not require us to obtain an application are we going to have to get a seperate signature showing intent for joint credit from the joint applicant?

This whole thing sounds stupid to me.

Yes - and everyone, including the regulators have blown this out of proportion. The question you have to ask yourself is how are you going to prove intent to apply/guarantee on your commercial loans? In reality, I have been recommending an "intent to apply/guarantee" form for commercial lending for the last 15 years. It doesn't have to be an "application" in the sense that we consider a consumer application. Otherwise, how are you going to defend yourself. I was involved in several "signature violation" defenses in the 80's and have been recommending what the Fed finally included in it's commentary for years. However, they have really muddied things up with their change in the consumer model forms and have gone too far with the separately initialed intent box. They threw the baby out with the bath water on this one.

Threw the baby out with the bathwater......that's a true statement! So you are saying if we don't put the seperate intent form in place we are going to have a difficult time proving intent for joint credit?

You'll need something. If it isn't on an app, a separate form will work.

Ok, another question along the lines of "joint applicant." Let's say we obtained the joint intent from the applicants and the loan was structured to balloon in 3 years. Are we required to have the applicants sign another joint intent if we just renew the existing obligation at maturity? Typically we use the same loan number and continue on with the loan. In some cases we end up using another loan number. If we combined notes at renewal would that require the applicants acknowledge a "intent" statement?

And the question above in this thread about corporate, organization, etc customers where an individual is also on the loan, is the "joint applicant" statement required? I believe it is required in all situations....am I on the right path?

I would say a joint notice is again required. If you had a borrower who had a co-borrower added because the primary wasn't strong enough, but is now, the co-borrower would need to be released. Collateral not withstanding.

Regarding your second question...is the "intent to apply jointly" required when the borrower(s) is ABC Corporation and John Brown, Individually. My understanding is yes, the individual is a co-borrower. And if he's a co-borrower he is a co-applicant, so you'll need written evidence of intent to apply jointly. Good luck on explaining that to Mr. Brown - I know, because that is how the majority of business loans are structured here.

This not only brings up the question of Reg. B's signature rules and intent to apply jointly, but also presents additional problems when the loan is subject to HMDA. We would not collect GMI on the corporation (1st applicant)reporting it as 4/7 but would collect GMI on the co-applicant/co-borrower who is a natural person. Then, we report Income as NA unless the lender considered the income of the individual, in that case we report that income.

In my first look-back at 2004 reporting files I am finding exception after exception for this exact scenerio.

Ok, another question because now I am really confused. I just got off the phone with "Kirchman" and it was expressed that the joint applicant intent only applies to spouses! That is not how I understand this new rule....so what is the right answer?

Well, I think Kirchman is half right - which in the regultory world is like being half pregnant. The intent was to eliminate the discriminatory practice of obtaining spousal signatures, when the spouse did not intend to co-borrow/guarantee the loan and normally did not bring any substantial resources to the table to support the loan request. However, you can't require married individuals to do different things than unmarried individuals or you're right back in the trap of marital descrimination.