Applications, Reg B, Fair Lending

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Question:

Can you remove the primary borrower off a pending loan? I was under the impression that as long as both borrowers were married, and they both completed the application and received the initial disclosures that the primary borrower could be removed and the co-borrower moved over to the primary borrower position. This was the only way, and any other attempt would result in a denial, or withdrawn application. We have done this with a couple of our loans, but upper management wanted documentation stating that this can be done.

Answer:

You are not going to find any documentation. I am also unsure by what you mean. You mean you have a joint credit application and then one of the borrowers withdraw leaving only a single applicant? How you handle that situation is an operational issue as to whether you allow the single applicant to continue or you treat it as a withdrawn application and require the single party to reapply. If you are in a situation where the joint applicants will not be approved, but one of the applicants if applying alone could be approved, then you owe one of them an adverse action notice.