Borrower Using Another Person's Home as Collateral

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Question:

My borrower is using another person's home as collateral on her loan. The person putting up the collateral is not on the loan. Who signs the disclosures (good faith, tila, etc)? Is it the borrower or the person putting up the collateral or both?

Answer:

There is no regulatory requirement that the GFE or TILA disclosures be signed by anyone. I would be visiting with legal counsel to see what they suggest to insure no party can't later say they were not fully informed.

P.S. These are always bad deals for the bank and represent huge reputational risks if this is someone's primary dwelling. Especially in cases where son/daughter does not pay and the Bank throws the 75 year old mom out into the streets.

First published on BankersOnline.com 8/22/11