QUESTION
I am an underwriter for conventional mortgage loan products. Our
compliance officer tells me that I can’t use a joint financial statement as an
application for joint credit under the ECOA. Is this so? Also, what exactly is
a joint applicant and, while you’re at it, how am I supposed to prove the intent
to apply for joint credit?
ANSWER
With respect to whether a lender may assume the application is for
joint credit if an applicant submits joint financial information, such action
would be a violation of the Equal Credit Opportunity Act (ECOA). A creditor may
not deem the submission of a joint financial statement or other evidence of
jointly held assets as an application for joint credit. [12 CFR §
202.7(d)(1)]
A joint applicant is 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. [12 CFR Supplement I, Part 202; Official Staff Interpretations §
202.7(d)(1)-2]
As to proving intent, indeed it is the case that 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.
In contrast, signatures or initials on a credit application affirming the
applicants’ intent to apply for joint credit may be used to establish intent to
apply for joint credit. 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.
[12 CFR Supplement I, Part 202; Official Staff Interpretations § 202.7(d)(1)-3]
It is worth noting that the Uniform Residential Loan Application (URLA)
specified by Fannie Mae and Freddie Mac includes a provision for signatures of applicants
to ensure evidence of the intent to apply for joint credit.
Jonathan Foxx
President & Managing Director
Lenders Compliance Group
