Compliance Alliance Q&A

Question of the Week: June 13, 2024

Q: If an application for a second home started with an individual applicant but mid-way through the applicant wants to add a spouse to the application to facilitate the approval, do I need to initiate a new application with a new application number or can I just use the initial application and keep the same loan number, then resent the early disclosures?  

A:  Ultimately, the bank's course of action in this situation will likely depend upon whether it is a co-signer or a co-borrower that is added, as well as any applicable internal/investor guidelines. In general, this tends to be more of a procedural question based upon your internal/investor policies. The regulations provide the bank discretion as to when the bank may either add a co-borrower or co-signer from the application or when the bank should close out an application and start the process over. Speaking to many different banks about this process, it seems that many banks are all over the place with exactly how they accomplish this because it's really about what fits the bank's processes best. Some member banks have indicated that they always close out files and make the applicant re-apply (with or without the co-borrower/co-signer, whatever the case may be) because it's better for their systems and it makes things easy to follow and allows for a better workflow. Further, other member banks have indicated that they tend to keep the files open and make changes and add and remove co-applicants because that system is better for their workflow, software, processes, etc., so, ultimately, the bank is free to do it however you'd like, as always keeping in mind Fair Lending and UDAAP considerations.
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