Have you ever seen the movie “Over the Top” starring Sylvester Stallone? If you haven’t, I suggest you look up this nostalgic 80s film about the world of professional arm wrestling. Stallone plays a father trying to get his son back and win the world arm wrestling championship. Stallone’s character “Lincoln Hawk” provides us with a glimpse of strategy over muscle to defeat the antagonist, “Bull Harley.” Why exactly am I telling you about an 80’s arm wrestling, action flick? Well it hit me, while trying to think of a blog idea, that as compliance professionals, we wrestle with compliance issues every day. Some of them can be simple, but most are unique and complex.
Recently, we received a question about whether signatures were required, by regulation, on mortgage applications. The simple answer is “no.” There is no federal regulation that requires the member’s signature on the application. However, unfortunately it is not that simple and further requirements may apply. For example, if the application has joint borrowers, you must note the borrowers’ joint intent per Regulation B. Per the Commentary in Regulation B, Section 1002.7(d):
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. On the other hand, signatures or initials on a credit application affirming applicants’ intent to apply for joint credit may be used to establish intent to apply for joint credit.
While a signature is not required, evidence of joint intent is required and COULD include a signature.
Like Stallone at the end of the film where it looks like it is over, we still have other signature competition to deal with. Signatures may be required by a secondary market buyer. If you sell to the secondary market, you will need to check your contract and your selling guide to determine if the application is required to be signed in order to be sold.
Another issue that may arise, is if you include any legal language within your application that the borrower is agreeing too. A signature would be required in order for the borrower to agree to the terms stated in your application. Again, the regulatory rules do not require it, but you may need to ensure you get the signature, so your borrower is bound to your legal terms.
The constant struggle with compliance is ensuring you have all your facts and are prepared for the proverbially “wrestling” of facts and information. So even though this question seemed simple on the surface, there were other areas and items to consider.
As Stallone’s character Lincoln Hawk said in the movie, “What I do is I just try to take my hat and I turn it around, and it’s like a switch that goes on. And when the switch goes on, I feel like another person, I feel, I don’t know, I feel like a… like a compliance officer. Like a compliance machine” Well he didn’t really say compliance officer or compliance machine, but I would task you to turn your compliance hat around, to hit the switch to fully research your question, and become a compliance machine. Then you will be able to say “YO, ADRIAN, I DID IT!” (Sorry wrong film, got excited with the Stallone references).