Loan Documentation 101 – Reg B & Spousal Signatures

By Angela L. Drumm

September 6, 2017

The Equal Credit Opportunity Act (“Regulation B”) prohibits discrimination in any aspect of a credit transaction – this includes discrimination based upon marital status. Violations can occur when a lender improperly takes marital status into account during underwriting and, for instance, requires a spousal guaranty if an applicant otherwise qualifies under the lender’s “standards of creditworthiness.”

Under Regulation B, lenders may require the spouse’s signature on certain loan documents if the spouse’s signature is necessary as a matter of state law to provide a secured creditor access to collateral in the event of default. See 12 C.F.R. § 1002.7(d)(2), (3), and (4). While the legal aspects of property ownership vary from state to state, in Missouri property acquired after marriage is presumed to be marital (subject to certain exceptions) regardless of how the property is titled.

Accordingly, there may be instances when a lender should require the spouse’s signature on documents that grant collateral or utilize a spousal waiver. The extent of a spousal waiver can vary, but typically a spousal waiver allows the lender access to the spouse’s rights, as a married person and as a surviving spouse, in marital property owned and thereafter acquired.

Good legal counsel can help guide you through the interplay between Regulation B and spousal signatures to determine when you should require a spouse’s signature on documents that grant collateral or utilize a spousal waiver. Please contact me for further information.

Angie Drumm is a Principal at Carmody MacDonald P.C. and concentrates her practice in Banking & Finance. As a member of the firm’s Business Law Group, she represents lenders and venture capital investors in finance transactions that range from $5 million to more than $100 million, often utilizing tax credit incentives. She also helps clients navigate through all aspects of commercial real estate matters – from the acquisition to development and leasing.

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