Olson Burns Lee, P.C. Law Practice

Community Bankers' Advisor

May - June, 2004

Page 4

(1) You could request a cosignor or guarantor. (Remember that you can't require the spouse to be the cosigner or guarantor!)

(2) You could offer to grant the applicant's request on a secured basis

(3) You could ask for the signature of the joint owner on an instrument that ensures access to the property in the event of the applicant's death or default but which does not impose personal liability unless necessary under state law (for example, a limited guarantee) See II(B)(2). However, you should obtain a thorough review of statutory or case law or an attorney general's opinion prior to this option!

You cannot, as policy, require that a joint owner sign an instrument such as a quitclaim deed that would result in the forfeiture of the joint owner's interest in the property.

Also, the FDIC Guidance reminds lenders that they may not undermine the spousal signature rules by using a combined note and security instrument. Signatures on any such instrument should be clearly marked to limit personal liability of the property owner who is providing only access to the property but is not an applicant. See II(C)(3) of the FDIC Guidance.

As a precaution, when a spousal signature issue arises and a lender is unsure of the proper procedure, we always recommend obtaining competent legal counsel.

DISCLAIMER
COMMUNITY BANKERS' ADVISOR is designed to share ideas and developments related to the field of banking. It is not intended as legal advice and nothing in the COMMUNITY BANKERS' ADVISOR should be relied upon as legal advice in any particular matter. If legal advice or other expert assistance is needed, the services of competent, professional counsel should be sought.