In response to your question, we asked a CFPB attorney about whether banks are permitted to ask about the civil union status of loan applicants (provided that the application is for secured or joint credit). She said that the CFPB’s informal guidance is that this is a permitted question, if it is asked on a separate form from any questions about the applicant’s marital status. Her reasoning is that while a bank may only used the terms “married, unmarried, and separated” in asking about an applicant’s marital status (under 12 CFR 1002.5(d)(1)), a bank can ask about whether an applicant is a party to a civil union as a separate question from the marital status question. Again, this would only be permissible if the applicant is for secured credit, joint credit, or any other type of credit other than individual, unsecured credit (see 12 CFR 1002.5(d)(1)).

 If a loan applicant is a party to a civil union (or married), the bank may be able to ask the other party to the civil union to sign a waiver of the homestead exemption and the mortgage (provided that you need the entire value of the property to secure the loan that the applicant requests). 

• The general rule is that Regulation B prohibits you from requiring a spouse or any other person (such as the other party to a civil union) to sign a mortgage unless the other signor is an applicant for joint credit where the applicant individually “qualifies under the creditor’s standards of creditworthiness for the amount and terms of the credit requested.” 12 CFR 1002.7(d)(1). 

• An exception to Regulation B’s prohibition on requiring additional signatures exists for documents that spouses must sign under state law to make the property securing the loan “available to satisfy the debt in the event of default.” 12 CFR 1002.7(d)(4). This exception allows creditors to require additional signatures on credit documents, including when a co-signer is necessary, and when the creditor needs an additional signature to establish its security interest in the borrower’s principal dwelling. See FDIC Financial Institution Letter 6-2004 (January 13, 2004).

• For example, a creditor may require a joint-owner of the applicant’s principal dwelling to sign the mortgage if the entire property value is needed to the secure the loan.

• And, a creditor may require an applicant’s spouse or fellow party to a civil union to sign a waiver of homestead rights; if the waiver is not signed “the individual and his or her spouse” (and any party to a civil union, 750 ILCS 75/10), it will not be effective under Illinois law, and the bank could lose the couple’s $30,000 homestead exemption. 735 ILCS 5/12-904.

If you decide that another person’s signature is necessary, you must carefully choose which documents you will require the non-applicant to sign. Regulation B distinguishes the note (under which the borrower agrees to repay the bank for the loan) from the security instrument or mortgage (under which the borrower agrees that his or her residence or other property secures the loan). You will likely be able to require the non-applicant to sign the security instrument/mortgage and a waiver of the homestead exemption (which could be included in the security instrument). But because Illinois law does not require that the applicant’s spouse sign the note in order for the bank to get a valid lien on the property, you cannot require the non-applicant to sign the note. Official Staff Commentary, 12 CFR 1002.7(d)(4), Comment 2. If you use a integrated instrument (in which the note and the mortgage are combined), it must make “clear—for example, by a legend placed next to the spouse’s signature—that the spouse’s signature is only to grant a security interest and that signing the instrument does not impose personal liability.” Official Staff Commentary, 12 CFR 1002.7(d)(4), Comment 3. 

• FDIC Financial Institution Letter 6-2004 (January 13, 2004): Under Section IV, Asset Valuation, this letter states: “If property that an applicant offers the creditor is owned jointly with another person, the creditor may only look to the applicant’s interest in the jointly owned property . . .  If, however, the applicant's interest in the jointly owned property is insufficient to protect the creditor, the creditor may require the signature of an additional person on the promissory note (but may not require it to be the spouse's signature), or may require the credit to be secured with sufficient additional collateral to satisfy the creditor's standards.”