DocMagic recently added a new borrower type, "Non-Title Spouse," to accommodate the scenario when a non-borrowing spouse is not on title but is still required to agree to the security interest in the property. The difference between "Non-Title Spouse" and "Title Only" is that in the latter, the individual is actually on title. The "Non-Title Spouse" is not on title but may have a community property or other marital interest in the property.

Type	Borrower under Note	On Title
Individual	Yes	Yes
Title Only	No	Yes
Non-Title Spouse	No	No

The impacts of selecting the "Non-Title Spouse" borrower type on the documents in the loan package are that the "borrower" will not appear on the Note or Notice of Right to Cancel but will appear on the Security Instrument and Riders. The Notice of Right to Cancel will not populate with the Non-Title Spouse's name based on Section 226.2 and Section 226.23 of Reg. Z. Under the Official Commentary to both of these Sections, a Non-Title Spouse is not a "consumer" for purposes of the Notice of Right to Cancel. The Official Commentary to Section 226.2 specifically states:

2. Rescission rules. For purposes of rescission under §§226.15 and 226.23, a consumer includes any natural person whose ownership interest in his or her principal dwelling is subject to the risk of loss. Thus, if a security interest is taken in A's ownership interest in a house and that house is A's principal dwelling, A is a consumer for purposes of rescission, even if A is not liable, either primarily or secondarily, on the underlying consumer credit transaction. An ownership interest does not include, for example, leaseholds or inchoate rights, such as dower. (Emphasis added.)

Thus, a "Non-Title Spouse" who has only a community property interest in his/her principal residence by virtue of community property laws in his/her state would not have an "ownership interest" within the meaning of Reg. Z. However, because many, if not all, community property states and some other states, such as New Jersey, require that a Non-Title Spouse sign the mortgage to encumber qualified property that the spouse occupies as his/her principal residence (homestead), we have added this borrower type to DocMagic.

Depending on the investor or lender, there may be additional documents that a non-title spouse may be required to sign, such as a Non-Applicant Affidavit.

To view Part II of this article, click here.

Please contact Customer Service at (800) 649-1362 if you have any questions regarding the Non-Title Spouse as a new borrower type.

Melanie A. Feliciano and Renee M. Cleary are both Assistant General Counsel of Document Systems, Inc. and members of its Compliance Department.