December

Question: Bank A has a new loan to pay down a line of credit held at Bank B. The original loan with Bank B was used to purchase real estate. Would this be HMDA reportable?  

Answer: For HMDA purposes, the purpose of the first loan being paid off to Bank B is ultimately irrelevant. If the new loan with Bank A is secured by a dwelling and it is not excluded or exempted under § 1003.3, then it would be HMDA reportable. 
Covered loan means a closed-end mortgage loan or an open-end line of credit that is not an excluded transaction under § 1003.3(c).  

12 CFR § 1003.2(e)https://www.consumerfinance.gov/policy-compliance/rulemaking/regulations/1003/2/#e   

Closed-end mortgage loan means an extension of credit that is secured by a lien on a dwelling and that is not an open-end line of credit under paragraph (o) of this section.

12 CFR § 1003.2(d)https://www.consumerfinance.gov/policy-compliance/rulemaking/regulations/1003/2/#d   

Open-end line of credit means an extension of credit that:  

(1) Is secured by a lien on a dwelling; and  

(2) Is an open-end credit plan as defined in Regulation Z, 12 CFR 1026.2(a)(20), but without regard to whether the credit is consumer credit, as defined in § 1026.2(a)(12), is extended by a creditor, as defined in § 1026.2(a)(17), or is extended to a consumer, as defined in § 1026.2(a)(11).  

12 CFR § 1003.2(d): https://www.consumerfinance.gov/policy-compliance/rulemaking/regulations/1003/2/#o   



November Questions of the Week

Question: Bank XYZ has a new commercial transaction where a closed-end loan is paying off a line of credit. The line of credit is dwelling secured and the new loan will also be dwelling secured but with different collateral. It will, however, be the same borrower on both loans. Since this is not a purchase and there are no new funds to consider it a home improvement, would this still be a reportable refinance for HMDA purposes with the new loan having different collateral?

Answer: For HMDA purposes, it would be a refinance if it satisfies and replaces an original debt with the same borrower. There is not a requirement that the collateral remain the same, only the borrower. However, the original debt had to have been secured by a dwelling as well.

(p) Refinancing means a closed-end mortgage loan or an open-end line of credit in which a new, dwelling-secured debt obligation satisfies and replaces an existing, dwelling-secured debt obligation by the same borrower. Read more. 

3. Existing debt obligation. A closed-end mortgage loan or an open-end line of credit that satisfies and replaces one or more existing debt obligations is not a refinancing under § 1003.2(p) unless the existing debt obligation (or obligations) also was secured by a dwelling. For example, assume that a borrower has an existing $30,000 closed-end mortgage loan and obtains a new $50,000 closed-end mortgage loan that satisfies and replaces the existing $30,000 loan. The new $50,000 loan is a refinancing under § 1003.2(p). However, if the borrower obtains a new $50,000 closed-end mortgage loan that satisfies and replaces an existing $30,000 loan secured only by a personal guarantee, the new $50,000 loan is not a refinancing under § 1003.2(p). See § 1003.4(a)(3) and related commentary for guidance about how to report the loan purpose of such transactions, if they are not otherwise excluded under § 1003.3(c). Learn more. 


October Questions of the Week


Question: Based on regulations, laws, or guidance, are there certain positions that are mandated to be named and approved by the Board of Directors such as BSA Officer, Compliance Officer, CRA Officer, etc.?

Answer: Regulations require that the Board of Directors approve a BSA Compliance Officer, Security Officer, and conservatively, the FACTA Officer. Your bank policy, however, can dictate that Board approval is required for any other officers.

Here are the requirements for each officer:

BSA Officer: The bank’s board of directors must designate a qualified individual or individuals to serve as the BSA compliance officer.[18] The BSA compliance officer is responsible for coordinating and monitoring day-to-day BSA/AML compliance. The BSA compliance officer is also charged with managing all aspects of the BSA/AML compliance program, including managing the bank’s compliance with BSA regulatory requirements. https://bsaaml.ffiec.gov/manual/AssessingTheBSAAMLComplianceProgram/04

Designation of security officer: § 326.2  Upon the issuance of Federal deposit insurance, the board of directors of each institution shall designate a security officer who shall have the authority, subject to the approval of the board of directors, to develop, within a reasonable time, but no later than 180 days, and to administer a written security program for each banking office. https://www.fdic.gov/regulations/laws/rules/2000-4900.html

FACTA: (e) Administration of the Program. Each financial institution or creditor that is required to implement a Program must provide for the continued administration of the Program and must:
(1) Obtain approval of the initial written Program from either its board of directors or an appropriate committee of the board of directors;
(2) Involve the board of directors, an appropriate committee thereof, or a designated employee at the level of senior management in the oversight, development, implementation and administration of the Program;
(3) Train staff, as necessary, to effectively implement the Program; and
(4) Exercise appropriate and effective oversight of service provider arrangements. https://www.ecfr.gov/cgi-bin/text-idx?SID=e3a9f76f766245aed0cee07386455b60&mc=true&node=se12.5.334_190&rgn=div8


October 29

Question: Our retail staff is looking to have changes made to our CIP policy in regard to the collection of identification regarding business accounts.  The CIP regulation states that the bank should obtain documents showing the legal existence of the entity, such as articles of incorporation or business licenses. We have found that most businesses cannot produce their articles of incorporation or equivalent and we are currently having then fill out our internal resolutions.  Does the regulation require us to obtain the original documents showing the formation of the entity?

Answer: The regulation requires that your CIP policy establish a way to verify the existence of the entity through documentary and/or non- documentary processes.  If you're going to verify through documents, the regulation lists as examples: articles of incorporation, a government-issued business license, a partnership agreement, etc.  There is not any particular form of documentation required by regulation and so long as the bank is satisfied that the legal existence of the entity is proven through whatever documentation that the entity is able to provide, then that is all that is required by the regulation. But it is already important to remember bank policy, best practices as well as any investor requirements or examiner input.

Reference:

(A) Verification through documents. For a bank relying on documents, the CIP must contain procedures that set forth the documents that the bank will use. These documents may include:

(2) For a person other than an individual (such as a corporation, partnership, or trust), documents showing the existence of the entity, such as certified articles of incorporation, a government-issued business license, a partnership agreement, or trust instrument.

31CFR1020.220(a)(2)(ii)(A)(2)https://www.ecfr.gov/cgi-bin/textidx?SID=3bb05afadae1080d1dbd9c9d461a80d6&mc=true&node=se31.3.1020_1220&rgn=div8

October 27
Question: FCRA 222.91 - Section about address changes and card issuance. Do we only care of address changes made first followed by card request, versus card ordered and then address change?

Answer: So while the regulation and the guidance only refer to times when a debit or credit card is ordered shortly after a change of address is requested, it is highly advisable and a best practice to validate addresses in general because of the potential identity theft and red flag concerns.
Address validation requirements (12 CFR 222.91(c)). A card issuer must establish and implement policies and procedures to assess the validity of a change of address if it receives notification of a change of address for a consumer’s debit or credit card account and, within a short period of time afterwards (during at least the first 30 days after it receives such notification), the card issuer receives a request for an additional or replacement card for the same account. In such situations, the card issuer must not issue an additional or replacement card until it assesses the validity of the change of address in accordance with its policies and procedures.
https://www.federalreserve.gov/boarddocs/srletters/2008/SR0807a3.pdf 


Question: If the Bank takes a commercial property in a business name as an “Abundance of Caution” and the property is in a flood plain; is the bank still required to make sure that there is flood insurance?

Answer: If the commercial property has a structure on it that is in a flood zone, then flood insurance is required. There is not an abundance of caution exemption in the flood rules, unfortunately. 
"(a) In general. An FDIC-supervised institution shall not make, increase, extend, or renew any designated loan unless the building or mobile home and any personal property securing the loan is covered by flood insurance for the term of the loan. The amount of insurance must be at least equal to the lesser of the outstanding principal balance of the designated loan or the maximum limit of coverage available for the particular type of property under the Act. Flood insurance coverage under the Act is limited to the building or mobile home and any personal property that secures a loan and not the land itself." 
Read more. 



August Questions of the Week

08/07/2020

Question: Our institution is working on the call report and we have several PPP loans to report. Should we report them as “held for investment” or “held for sale”? We don’t plan to sell them but want to verify to be sure. 

Answer: From what you describe, it seems that these loans would be reported as "held for investment." They should be categorized as held for investment if the bank intends and has the ability to hold the loan for the foreseeable future or until maturity or payoff. On the other hand, they would be reported as "held for sale" if the bank intends to sell the PPP loans on the secondary market, which you have indicated that the bank does not plan to do.

Consistent with U.S. generally accepted accounting principles (U.S. GAAP), the agencies would expect banking organizations to report PPP covered loans on their balance sheets. Starting with the June 30, 2020, report date, institutions would include the outstanding balances of their PPP covered loans held for investment or held for sale in the appropriate loan category in Schedule RC-C, Part I, and, as applicable, in other Call Report schedules in which loan data are reported.
Page 5: https://www.ffiec.gov/pdf/FFIEC_forms/FFIEC031_FFIEC041_FFIEC051_suppinst_COVID_202006.pdf

Report all loans and leases that the bank has the intent and ability to hold for the foreseeable future or until maturity or payoff, i.e., loans and leases held for investment, in Schedule RC-C, part I. 
https://www.fdic.gov/regulations/resources/call/crinst/2020-03/rc-c-parti-033120.pdf


07/30/2020

Question: If our bank chooses to continue to impose the six-transfer limit as it used to be set out in Regulation D, does a telephone transfer count toward the six transfers per month? 

Answer: Yes, in general, these would usually have been counted in the six-transfer limit that used to be set out in Regulation D--there is one exception for withdrawals by phone when a check is mailed to the customer, but that is rarely the case. Like you point out, the bank is allowed to continue to impose these limitations, but make sure that any disclosures or other related materials no longer say that the bank is required to impose these as a matter of law. 

(2) The term “savings deposit” also means: A deposit or account, such as an account commonly known as a passbook savings account, a statement savings account, or as a money market deposit account (MMDA), that otherwise meets the requirements of §204.2(d)(1) and from which, under the terms of the deposit contract or by practice of the depository institution, the depositor is permitted or authorized to make no more than six transfers and withdrawals, or a combination of such transfers and withdrawals, per calendar month or statement cycle (or similar period) of at least four weeks, to another account (including a transaction account) of the depositor at the same institution or to a third party by means of a preauthorized or automatic transfer, or telephonic (including data transmission) agreement, order or instruction, or by check, draft, debit card, or similar order made by the depositor and payable to third parties. … Such an account is not a transaction account by virtue of an arrangement that permits transfers for the purpose of repaying loans and associated expenses at the same depository institution (as originator or servicer) or that permits transfers of funds from this account to another account of the same depositor at the same institution or permits withdrawals (payments directly to the depositor) from the account when such transfers or withdrawals are made by mail, messenger, automated teller machine, or in person or when such withdrawals are made by telephone (via check mailed to the depositor) regardless of the number of such transfers or withdrawals.
https://www.ecfr.gov/cgi-bin/text-idx?SID=14a7ef2b738d5e3a010103190c43cc5f&mc=true&node=se12.2.204_12&rgn=div8

Does the interim final rule require depository institutions to suspend enforcement of the six convenient transfer limit on accounts classified as "savings deposits"?

No. The interim final rule permits depository institutions to suspend enforcement of the six-transfer limit

but it does not require depository institutions to do so.

https://www.federalreserve.gov/supervisionreg/savings-deposits-frequently-asked-questions.htm



June Questions of the Week

06/04/2020

Question: An applicant applied for a Paycheck Protection Program (PPP) loan via our website, and in reviewing the application, we determined the business is an ineligible industry.  Would this be considered an application requiring an adverse action notice?

AnswerWhile this hasn't been specifically addressed in the PPP context, conservatively the Bank would treat this as an application requiring an adverse action notice as the Bank communicated the decision to the consumer (they were ineligible based on information related to them).

3. When an inquiry or prequalification request becomes an application. A creditor is encouraged to provide consumers with information about loan terms. However, if in giving information to the consumer the creditor also evaluates information about the consumer, decides to decline the request, and communicates this to the consumer, the creditor has treated the inquiry or prequalification request as an application and must then comply with the notification requirements under § 1002.9. Whether the inquiry or prequalification request becomes an application depends on how the creditor responds to the consumer, not on what the consumer says or asks. (See comment 9-5 for further discussion of prequalification requests; see comment 2(f)-5 for a discussion of preapproval requests.)

Reg.B: https://www.consumerfinance.gov/policy-compliance/rulemaking/regulations/1003/4/#4-a-16-Interp-3



May

05/27/2020
Question: 
This is a HMDA question. Borrower was scheduled for closing, but because a home inspection that the borrower ordered did not go as they planned, the borrower ended up cancelling closing. The bank did not require this inspection and all underwriting conditions had otherwise been met. In looking at the HMDA Action Taken guidance, which do you think we should report in this situation?

 

Answer: It appears that this situation should be reported as Approved but not Accepted based on what you describe, and you can find this reflected in the commentary here:  

If all the conditions (underwriting, creditworthiness, or customary commitment or closing conditions) are satisfied and the institution agrees to extend credit but the covered loan is not originated, the institution reports the action taken as application approved but not accepted.
https://www.consumerfinance.gov/policy-compliance/rulemaking/regulations/1003/4/#4-a-8-i-Interp-13-i


05/20/2020

Question: Given the current rate environment, the bank is looking at slightly decreasing our money market account rates. In our original disclosures for these accounts, we disclosed the rate as variable, subject to change at our discretion at any time. For this change, is there an advance notice requirement or would it be acceptable to just include a notice about the rate change on the next periodic statement?

Answer: A 30-day advance notice is not explicitly required by TISA in this situation, as set out here: 

(2) No notice required. No notice under this section is required for:
(i) Variable-rate changes. Changes in the interest rate and corresponding changes in the annual percentage yield in variable-rate accounts.
https://www.consumerfinance.gov/policy-compliance/rulemaking/regulations/1030/5/#a-2

Like you imply, though, it's still a good practice to give some kind of advance notice of the change, and including a statement message is a common way to accomplish this. 


05/14/2020

Questions: This is a CARES Act question on credit bureau reporting for consumer-purpose loans. For those loans that have requested forbearance or other payment accommodations during the pandemic, we are not reporting those accounts as late (nor charging fees). However, if a loan does go past due and the borrowers have not requested a forbearance plan, our mortgage department wants to report those as late and charge late fees. Does the CARES Act question actually prohibit this?

Answer: Technically it does not--essentially the CARES Act addresses when the Bank has provided an accommodation due to COVID-19. In the situation you describe, the Bank hasn't provided an accommodation, so the CARES Act requirements really don’t come into play. In other words, the Bank needs to report accurately and can't report them as current when they are, in fact, not current. For reference, I'm including the relevant provision as well as the link to our summary on the credit reporting provisions under the CARES Act:

(ii) REPORTING.—Except as provided in clause (iii), if a furnisher makes an accommodation with respect to 1 or more payments on a credit obligation or account of a consumer, and the consumer makes the payments or is not required to make 1 or more payments pursuant to the accommodation, the furnisher shall—

“(I) report the credit obligation or account as current; or

“(II) if the credit obligation or account was delinquent before the accommodation—

“(aa) maintain the delinquent status during the period in which the accommodation is in effect; and

“(bb) if the consumer brings the credit obligation or account current during the period described in item (aa), report the credit obligation or account as current.

https://www.congress.gov/bill/116th-congress/house-bill/748/text#H1274B87B2B204ACA95F8C0D8228925C2

C/A COVID-19 Credit Reporting Summary: https://compliancealliance.com/find-a-tool/tool/covid-19-credit-reporting-summary


05/06/2020

Question: Are banks required to report SBA Paycheck Protection Program (PPP) loans to the credit bureaus? I thought that SBA 7(a) loans are required to be reported, but I don’t know if this extends to PPP loans.

Answer: You are right that there is a general requirement to report SBA loans. That being said, this requirement was not specifically cross referenced in the PPP rules, so it’s currently still not clear whether this requirement extends to PPP loans. While the intent does not appear to be to require institutions who currently do not report to begin the reporting process for PPP loans, the bank will ultimately have to make an internal judgment call until further guidance is issued.  


2. Reports to Credit Reporting Agencies In accordance with the Debt Collection Improvement Act of 1996, Lenders are required to report information to the appropriate credit reporting agencies whenever they extend credit via an SBA loan. Thereafter, they should continue to routinely report information concerning servicing, liquidation, and charge-off activities throughout the life-cycle of the loan. (See Chapter 26 for more information regarding credit reporting requirements for loans in charge-off status.)
SBA SOP 50 57 2, p. 28: https://www.sba.gov/sites/default/files/files/SOP_50_57_2_1.pdf



April
04/29/2020

Question: Regarding the recent Regulation D amendments, are these temporary or permanent changes? 

Answer: As the interim final rule is currently written, these changes do appear to be permanent, and not tied directly to the current COVID-19 pandemic: 

"In January 2019, the FOMC announced its intention to implement monetary policy in an ample reserves regime. Reserve requirements do not play a role in this operating framework. In light of the shift to an ample reserves regime, the Board announced that, effective March 26, 2020, reserve requirement ratios were reduced to zero percent. This action eliminated reserve requirements for thousands of depository institutions and helped to support lending to households and businesses. As a result of the elimination of reserve requirements on all transaction accounts, the retention of a regulatory distinction in Regulation D between reservable “transaction accounts” and non-reservable “savings deposits” is no longer necessary. In addition, financial disruptions arising in connection with the novel coronavirus situation have caused many depositors to have a more urgent need for access to their funds by remote means, particularly in light of the closure of many depository institution branches and other in-person facilities."
p. 5: https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20200424a1.pdf

Because this is an interim final rule, however, there is an allowance for comments--so it's possible that there can be changes to it after those are considered and a finalized rule is issued:

 
"III. Request for Comment The Board seeks comment on all aspects of this interim final rule. In particular, the Board seeks comment on the considerations that may lead depository institutions to choose, or to be required, to retain a numeric limit on the number of convenient transfers that may be made each month from a savings deposit."
p. 11: https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20200424a1.pdf



04/23/2020

Question: Should the bank return stimulus checks that are received through direct deposit for deceased or divorced recipients? Is there a possibility of reclamation?

Answer: According to a recent call in which several members of the Treasury spoke, banks may accept even single-party deceased payments because they have been screened and eligible based on date of death.  As for divorced parties, Banks may pay into joint accounts if that's how the payment is made even if the bank is aware the parties are now divorced. The Treasury members indicated that there should be no reclamation claim on the bank if $2,400 were deposited into the account, even if the parties are divorced. They indicated that the Treasury has no authority to hold the bank liable as long as the bank posted it properly according to the account number. 


04/16/2020

Question: With everything happening in regard to the COVID-19 pandemic, the Bank has been discussing all of our Business Continuity Planning options. Rescission is one of the areas that we could use some help with. What if we close a rescindable mortgage loan on Monday but then the bank has to close its branches on Tuesday? Would you give the borrowers another three business day rescission period when we open back up, or would you disperse on Friday as originally planned?

Answer: For the right of rescission, any day except for Sunday and the specific federal holidays mentioned is considered a business day, even if the bank is not open. There is not an express exception in that rule for national emergencies. The bank may consider seeing if the disbursement can be automated or disbursed by an employee remotely. 

"(6) Business day means a day on which the creditor's offices are open to the public for carrying on substantially all of its business functions. However, for purposes of rescission under §§ 1026.15 and 1026.23, and for purposes of §§ 1026.19(a)(1)(ii), 1026.19(a)(2), 1026.19(e)(1)(iii)(B), 1026.19(e)(1)(iv), 1026.19(e)(2)(i)(A), 1026.19(e)(4)(ii), 1026.19(f)(1)(ii), 1026.19(f)(1)(iii), 1026.20(e)(5), 1026.31, and 1026.46(d)(4), the term means all calendar days except Sundays and the legal public holidays specified in 5 U.S.C. 6103(a), such as New Year's Day, the Birthday of Martin Luther King, Jr., Washington's Birthday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving Day, and Christmas Day."
https://www.consumerfinance.gov/policy-compliance/rulemaking/regulations/1026/2/#a-6


"2. Rule for rescission, disclosures for certain mortgage transactions, and private education loans. A more precise rule for what is a business day (all calendar days except Sundays and the Federal legal holidays specified in 5 U.S.C. 6103(a)) applies when the right of rescission, the receipt of disclosures for certain dwelling- or real estate-secured mortgage transactions under §§ 1026.19(a)(1)(ii), 1026.19(a)(2), 1026.19(e)(1)(iii)(B), 1026.19(e)(1)(iv), 1026.19(e)(2)(i)(A), 1026.19(e)(4)(ii), 1026.19(f)(1)(ii), 1026.19(f)(1)(iii), 1026.20(e)(5), 1026.31(c), or the receipt of disclosures for private education loans under § 1026.46(d)(4) is involved. Four Federal legal holidays are identified in 5 U.S.C. 6103(a) by a specific date: New Year's Day, January 1; Independence Day, July 4; Veterans Day, November 11; and Christmas Day, December 25. When one of these holidays (July 4, for example) falls on a Saturday, Federal offices and other entities might observe the holiday on the preceding Friday (July 3). In cases where the more precise rule applies, the observed holiday (in the example, July 3) is a business day."
https://www.consumerfinance.gov/policy-compliance/rulemaking/regulations/1026/2/#2-a-6-Interp-2



04/09/2020

Question: Does Regulation O apply to PPP and bank insider?

Answer: The CARES Act nor the implementing regulations directly prohibit bank insiders from participating in the Paycheck Protection Program—however, one of the requirements of the PPP is compliance with the SBA's 120.110 and SOP 50 10 which defines eligibility, which contains and cross references some fairly broad restrictions.  That is not to say, assuming the insider is not ineligible, that they cannot apply for PPP loan at another institution. But the Interim Final Rule for the PPP cross references existing SBA restrictions for 7(a) loans—associates of lenders cannot be essentially any kind of owner of the applicant business.  This includes officers, directors, key employees or any owners—so it essentially cuts out all insiders (with only an extremely narrow circumstance for Reg O insider to not fall under SBA restrictions). Compliance Alliance is advising banks to comply with all Regulation O requirements as there is no specific exemption, as well as to establish a reciprocal program at another financial institution for PPP loans of your bank’s insiders.

See generally:

c. How do I determine if I am ineligible?
Businesses that are not eligible for PPP loans are identified in 13 CFR 120.110 and described further in SBA’s Standard Operating Procedure (SOP) 50 10, Subpart B, Chapter 2, except that nonprofit organizations authorized under the Act are eligible. (SOP 50 10 can be found at https://www.sba.gov/document/sop50-10-5-lender-development-company-loan-programs.)

https://home.treasury.gov/system/files/136/PPP--IFRN%20FINAL.pdf

III. INELIGIBLE TYPES OF BUSINESSES A. The Lender must determine whether the Applicant is one of the types of businesses listed as ineligible in SBA regulations (13 CFR § 120.110). Certain business types appearing on this list may be eligible under limited circumstances, as discussed below.
14. Equity Interest by Lender or Associates in Applicant Concern (13 CFR § 120.110(o)) 
a) A Lender or any of its Associates, may not obtain an equity interest, either directly or indirectly, in the Applicant. 
b) The only exception is when the Associate of the Applicant is a Small Business Investment Company (SBIC), in which case the requirements of 13 CFR § 120.104 apply. See also 13 CFR § 120.140 for a list of ethical requirements that apply to Lenders.
https://www.sba.gov/sites/default/files/2017-10/SOP%2050%2010%205%28J%29_FINAL_.pdf

"§120.110   What businesses are ineligible for SBA business loans?
The following types of businesses are ineligible:

...
(o) Businesses in which the Lender or CDC, or any of its Associates owns an equity interest;"
https://www.ecfr.gov/cgi-bin/text-idx?SID=40c56d244eaa72026eaf7b8c125bb7ec&mc=true&node=pt13.1.120&rgn=div5#se13.1.120_1110

Associate. (1) An Associate of a Lender or CDC is:
(i) An officer, director, key employee, or holder of 20 percent or more of the value of the Lender's or CDC's stock or debt instruments, or an Agent (as defined in §103.1 of this chapter) involved in the loan process; or
(ii) Any entity in which one or more individuals referred to in paragraphs (1)(i) of this definition or a Close Relative of any such individual owns or controls at least 20 percent.
https://www.ecfr.gov/cgi-bin/text-idx?SID=40c56d244eaa72026eaf7b8c125bb7ec&mc=true&node=pt13.1.120&rgn=div5#se13.1.120_1110


04/02/2020

Question: Does our bank’s initial Privacy Policy notice have to be on 8 1/2 x 11 size paper?

Answer: Assuming you are using the model forms, there is not a particular paper size required. However, you have to ensure that the font is easily readable, in at least 10-point.

Each page of the model form must be printed on paper in portrait orientation, the size of which must be sufficient to meet the layout and minimum font size requirements, with sufficient white space on the top, bottom, and sides of the content.

Section B(3)(c) of Appendix A to 12 CFR §1016: https://www.consumerfinance.gov/policy-compliance/rulemaking/regulations/1016/A/#c

Financial institutions that use the model form must use an easily readable type font. While a number of factors together produce easily readable type font, institutions are required to use a minimum of 10-point font (unless otherwise expressly permitted in these Instructions) and sufficient spacing between the lines of type.

Section B(3)(a) of Appendix A to 12 CFR §1016: https://www.consumerfinance.gov/policy-compliance/rulemaking/regulations/1016/A/#a



March

03/26/2020

Question: Our bank is filing a SAR for a customer that brought in $2,500 in cash on eight separate occasions. The account in question is owned by a husband and wife, and we are not 100% sure who brought it in the cash deposits. We have filed SARs previously but in those cases, we knew the husband made the deposits because they were over $3,000. Do we need to add both the husband and wife to the new SAR?

 

Answer: For SARs, the bank should only file Part I's on subjects known to be involved in the suspicious activity, so if you know or suspect the husband is involved but you do not know or suspect that the wife is involved, you'd complete a Part I on the husband and describe the activity of the unknown transactions in Part V, the narrative section.

Complete a Part I section on each known subject involved in the suspicious activity.

...
If the suspicious activity involves known and unknown subjects, complete a Part I section on each known subject and record the nature of the unknown subject(s) in Part V. Do not complete Part I records on the unknown subjects when there are known subjects.

SAR Instructions, p. 88 https://www.fincen.gov/sites/default/files/shared/FinCEN%20SAR%20ElectronicFilingInstructions-%20Stand%20Alone%20doc.pdf



03/19/20

Question: What type of concerns should the bank consider if we decided to host a podcast with one of our mortgage loan originators and one of his friends who is a realtor? Currently, the plan is for the podcast to discuss the housing market, conduct interviews, and talk about what our city has to offer.

Answer: The main concern here would be a potential RESPA Section 8 violation, which in general prohibits referral relationships between the bank and settlement service providers.

"(b) No referral fees. No person shall give and no person shall accept any fee, kickback or other thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or part of a settlement service involving a federally related mortgage loan shall be referred to any person. Any referral of a settlement service is not a compensable service, except as set forth in § 1024.14(g)(1). A company may not pay any other company or the employees of any other company for the referral of settlement service business."

https://www.consumerfinance.gov/policy-compliance/rulemaking/regulations/1024/14/

The bank should also follow its social media policy as I assume the bank will be sharing the podcast online. We also recommend including a disclaimer that the views expressed do not represent those of the bank.

Additionally, depending on the topics discussed, the bank may need to include certain disclosures. For example, if the podcast includes any home loan advertising, it must also include the "Equal Housing Lender" disclosure:  
https://www.fdic.gov/regulations/laws/rules/2000-6000.html). 

Finally, we suggest reviewing our Advertising and Marketing Review Checklists for further guidance on the requirements: 
https://compliancealliance.com/find-a-tool/tool/advertising-and-marketing-review-checklists.


03/12/20

Question: In some cases, our bank pulls an Automated Underwriting System (AUS) report, but ultimately not used in making the credit decision. Instead, the application is manually underwritten, and those results are used to make the credit decision. For HMDA purposes, do we still have to report the AUS that was pulled?

Answer: If the bank used the AUS results to evaluate the application, even if it was not used in the underwriting to make the credit decision, the bank should still report the AUS. 

1. Automated underwriting system data - general. Except for purchased covered loans
i. A financial institution that uses an AUS, as defined in § 1003.4(a)(35)(ii), to evaluate an application, must report the name of the AUS used by the financial institution to evaluate the application and the result generated by that system, regardless of whether the AUS was used in its underwriting process. For example, if a financial institution uses an AUS to evaluate an application prior to submitting the application through its underwriting process, the financial institution complies with § 1003.4(a)(35) by reporting the name of the AUS it used to evaluate the application and the result generated by that system.

https://www.consumerfinance.gov/policy-compliance/rulemaking/regulations/1003/4/#4-a-35-Interp-1



03/05/20

Question: Can I use proof of disclosing the Closing Disclosure to the borrower from the Title Company, or does the proof have to be from us the Lender?

Answer: As far as specific evidence of delivery for the Closing Disclosure, Reg. Z doesn't specifically require any one type of evidence. The Bank, however, would want to have documentation showing that it complied with TRID's delivery/timing requirements. Additionally, the regulation does permit settlement agents to provide the CD. Ultimately, however, the creditor remains responsible for ensuring compliance with applicable regulatory provisions.


(1) Provision of disclosures —
(i) Scope. In a transaction subject to paragraph (e)(1)(i) of this section, the creditor shall provide the consumer with the disclosures required under § 
1026.38 reflecting the actual terms of the transaction.
...
(iii) Receipt of disclosures. If any disclosures required under paragraph (f)(1)(i) of this section are not provided to the consumer in person, the consumer is considered to have received the disclosures three business days after they are delivered or placed in the mail.


12 CFR 1026.19(f)(1)(iii):
https://www.consumerfinance.gov/policy-compliance/rulemaking/regulations/1026/19/#f-1-iii

(v) Settlement agent. A settlement agent may provide a consumer with the disclosures required under paragraph (f)(1)(i) of this section, provided the settlement agent complies with all relevant requirements of this paragraph (f). The creditor shall ensure that such disclosures are provided in accordance with all requirements of this paragraph (f). Disclosures provided by a settlement agent in accordance with the requirements of this paragraph (f) satisfy the creditor's obligation under this paragraph (f).


12 CFR 1026.19(f)(1)(v)(i):
https://www.consumerfinance.gov/policy-compliance/rulemaking/regulations/1026/19/#f-1-v


February


02/27/20


Question: 
Our bank is trying to find the law or regulation that states what period of time the bank must give a customer to stop conducting excessive transactions before the savings account is converted or closed.

Answer: Reg. D discusses the requirement to monitor transfers in a footnote in the regulation, however, it does not specify a precise number of months which the customer has to "continue to violate those limits", in order for the Bank to close the account or take away the transfer and draft capacities. As a best practice recommendation, a three-month time frame is common among members as well as from regulators, but again, the regulation doesn't specifically set out a number.

...In order to ensure that no more than the permitted number of withdrawals or transfers are made, for an account to come within the definition of “savings deposit,” a depository institution must either:

(a) Prevent withdrawals or transfers of funds from this account that are in excess of the limits established by paragraph (d)(2) of this section, or

(b) Adopt procedures to monitor those transfers on an ex post basis and contact customers who exceed the established limits on more than occasional basis. For customers who continue to violate those limits after they have been contacted by the depository institution, the depository institution must either close the account and place the funds in another account that the depositor is eligible to maintain or take away the transfer and draft capacities of the account. An account that authorizes withdrawals or transfers in excess of the permitted number is a transaction account regardless of whether the authorized number of transactions is actually made. For accounts described in paragraph (d)(2) of this section, the institution at its option may use, on a consistent basis, either the date on the check, draft, or similar item, or the date the item is paid in applying the limits imposed by that section....

12 CFR 204.2(d)(2) FN 4:  https://www.ecfr.gov/cgi-bin/text-idx?SID=4cfab07594dfb576e5e767d0261cb1a4&mc=true&node=se12.2.204_12&rgn=div8



02/20/20
Question:
In regards to the six-transaction limit imposed in Regulation D, can a bank reduce this limit to only two transactions?

 

Answer:  Yes, the bank may set stricter limits than required under Reg. D. There is not a prohibition in doing using a stricter limit as long as it is disclosed in the bank's account agreement to avoid any potential UDAAP issues. 




02/13/20  

Question: Regarding CTRs, when there is an aggregated transaction, what are the requirements in order for the transaction to be considered an aggregated transaction?


Answer: The bank would report as an aggregated transaction only if, 1) the financial institution did not identify any of the individuals conducting the related transactions, 2) of all the transactions were below the reporting requirement, and 3) at least one of the aggregated transactions was a teller transaction. All three requirements must be met.

27. When do you check the “Aggregated transactions” box (Item 24)?

Filers should check box 24e “Aggregated transactions” (along with any other box applicable in Item 24) only in the following circumstance: 1) the financial institution did not identify any of the individuals conducting the related transactions, 2) all of the transactions were below the reporting requirement, and 3) at least one of the aggregated transactions was a teller transaction. If the aggregated transactions being reported included only deposits made via a night depository, the financial institution would not check “Aggregated transactions” as none of the aggregated transactions were a teller transaction; instead, the financial institution would check Item 24 “Night Deposit.” A “teller transaction” would include, but would not be limited to: the deposit or withdrawal of currency by an individual at the teller window, an individual making a loan payment with currency at the teller window or, an individual exchanging currency at the teller window. The option “Aggregated transactions” is not the same as Item 3 “Multiple transactions,” which can involve transactions that are above the reporting requirement.

Frequently Asked Questions Regarding the FinCen Currency Transaction Report (CTR) #27: https://www.fincen.gov/frequently-asked-questions-regarding-fincen-currency-transaction-report-ctr




02/06/20

Question: Our bank has a question for CRA reporting.  When we have a start-up businesses, do we report the revenue as "unknown" since there is no real revenue information (only projections)?

 

Answer:  For start-ups, the bank should use $0 if the business is pre-revenue. The bank will not use any pro-forma or projected revenue figures.

For a start-up business, the institution should use the actual gross annual revenue to date (including $0 if a new business has had no revenue to date). Although start-up businesses will provide the institution with pro forma projected revenue figures, these figures may not accurately reflect actual gross revenue and therefore should not be used.

A Guide to CRA Data Collection and Reporting (Page 14 of 2015 version): https://www.ffiec.gov/cra/pdf/2015_CRA_Guide.pdf 



January


01/30/20

Question: Can I use proof of disclosing the Closing Disclosure to the borrower from the Title Company, or does the proof have to be from us the Lender?

Answer: As far as specific evidence of delivery for the Closing Disclosure, Reg. Z doesn't specifically require any one type of evidence. The Bank, however, would want to have documentation showing that it complied with TRID's delivery/timing requirements. Additionally, the regulation does permit settlement agents to provide the CD. Ultimately, however, the creditor remains responsible for ensuring compliance with applicable regulatory provisions.


(1) Provision of disclosures —
(i) Scope. In a transaction subject to paragraph (e)(1)(i) of this section, the creditor shall provide the consumer with the disclosures required under § 
1026.38 reflecting the actual terms of the transaction.
...
(iii) Receipt of disclosures. If any disclosures required under paragraph (f)(1)(i) of this section are not provided to the consumer in person, the consumer is considered to have received the disclosures three business days after they are delivered or placed in the mail.


12 CFR 1026.19(f)(1)(iii):
https://www.consumerfinance.gov/policy-compliance/rulemaking/regulations/1026/19/#f-1-iii

(v) Settlement agent. A settlement agent may provide a consumer with the disclosures required under paragraph (f)(1)(i) of this section, provided the settlement agent complies with all relevant requirements of this paragraph (f). The creditor shall ensure that such disclosures are provided in accordance with all requirements of this paragraph (f). Disclosures provided by a settlement agent in accordance with the requirements of this paragraph (f) satisfy the creditor's obligation under this paragraph (f).


12 CFR 1026.19(f)(1)(v)(i):
https://www.consumerfinance.gov/policy-compliance/rulemaking/regulations/1026/19/#f-1-v



01/23/20

Question: We have a few questions about mortgage payments. Our core is set up so that mortgage payments are applied in the following order:

1. The monthly escrow is put into the escrow account.

2. The remainder is applied to interest.

3. If anything remains after interest is paid, it is put toward the principle.

Are we allowed to apply mortgage payments this way? Is there anything in regulation that dictates how to apply mortgage payments?


Answer: There is not a prohibition in doing that under the federal regulations. It would be up to the bank's loan agreement regarding how payments are applied. As long as the bank's loan agreement does not state otherwise, there should not be an issue with applying payments in that way.



01/16/20

Question: We do business in a state with dower rights. I just want to make sure that a spouse who is not on the title to real estate but uses the home as a primary residence does not receive the right to rescind—is this correct?


Answer:  That is correct. For purposes of the rescission rules, dower does not constitute an ownership interest.

An ownership interest does not include, for example, leaseholds or inchoate rights, such as dower.
Comment 2 to §1026.2(a)(11): https://www.consumerfinance.gov/policy-compliance/rulemaking/regulations/1026/2/#2-a-11-Interp-2



01/09/20   
Question: We send disclosures electronically and can be notified when the borrower has not accessed them by the Loan Estimate (LE) due date. Are we required to mail the disclosures on that day if the borrower hasn’t accessed the electronic docs? They are telling us they are having a problem once we are past the LE due date so we are mailing them then but it is past the due date. If our system logs that we sent it by the due date and the borrower had e-consented, are we okay?

Answer: The customer is considered to have received the LE three business days after the bank sends it, even if the customer has not opened it. There is not a regulatory requirement to then send the disclosures in paper form as well. However, doing so may be required under the bank's internal policy, or an investor's guidelines (if applicable). 

2. Electronic delivery. The three-business-day period provided in § 1026.19(e)(1)(iv) applies to methods of electronic delivery, such as email. For example, if a creditor sends the disclosures required under § 1026.19(e) via email on Monday, pursuant to § 1026.19(e)(1)(iv) the consumer is considered to have received the disclosures on Thursday, three business days later.
https://www.consumerfinance.gov/policy-compliance/rulemaking/regulations/1026/19/#19-e-1-iv-Interp-2