View a list of answered questions below. If you have any compliance questions or challenges, we have experts on hand to provide you with direct feedback. Submit Questions and our experts will deliver compliance support straight to your inbox.
Our credit cards are underwritten by our bank and then transferred to FIS for servicing. The card is never entered into our core system. The guarantor’s credit is pulled, but the business name can appear on the card. Would the Beneficial Ownership rule even apply, since we are pulling credit on the guarantor and not the actual business? If so, would that be the responsibility of our institution or FIS?
Answer: It appears your card is a co-branded card; according to FinCEN, co-branded credit cards are subject to the Beneficial Ownership/Customer Due Diligence rule. You will need to record the beneficial ownership information for these cards in some capacity, even if it is not in your core system. Although you are pulling credit on the guarantor, the line of credit is for the business entity, and you should determine its beneficial owners – who may not be just the guarantor.
Are Home Equity Lines of Credit included in the new loan originator compensation rules? If so, can an employer incent a loan originator based on the amount drawn versus the line amount?
Answer: HELOCs are exempt from the loan originator compensation rules. Financial institutions may incent loan originators based on the amount drawn.
What are the UDAAP requirements for handling oral complaints from consumers?3>
Answer: There are no regulatory requirements for how your institution should handle oral complaints from a UDAAP perspective. However, a best practice may involve tracking oral complaints, including those that may be phrased as more innocuous questions, using the same system that you use for written complaints. These best practices are described in detail in course 20383 – UDAAP: How to Prepare Your UDAAP Program.
Do the private mortgage insurance (PMI) requirements apply to FHA loans? For example, are we required to terminate PMI on an FHA loan when the loan-to-value (LTV) ratio reaches 78 percent?
Answer: FHA loans are subject to slightly different PMI requirements than conventional mortgage loans. For example, FHA loans are subject to certain loan term requirements in addition to LTV requirements. The FHA requirements are complex; you can visit the FHA website for more information.
Our current CIP requires that all, including non-signing, partners be identified and associated with the account. When our CIP was originally drafted, we interpreted the regulation that it requires all partners to be identified. See example below.
Example: Partnership has 1 general partner (Family Trust) and 6 limited partners (Individual trusts of the children/siblings). Two of the siblings are the Trustees of the Family Trust. We are debating whether or not we need to identify only the General Partner or if we need Trust Certifications from each of the limited partners as well. The limited partners each have a 16.5% interest. This seems like overkill, since they do not have authority to act on behalf of the partnership.
CIP regulations provide flexibility for institutions to establish their own policies on identifying the non-signatory beneficiaries of an account. You can change your bank policy so limited partners do not need to be identified on an account as long as the new policy is approved by your bank’s board of directors. However, be aware that regulatory examiners may question your institution on why your policy was changed to be less stringent. If you do change your policy, you will need to be ready to explain and defend the reasoning behind such a change.
I need some help with clarifying a section of Reg E. When a member opts in to Reg E they are opting into our overdraft protection services for ATM & one-time debit transactions, correct? If this is true, once the member’s use of the overdraft service has been revoked due to the reasons stated in the program do we have to cover their ATM & one-time debit transactions because they opted in? I don’t believe that this is true but I cannot seem to locate the Commentary 1.4 17B to see how this was all clarified when this first took effect. Currently this is all I have been able to find and I am under the belief that this states things as I have explained them in the above: 205.17(b)-2) Conversely, the financial institution is not required to pay an ATM or one-time debit card overdraft even if the consumer has consented to pay a fee. (Commentary 205.17(b)-3)
Answer: Even though the member opted-in, if they no longer qualify and their overdraft privileges have been revoked, you are not obligated to pay their ATM or one-time debit transactions – but you also cannot charge them if they overdraw their account through those types of transactions. Some institutions process transactions in real time, so if a member overdraws their account through an ATM or POS transaction, the institution can prevent/reject the transaction. Others institutions do not process transactions in real time, so even though the account is overdrawn, the real-time balance hasn’t updated. An ATM or POS transaction may process on an already overdrawn account and if the customer doesn’t qualify for overdraft privileges, and the transaction goes through, they can’t be charged.
I am having trouble understanding “exactly” was is considered an affiliate as it relates to the Ability to Repay Rules. We have a member of our Board of Directors, who is also a stock holder. He does the title work, title insurance and closes many of our real estate loans. The bank does not receive any of the proceeds from these services. His business is not connected to the bank in any way. Would he be considered an affiliate and would the fees paid for his services have to be considered in the points and fees calculations?
Answer: Like many other regulations, the Ability-to-Repay rule defines bank affiliates as set forth in the Bank Holding Company Act of 1956, which generally means that your board member is considered an affiliate only if he has control over your bank – for example, by owning 25 percent or more of your bank’s stock. If the board member does not have control of your bank, and your bank does not receive any of the proceeds from his title work, then he is not considered an affiliate and you do not need to include fees for his services in the points and fees for mortgages.
I have been reading about a Bank’s REMA (Reasonably Expected Market Area) vs. their Assessment Area for the Community Reinvestment Act. Is it a requirement that a Bank identify their REMA?
Answer: For now, only the FDIC is explicitly asking the banks it supervises about the REMA. However, the REMA is useful in fair lending analysis, particularly when looking for evidence of redlining. Therefore, it is a good idea for your institution to identify it REMA even if it is not supervised by the FDIC.
Can we purchase force-placed insurance (homeowner’s) that has coverage greater than the balance of the loan? Specifically, can we purchase coverage that equals the value of the property even when it is more than the balance of the loan?
Answer: Yes, you can purchase insurance that is greater than the outstanding value of the loan. The FDPA requires that the minimum insurance amount be the outstanding principal of the loan or the insurable value of the property, whichever is lower. If you can support the purchase of insurance for higher than the outstanding principal amount, such as through a replacement cost method, then you are free to do so.
As an FDIC regulated institution I wanted to inquire about notification requirements regarding adverse action. I am unsure if I am reading the regulation accurately in stating that Oral Notification by small-volume creditors is a loop hole to not having to issue a written adverse action notice. We definitely have less than 150 applications. Please advise.
Answer: You are correct; Regulation B has an exception for creditors that received fewer than 150 applications in the previous calendar year. Such institutions can provide a verbal Adverse Action Notice (instead of a written notice) and still be compliant with Regulation B. This exception does not conflict with any other federal regulation.
Is it acceptable to combine both the HUD Homeownership Counseling notice (i.e. the notice provided within 45 days of a loan secured by the borrower’s primary becoming delinquent) and the SCRA Disclosure (form HUD-92070) into one disclosure and be compliant with both requirements? Since there is a model SCRA notice, we looking to add a specific reference (below) for non-active duty service members to the top / bottom of the form.
Answer: For non-active service members: The Department of Housing and Urban Development (HUD) has approved local counseling agencies to assist those having financial difficulties. You may obtain a list of HUD-approved agencies in your area by contacting HUD at 1-800-569-4287, or visiting their website at www.hud.gov
There is no particular regulation that prohibits you from combining the SCRA Disclosure with the homeownership counseling disclosure for delinquent borrowers. However, because the SCRA Disclosure takes up an entire page, it is preferable to keep the homeownership counseling notice separate from the SCRA notice.
A member has verbally told me of some fraud on their debit card, so the Reg E 45/90 day clock starts ticking. Our card processor requires us to obtain the member’s signature in order for us to dispute the transactions. However, Reg E (as far as I understand) only requires their written notification for provisional credit. No matter how many times that I ask, the member is not getting me this written notification. How do I handle this?
Answer: I could make a final determination on the claim myself, but it would be entirely arbitrary. We rely on our card processor to do the research with the merchant, so I am unable to take any further steps to research the transaction. Would I be in compliance if I sent the member a letter stating something like “In order to continue processing your claim, I need the enclosed form signed and returned to me by such-and-such date or we will close your claim and assume you have resolved the error yourself?”
As you know, you cannot delay the start of the investigation if the member does not provide a signature. However, you can request that the member sign a written error conformation form. If you do not receive the signature within ten business days, then you do not have to provisionally credit the member’s account, but you still must complete the investigation to the best of your ability.
We have a loan client that is a bit eccentric in which she will write multiple checks for $1.00 and request they be processed as principal reductions, then she would go to the teller line with .01cent to be applied to principal. I know there is compliance issues surrounding the timing of posting payments is there anything surrounding minimum payment amounts? Please advise.
Answer: Currently there are no particular compliance issues regarding minimum payment amounts. Your institution is free to set reasonable procedures for the acceptance of payments, and you are free to do something else with payments that do not conform to your procedures.
However, be aware that starting in 2014 you will not be able to return a non-conforming payment that is less than the minimum amount set by your institution. Instead, you will have to either post the payment or put it in a suspended account until the borrower provides more funds and brings the payment up to the minimum amount.
If a loan is going to escrow for all insurance (flood & hazard) and taxes, can the 1st year of flood be paid at closing or does it need to be paid BEFORE closing? Also, can the loan close the same day the flood is in effect?
Answer: The Flood Disaster Protection Act forbids a bank from making, increasing, extending, or renewing 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. That means flood insurance must be in place at the time of loan closing. Generally, insurance companies require the premium to be paid before the policy is effective, although this might vary from company to company.
Terms and Conditions
The Expert Opinion service in BAI L&D Connect® is provided for general information and is not legal advice. Although the statements in this community are derived from sources that BAI Learning & Development considers reliable, BAI does not guarantee their accuracy and any such information may be incomplete or condensed. Also views expressed in this community are based on research materials available from sources considered reliable. It should not be assumed that all resources have been reviewed, and views are subject to change on the basis of additional or new research, new facts or developments. BAI Learning & Development is not a law firm, does not offer, and is not authorized to provide, legal advice or counseling in any jurisdiction. BAI disclaims any and all liability or responsibility related to or arising out of any user’s use of L&D Connect or the content therein.