LENDING COMPLIANCE 101 - Total Training Solutionsttsmedia.ttstrain.com/CULending101082814.pdf · 2015-02-10 · Loans detrimental to service members Payday loans Vehicle title loans

1

FOR CREDIT UNIONS

LENDING COMPLIANCE 101

2

TOTAL TRAINING SOLUTIONS

with

ANNE LOLLEY

2

PURPOSE OF THIS WEBINAR

Rules are overwhelming/unrelated

Webinar offers information in one place

Note: Summaries not detailed

Nice reference booklet Part 1: Compliance rules (listed alphabetically)

Part 2: Supplemental memos, charts, sample forms

Cites

Index

3

SOME REGS HAVE A NEW HOME

Regulations transferred to Consumer Financial Protection Bureau:

Regulation B: Equal Credit OpportunityRegulation C: Home Mortgage DisclosureRegulation D: Alternative Mortgage Parity ActRegulation E: Electronic Fund TransfersRegulation F: Fair Debt Collection Practices ActRegulation G: SAFE Mortgage Licensing Act –Registration of Residential Mortgage Loan OriginatorsRegulation H: SAFE Mortgage Licensing Act – State Compliance and Bureau Registration Regulation I: Disclosure Requirements for Institutions Lacking Federal Deposit InsuranceRegulation J: Land RegistrationRegulation K: Purchasers’ Revocation Rights, Sales Practices and StandardsRegulation L: Special Rules of PracticeRegulation M: Consumer LeasingRegulation N: Mortgage Acts and Practices-AdvertisingRegulation O: Mortgage Assistance Relief ServicesRegulation P: Privacy of Consumer Financial InformationRegulation V: Fair Credit ReportingRegulation X: Real Estate Settlement Procedures ActRegulation Z: Truth in LendingRegulation DD: Truth in Savings

4

3

NO MEMORIZING!

5

PART I: THE FEDERAL COMPLIANCE LAWS

6

4

APPRAISALS AND EVALUATIONS

Every loan secured by real property

OVER $250,000 –APPRAISAL

Exception – Business loan $1 million or less

Exception – Refinancings

$250,000 OR LESS – EVALUATION

___________

Existing A/E okay if still valid–must document!

Be sure to review

Before loan is closed

7

A

EVALUATION

BANK SECRECY ACT

Applicable if loan is: Over $10,000

Not secured by real estate

Show purpose of loan

No general terms Business Personal NOT ACCEPTABLE Personal expenses

8

A

PURPOSE

5

CREDIT PRACTICES RULE – REG AA

All consumer loans - except loans to purchase real estate

Prohibits:Confession of judgment

Assignment of wages

Pyramiding late fees

Security interests in existing household goods

Requires Notice to Cosigner

9

A

Technically repealed . . .but principals remain sound.

CUSTOMER IDENTIFICATION PROGRAM (CIP)

New customers only

Before closing: IDENTIFY Name

Date of birth

Address

Taxpayer identification number (TIN or EIN)

Reasonable time after closing: VERIFY Driver’s license

Other as required by bank policy

10

A

6

ENVIRONMENTAL RISK

Loans secured by real property

Initial analysis Present and past uses of property

Governmental contacts

If problem – investigate further (policy)

Due diligence will protect against: Liability on mortgaged property

Worthless collateral

Emphasis for credit union examiners

11

A

EQUAL CREDIT OPPORTUNITY ACT – REG B

Every loan—including business/ag

Prohibits discrimination

Monitoring requirements If loan is to purchase/refinance principal dwelling + secured by dwelling

Ethnicity, race, sex, marital status and age

Substitute monitoring programs okay (HMDA)

Written application Purchase/refinancing of applicant’s dwelling

Secured by same dwelling12

A

7

ECOA – REG B . . . CONTINUED

Adverse action notices Consumer Large business – gross revenues >$1 million Small business – can use consumer rules

Intent to apply for joint credit

Signature requirements – individual applications Individual qualifies – cannot require another signer Individual does not qualify – can require another signer Security documents – can require all owners to sign

13

ECOA – REG B . . . CONTINUED

Copy-of-Appraisal Rules

Applies to all loans (including commercial)

Applies to loans secured by first lien on dwelling

Copy-of-Appraisal Notice (3 business days after application)

Provide Copy of Appraisal Promptly upon completion . . . but at least 3 business daysbefore closing

Applicant can waive timing –give by closing

No charge for copies

14

NEW

8

E-SIGN ACT

Electronic disclosures to consumers

Generally Electronic consumer consent Disclosure prior to consent

Special rules Reg B Reg Z

15

A

FAIR CREDIT REPORTING ACT

Will discuss two rules:

1. FACTA Credit Score Disclosures2. Risk-Based Pricing Disclosures

16

9

1. FACTA CREDIT-SCORE DISCLOSURES

Applicable if: Loans is secured by residential property

Bank uses credit score

FACTA – 2003

Credit Score Disclosures Notice to Home Loan Applicant

Disclosure of Credit Score Information

17

A

SAME INFO AS RISK-BASED-PRICING

DISCLOSURE

NOT REQUIRED IF RISK-BASED-PRICING DISCLOSURE IS PROVIDED

2. RISK-BASED PRICING DISCLOSURES

2003 rule . . . Not implemented until 2011

CFPB’s Reg V

Consumer loans only

Two options - Option 2 is usual option Applicable when risk-based pricing

Determine on loan-by-loan basis

Give Credit Score Notice

18

TRIGGERED BY RISK-BASED PRICING,NOT BY PULLING CREDIT SCORE . . .

BUT MUST GET CREDIT SCORE TO COMPLETE THE NOTICE!

TWO TYPES OF NOTICES

SECURED BY REAL ESTATE

NOT SECURED BY REAL ESTATE

10

FAIR HOUSING

Loans to finance or refinance: Purchase/construction/improvement/repair/maintenance of a dwelling

Secured by a dwelling

Prohibits discrimination

Advertising rules Indicate that institution will not discriminate

Logo or spoken words

Required Poster - Equal Housing Lender Poster (NCUA)

Equal Housing Opportunity Poster (HUD)

19

A

FLOOD DISASTER PROTECTION ACT

Any loan secured by a building Determination

Whether building in SFHA Whether community participates in NFIP

Notice If building is in flood hazard area Must be acknowledged At least 10 days before closing

Require insurance If building in flood hazard area AND Community participates in flood program

Force place if necessary

20

A

11

FLOOD INSURANCE . . . CONTINUED

AMOUNT OF INSURANCE

21

OUTSTANDING PRINCIPAL BALANCE

OF THE LOAN

“INSURABLE VALUE

ORLESSER

OF


Prior Determinations

Okay on refinancings, renewals, extensions if: Less than 7 years old No map revisions or updates

Be safe – use recertification

Can never be used on new loans

22

ARE YOU SURE?

12


Manufactured homes – if it can’t be hauled off to avoid flood, subject to flood insurance rules.

Escrowing premiums – if bank requires escrow account for other purposes (taxes, insurance), must also escrow flood insurance premiums.

23

HOME MORTGAGE DISCLOSURE ACT – REG C

HMDA institutions - Assets in excess of $43million Home/branch in MSA

Must report data on these loans Home-purchase Home improvement SPECIAL DEFINITIONS Refinancing

24

A

13

HOMEOWNERS PROTECTION ACT

When PMI on home mortgage

From Homeowners Protection Act of 1998

Not applicable if FHA/VA loan or lender-paid PMI

Termination/cancellation rules 20% equity – cancel upon request

22% equity – automatically terminate

Required disclosures and notices Initial

Annual

At cancellation or termination

25

A

EXCEPTIONS

HIGH-RISK LOANPAYMENTS NOT CURRENT

OTHER LIENS

SEE BOOKLET FOR SAMPLE ANNUAL DISCLOSURE

HUD HOMEOWNERSHIP COUNSELING

HUD HOMEOWNERSHIP COUNSELING NOTICE Delinquent homeowner

Within 45 days of delinquency

NEW RELATED RULES High-cost mortgages (Reg Z)

List of Counselors (RESPA)

26

14

LOAN-TO-VALUE LIMITS

All loans secured by real estate

27

A

LOAN CATEGORY LOAN-TO-VALUE LIMITS

RAW LAND 65%

LAND DEVELOPMENT 75%

CONSTRUCTION• COMMERCIAL, MULTI-FAMILY, NON-RESIDENTIAL• 1-TO-4 FAMILY RESIDENTIAL

80%85%

IMPROVED PROPERTY 85%

OWNER-OCCUPIED 1-TO-4 FAMILYAND HOME EQUITY

IF > 90% GET MORTGAGE INSURANCE OR COLLATERAL

CONSIDERED “BEST PRACTICES” FOR CREDIT UNIONS

PRIVACY OF CONSUMER FINANCIAL INFORMATION

Consumer loans

New customer

New policy

Initial privacy notice - at or before closingAnnual privacy notice

28

A

15

REAL ESTATE SETTLEMENT PROCEDURES ACT

Loan secured by real property with dwelling/MH

Exemptions 25 acres or more Business/ag loans Construction/bridge loans

29

A

SEE BOOKLET FOR NIFTY

“CHEAT SHEET”

RESPA . . . CONTINUED

No unearned fees

Early disclosures – within 3 days of “application” Booklet Good Faith Estimate (and list of providers) Servicing Disclosure - first mortgages only List of Homeownership Counseling Organizations

30

EARLY DISCLOSURES NOT REQUIRED IF:

DENIED/WITHDRAWN WITHIN THREE-DAY PERIOD

SEE BOOKLET FOR REFERRAL FEE CHECKLIST

16

RESPA . . . CONTINUED

Settlement Statement at closing (HUD-1/1A)

Escrow Requirements Limits and calculation rules Initial Escrow Account Statement Annual Escrow Account Statement

Required-Provider Disclosure

31

RESPA . . . NEW CFPB RULES

.

32

SOME EXEMPTIONS FOR SMALL SERVICERS

Services 5,000 or fewer mortgage loans and creditor of every loan it services

17


List of homeownership counseling organizations 3 business days after application

10 organizations closest to applicant’s location

Error resolution Acknowledge within 5 business days

Correct and notify within 7 business days (extensions possible)

Information requests Acknowledge within 5 business days

Provide requested information within 10 business days (30 days for some)

33

NEW


Force-Place Insurance Cannot charge until two notices

Cancel duplicate insurance within 15 days

Refund fees for overlapping coverage

Cannot force-place if escrow account (exception for small servicers)

Rule does not cover flood insurance

Policies & Procedures Providing information

Loss mitigation

Oversight of service providers

Transferring information

Error-resolution and information-requests

34

SMALL SERVICERS EXEMPT

NEW

18


Early Intervention with Delinquent Consumers Establish contact by 36th day

Written information by 45th day

Continuity of Contact with Delinquent Consumers Assign personnel to help by 45th day

Ensure personnel can be reached by phone

Ensure timely responses to phone messages

35



NEW


Loss Mitigation Procedures - Generally Help consumers apply for loss mitigation Evaluate application within 30 days

Inform of options

Evaluate appeals

Refrain from foreclosure during evaluation

Loss Mitigation Procedures for Small Servicers Cannot file for foreclosure unless loan is more than 120 days delinquent

No judgment/sale if consumer is performing on loss mitigation agreement

36


NEW

19

SECURITIES EXCHANGE ACT – REG U

Loan is secured by stock

Purchase secured stock – limited to 50% of market value

Secured by margin stock and loan >$100,000 – U-1 form

Custody/control of secured stock – SEC verification

37

A

SERVICEMEMBERS CIVIL RELIEF ACT

Persons in military service Active duty National Guard – active duty >30 days

Formerly Soldiers and Sailors Act

Existing loan – lower rate to 6%

Limits on foreclosure

38

A

MORE INFORMATION IN BOOKLET

20

SERVICE MEMBERS & DEPENDENTS RULE

Loans detrimental to service members

Payday loans

Vehicle title loans

Tax refund anticipation loans

39

A

• 91 days or less• $2,000 or less• Holding check/EFT authorization

• 181 days or less• Secured by vehicle• Non-purchase

Repay withtax refund

SERVICE MEMBERS . . . CONTINUED

Identify borrower – Active service member or dependent? Special identification form

If active service member/dependent Calculate and disclose MAPR (includes credit insurance) Statement – financial assistance available Disclosures - written and oral Protective loan limitations

40

PAGE 18

21

TENANTS IN FORECLOSURE

When bank forecloses on residential property with tenants

Notice of need to vacate 90 days in advance

41

A

TRUTH IN LENDING – REG Z

Consumer-purpose loans

42

A

EXEMPT

NON-REAL ESTATE LOANS OVER $53,500

INCREASED FROM $25,000

22

TRUTH IN LENDING . . . CONTINUED

Initial disclosureClosed-endOpen-end

Periodic disclosures (open-end)

43


Early disclosures (ELYTIL)

Required when: Loan secured by consumer’s dwelling AND Loan subject to RESPA

Within 3 business days after application

Inaccurate APR – give corrected disclosures

Waiting period . . . cannot close until: 7th business day after bank mails/delivers original 3rd business day after consumer receives correction

44

SATURDAY IS ALWAYS A “BUSINESS DAY”

23


HELOCs – special disclosures and rules

Adjustable-rate-mortgages disclosures Secured by borrower’s principal dwelling Greater than one year

45


Right of Rescission

Applies to a loan secured by a principal dwelling

Exemptions Residential Mortgage Transaction [loan to buy/build] Refinancing with no new money

Can cancel within 3 business days

Give Notice of Right to Rescind

46

SATURDAY IS ALWAYS A “BUSINESS DAY”

SEE DETAILED MEMO ON PAGE 28

24


Advertising rules – for consumer loans

Credit card applications and solicitations

High Cost Mortgages (HOEPA loans) Applies if:

Secured by borrower’s principal dwelling High rates or fees

Special disclosures and restrictions New rules (later)

47


Higher-priced mortgage loans

Applies when: Loan is secured by consumer’s principal dwelling APR exceeds average prime offer rate by:

1.5% or more (first mortgage) 3.5% or more (second mortgage)

Escrow requirements (later)

New appraisal rules (later)

48

25


Private education loans

If any part of a loan is for post-secondary educational expenses Three new disclosures:

At application At loan approval After borrower accepts

Self-certification form Three-day right of rescission Not applicable if:

Open-end credit or Secured by real estate

49

EDUCATIONAL EXPENSES

• Tuition and fees• Books• Supplies• Miscellaneous personal expense• Room and board

TRUTH IN LENDING . . . NEW CFPB RULES

50

26

TRUTH IN LENDING . . . ABILITY TO REPAY

New Ability-to-repay rules

For closed-end loans secured by a dwelling

Not limited to first liens or primary dwellings

Exempt loans: HELOCs

Temporary/bridge loans of 12 months or less

51

NEW


Ability-to-repay rules (continued)

Reasonable, good faith determination of ability-to-repay

Consider and verify: Income or assets

Employment status

Monthly mortgage payment

Monthly payment on simultaneous loan secured by same property

Monthly payments for property taxes and insurance

Debts, alimony and child-support obligations

Monthly debt-to-income (DTI) ratio (no specific threshold)

Credit history

52

NEW

27


Qualified mortgages

Easier alternative to ATR requirements

Usual features (but some exceptions): No negative amortization, balloon payment, interest-only

DTI cannot exceed 43%

Limited points and fees

Bank benefits Presumption of ATR compliance

Eased underwriting requirements

Loan exempt from new HPML appraisal rules

53

FOUR TYPESGeneral

Temporary

Balloon-Payment

Small-Creditor Portfolio

NEW

TRUTH IN LENDING . . . ARM / HIGH-COST MORTGAGES

New ARM adjustment notices Initial notice – 210-240 days before first payment at new rate

Ongoing notice – 60-120 days before payment change

New high-cost mortgage rules Formerly called “HOEPA” loans

New triggers

Purchase-money loans now covered (formerly exempt)

Cannot close without a certificate of homeownership counseling

Counseling must occur after RESPA good faith estimate

54

NEW

28

TRUTH IN LENDING . . . HPML APPRAISAL RULES

New HPML appraisal rules

Appraisal required No existing appraisals

No evaluations

Appraiser must visit interior

Give right-to-copy notice within 3 business days after application

Deliver copy of appraisal at least 3 business days before closing Delivery occurs 3 business days after mailing (or as otherwise evidenced)

No timing waiver permitted

Additional appraisal for some flipped properties

55

NEW

TRUTH IN LENDING . . . HPML ESCROW RULES

New HPML escrow rules

5-year minimum

Exemption for small banks in rural/underserved counties

Most covered loans in rural/underserved counties

No more than 500 first-lien dwelling loans in prior year

Less than $2.028 billion in assets

No escrow accounts for consumer loans Okay if bank complied with earlier HPML escrow rules

Can maintain those existing escrow account

56

NEW

29

TRUTH IN LENDING . . . LOAN ORIGINATOR RULES

New loan originator rules

Compensation restrictions 3-year record retention Prohibition on steering Qualification requirements Screening requirements Training requirements Name/NMLSP on loan documents Prohibition of arbitration clauses Prohibition on financing credit insurance

57

NEW

TRUTH-IN-LENDING . . . SERVICING RULES

Payoff statements – within 7 days

Periodic statements for mortgage loans

Prompt crediting of payments Same ole, same old (credit on day of receipt) Only if payment covers principal/interest/escrow If not, may hold in suspense account Effective cutoff time – must notify in writing

58


NEW

30

UNIFORM CONSUMER CREDIT CODE

Consumer-purpose loans in certain states Model consumer-protection law

Not covered here

Adopted by only nine states Colorado

Idaho

Indiana

Iowa

Kansas

Maine

Oklahoma

Utah

Wyoming

59

AUCCC RULES

RatesFees

DisclosuresBalloon payments

DefaultRepossession

PART 2: MEMOS AND CHARTS

60

31

SUPPLEMENTAL MEMOS AND CHARTS

Appraisal and Evaluation Chart – 26

Adverse Action Requirements – 27

Right-of-Rescission Memo - 28

Right-of-Rescission Applicability Chart – 32

RESPA Applicability Cheat Sheet - 33

RESPA and Referral Fees Checklist– 34

Crediting Loan Payments Memo – 35

61

SUPPLEMENTAL MEMOS AND CHARTS

PMI Annual Disclosure – 36

Tenants in Foreclosure Sample Notice – 37

Business Documents Chart – 38

SCRA Memo – 39

SCRA Notice – 42

SCRA Sample Policy – 43

New CFPB Rules Chart – 4462

INDEX – 49

32

63

64

Total Training SolutionsInfo@ttsTrain.com1-800-831-0678CUWebinars.comttsTrain.com

Upcoming Webinars

• September 3 - Do’s and Don’ts on Checks

• September 8th - The Art & Science of Asking Questions

• September 17 - Robbery Procedures, Counterfeit and Fraudulent Items: Program for Credit Unions

• September 24 - Best-Ever Compliance Checklists for Consumer Loans

• October 6th - Build a No-Excuses Sales Environment

• October 16 - Handling Power of Attorney Documents

• October 22nd - Flood Insurance

• October 29th - Opening Accounts for Nonresident Aliens

• November 4th - New Share Member Account Interview

Anne [email protected] ext. 4

Thanks Again!