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Total Training Solutions
LENDING COMPLIANCE 101
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with
ANNE LOLLEY
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CONTACT INFORMATION
Anne Lolley____
877-778-5192 x4
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PURPOSE OF THIS WEBINAR
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Rules appear overwhelming. . . unrelated
Here: All rules covered in one place
Note: Summaries . . . no detailed information
Reference booklet Part 1: Federal compliance requirements (listed alphabetically)
Part 2: Supplemental memos, charts, sample forms
Part 3: Index
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NO MEMORIZING / NOTE TAKING!
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SOME REGS HAVE A NEW HOME
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Regulations transferred to CFPB . . .Regulation B: Equal Credit OpportunityRegulation C: Home Mortgage DisclosureRegulation E: Electronic Fund TransfersRegulation F: Fair Debt Collection Practices ActRegulation M: Consumer LeasingRegulation P: Privacy of Financial InformationRegulation V: Fair Credit ReportingRegulation X: Real Estate Settlement Procedures ActRegulation Z: Truth in LendingRegulation DD: Truth in Savings
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FEDERAL COMPLIANCE REQUIREMENTS
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APPRAISALS AND EVALUATIONS
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Every loan secured by real property
OVER $250,000 – APPRAISAL
Exception – Business loan $1 million or less
Exception – Refinancings
$250,000 OR LESS – EVALUATION
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May use existing A/E if still valid–must document!
Be sure to review
Before loan is closed
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EVALUATION
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BANK SECRECY ACT - PURPOSE
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Applicable if loan is: Over $10,000
Not secured by real estate
Document purpose of loan
No general terms Business Personal NOT ACCEPTABLE Personal expenses
APURPOSE
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
CREDIT PRACTICES RULE
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Technically repealed . . .but principles remain sound.
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CUSTOMER IDENTIFICATION PROGRAM (CIP)
New customers only
Before closing: IDENTIFY Name
Date of birth
Address
Taxpayer identification number (SSN or EIN)
Reasonable time after closing: VERIFY Driver’s license
Other as required by bank policy
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ENVIRONMENTAL RISK
Loans secured by real property
Initial analysis• Present and past uses of property
• Governmental contacts
If problem – investigate further as per policy
Due diligence will protect against: Liability on mortgaged property
Worthless collateral
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A
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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 dwelling
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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
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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 Must be received at least 3 business days before closing If mail/e-mail: Allow 3 business days for delivery (then wait 3 days) Applicant can waive timing
Must receive waiver at least 3 days before closing
Still provide copy by closing
No charge for copies
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E-SIGN ACT
Electronic disclosures to consumers
Permitted if: Disclosure (before consent)
Electronic consumer consent
Disclosure: Right to have paper documents
Right to withdraw consent
Whether consent applies to a particular transaction
Categories of records that may be electronically provided
How to withdraw consent and update contact information
How to obtain a paper copy and whether a fee will be charged
Hardware and software requirements
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FAIR CREDIT REPORTING ACT – REG V
Risk-Based Pricing Disclosures
Applies to consumer loans with risk-based pricing
Two options - Option 2 is usual option If risk-based pricing
Give Credit Score Notice
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TRIGGERED BY RISK-BASED PRICING,NOT BY PULLING CREDIT REPORT . . .
BUT MUST GET CREDIT REPORTTO COMPLETE THE NOTICE!
TWO TYPES OF NOTICES
1. SECURED BY REAL ESTATE
2. NOT SECURED BY REAL ESTATE
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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 lender will not discriminate
Logo or spoken words
Required Poster - Equal Housing Lender Poster (NCUA)
Equal Housing Opportunity Poster (HUD)
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FLOOD DISASTER PROTECTION ACT
Make, increase, extend or renew a 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 Old rule – after 45-day notice New rule – can force place immediately
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FLOOD INSURANCE . . . CONTINUED
AMOUNT OF INSURANCE
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OUTSTANDING PRINCIPAL BALANCE
OF THE LOAN
“INSURABLE VALUE
ORLESSER
OF
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FLOOD INSURANCE . . . CONTINUED
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.
New escrow rules coming
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FLOOD INSURANCE . . . CONTINUED
New rule on detached structures: Insurance not required if structure:
On residential property
Detached from primary residence
Not used as a residence
Lender may require insurance
Effective March 21, 2014
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HOME MORTGAGE DISCLOSURE ACT – REG C
HMDA institutions - Assets in excess of $44 million Home/branch in MSA
Must report data on these loans Home-purchase
Home improvement SPECIAL DEFINITIONS Refinancing
Changes on the way
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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
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EXCEPTIONS
HIGH-RISK LOANPAYMENTS NOT CURRENT
OTHER LIENS
SEE BOOKLET FOR SAMPLE ANNUAL DISCLOSURE
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HUD HOMEOWNERSHIP COUNSELING NOTICE
If delinquent homeowner
Provide within 45 days of delinquency
Includes SCRA Notice
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LOAN-TO-VALUE LIMITS
All loans secured by real estate
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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
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PRIVACY OF CONSUMER FINANCIAL INFORMATION
Consumer loans New customer
New policy
Initial privacy notice - at or before closing Annual privacy notice
Can be posted on website (in some cases)
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REAL ESTATE SETTLEMENT PROCEDURES ACT
Loan secured by real property with dwelling/MH
Exemptions 25 acres or more Business/ag loans Construction/bridge loans
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SEE BOOKLET FOR NIFTY
“CHEAT SHEET”
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RESPA . . . CONTINUED
SOME EXEMPTIONS FOR SMALL SERVICERS
Services 5,000 or fewer mortgage loans and is the creditor of every loan it services
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RESPA . . . CONTINUED
Application Rule Name
SSN
Property address
Monthly income
Estimate of property value
Loan amount requested
Any other information deemed necessary by lender
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
SMALL SERVICERS EXEMPT
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RESPA . . . CONTINUED
Early Disclosures – within 3 days of application Settlement Cost Booklet
Good Faith Estimate
Servicing Disclosure
List of Homeownership Counseling Organizations
Early Intervention with Delinquent Consumers Establish contact by 36th day
Written information by 45th day
Error resolution Acknowledge within 5 business days
Correct and notify within 7 business days (extensions possible)
SMALL SERVICERS EXEMPT
NOT REQUIRED IF:DENIED / WITHDRAWN WITHIN 3 DAYS
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RESPA . . . CONTINUED
Escrow Requirements Limits and calculation rules
Initial Escrow Account Statement
Annual Escrow Account Statement
Force-Place Insurance Cannot charge until two notices
Cancel duplicate insurance within 15 days
Refund fees for overlapping coverage
If escrow . . . cannot force-place (exception for small servicers)
Rule does not cover flood insurance
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RESPA . . . CONTINUED
List of Homeownership Counseling Organizations 3 business days after application
10 organizations closest to applicant’s location
Information Requests Acknowledge within 5 business days
Provide requested information within 10 business days (30 days for some)
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RESPA . . . CONTINUED
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
Special Loss-Mitigation Rules 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
SMALL SERVICERS EXEMPT
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RESPA . . . CONTINUED
Required Policies & Procedures Providing information
Loss mitigation
Oversight of service providers
Transferring information
Error-resolution and information-requests
Settlement Statement at closing (HUD-1/1A)
Unearned Fee Prohibition
SMALL SERVICERS EXEMPT
REFERRAL FEE CHECKLIST
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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
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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
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MORE INFORMATION IN BOOKLET
SERVICE MEMBERS & DEPENDENTS RULE
Loans detrimental to service members
Payday loans
Vehicle title loans
Tax refund anticipation loans
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• 91 days or less• $2,000 or less• Holding check/EFT authorization
• 181 days or less• Secured by existing vehicle
Repay withtax refund
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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
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TENANTS IN FORECLOSURE
When bank forecloses on residential property with tenants
Helping Families Save Their Homes Act of 2009
Provide notice of need to vacate
90 days in advance
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TRUTH IN LENDING – REG Z
Consumer-purpose loans
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EXEMPT
NON-REAL ESTATE LOANS OVER $54,600
Increased to $54,600 for 2015
ORIGINALLY $25,000
TRUTH IN LENDING . . . CONTINUED
Ability-to-Repay
For closed-end loans secured by a dwelling
Exempt loans: HELOCs
Temporary/bridge loans of 12 months or less
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
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TRUTH IN LENDING . . . CONTINUED
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 (in case you’re sued)
Eased underwriting requirements
Loan exempt from special HPML appraisal rules
FOUR TYPESGeneral
Temporary
Balloon-Payment
Small-Creditor Portfolio
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TRUTH IN LENDING . . . CONTINUED
Adjustable-Rate-Mortgages Disclosures Secured by borrower’s principal dwelling Greater than one year
Advertising Rules – for consumer loans
Credit Card Applications and Solicitations
Early Disclosures (ELYTIL)
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TRUTH IN LENDING . . . CONTINUED
High-Cost Mortgages (HOEPA loans)
Formerly called “HOEPA” loans
Applies if: Secured by borrower’s principal dwelling
High rates or fees, certain prepayment penalties
Special disclosures and restrictions
New triggers (purchase-money loans now covered)
Cannot close without a certificate of homeownership counseling
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TRUTH IN LENDING . . . CONTINUED
Higher-Priced Mortgage Loans
Applies when: Loan is secured by consumer’s principal dwelling APR exceeds APOR by 1.5% (1st mortgage) / 3.5% (2nd mortgage)
Escrow requirements
Special appraisal rules
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TRUTH IN LENDING . . . CONTINUED
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
Must be received at least 3 business days before closing Allow 3 business days for delivery (or as otherwise evidenced)
No timing waiver permitted
Additional appraisal for some flipped properties
EXEMPT
Qualified mortgagesBridge loans 12 months or less
Initial constructionSecured by manufactured home
Streamlined refinancings$25,500 or less
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TRUTH IN LENDING . . . CONTINUED
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
NOTE NEW RULES THAT CHANGE THE
DEFINITION OF “RURAL”
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TRUTH IN LENDING . . . CONTINUED
HELOCs – special disclosures and rules
Loan Originator Rules
Compensation restrictions
Prohibition on steering
Qualification requirements
Screening requirements
Training requirements
Name/NMLSP on loan documents (application, note, mortgage)
Prohibition on financing credit insurance
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TRUTH IN LENDING . . . CONTINUED
Payoff Statements –Within 7 days
Periodic Statements (Open-End)
Periodic Statements (Mortgage Loans)
Prompt Crediting of Payments
Same ole, same old (credit on day of receipt)
Clarifies rules for partial payments
Effective cutoff time – must notify in writing
SMALL SERVICERS
EXEMPT
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TRUTH IN LENDING . . . CONTINUED
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
EDUCATIONAL EXPENSES
• Tuition and fees• Books• Supplies• Miscellaneous personal expense• Room and board
CONSIDER
Revising loan policy to prohibit . . . unless:
(1) Open-end credit or (2) Secured by real estate
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TRUTH IN LENDING . . . CONTINUED
Right of Rescission
Applies to a loan secured by consumer’s 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
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SATURDAY IS ALWAYS A “BUSINESS DAY”
SEE DETAILED MEMO ON PAGE 30
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TRUTH IN LENDING . . . CONTINUED
TRID (Integrated Disclosures)
Loan Estimate 3 business day after application
7 business day before closing
Home Loan Toolkit Settlement Cost Booklet
3 business day after application
Not required if refi or junior lien
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CONSUMER-PURPOSE
CLOSED-END
SECURED BY REAL PROPERTY
TRUTH IN LENDING . . . CONTINUED
List of Settlement Providers If consumer can shop for provider
3 business days after application
Closing DisclosureReceived 3 business days before closing
Allow 3 business days for delivery
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FEDERAL COMPLIANCE REQUIREMENTS
MEMOS AND CHARTS
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SUPPLEMENTAL MEMOS AND CHARTS
Compliance Rules and Commercial Loans - 27
Appraisal and Evaluation Chart – 28
Adverse Action Requirements – 29
Right-of-Rescission Memo - 30
Right-of-Rescission Applicability Chart – 34
RESPA Applicability Cheat Sheet - 35
RESPA and Referral Fees Checklist– 36
Crediting Loan Payments Memo – 37
PMI Annual Disclosure – 38
Tenants in Foreclosure Sample Notice – 39
Servicemembers Civil Relief Act Memo – 40
Business Documents – 43
Business Day Definitions – 44
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Anne Lolley877‐778‐5192 [email protected]
TTS800‐831‐[email protected]
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