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On May 27, 2020 the federal regulatory agencies issued FAQS covering Consideration for Activities in Response to the Coronavirus Pandemic that state, “Generally, a bank should rely on and report the gross annual revenues that it considered in making its credit decision. Loans for which the bank did not collect revenue information may not be included when evaluating a bank’s performance in lending to businesses and farms with gross annual revenues of $1 million or less unless the small business or small farm provides supplemental information or the bank has another source demonstrating the borrower’s revenue, such as information on existing customers. Banks that have access to an applicant’s gross annual revenue information may, but are not required to, report that information. When evaluating CRA performance, the agencies will take into account the unique circumstances affecting borrowers and banks resulting from the COVID-19 emergency and will not penalize a bank for making a large volume of loans for which gross annual revenue information is not available. The agencies will also take into account a bank’s good faith efforts demonstrably designed to support low- and moderate-income individuals and small businesses and small farms and its efforts to comply with applicable consumer protection laws.”
You are obtaining written instructions from the consumer to pull a consumer report. If you obtain written instructions from the consumer, then no further permissible purpose is needed.
A couple of things come to mind:
* – Section 913 of the Electronic Fund Transfers Act prohibits conditioning an extension of credit on the requirement that payments be made by electronic fund transfers.
* – Section 1026.18(r) requires an disclosure that the annual percentage rate does not reflect the effect of the required deposit, if the creditor requires the consumer to maintain a deposit as a condition of the specific transaction.You have potential problems with both the TRID rules and the appraisal guidelines. The TRID problem with both the LE and CD is that the forms list closing costs, which are costs paid at or before closing. Your fee is to paid after closing. You may want to list the charge on an addendum to the disclosure, similar to what the reg. requires on inspection and handing fees paid after closing.
The appraisal guidelines generally require an appraisal to be conducted before the transaction is complete. Evan though tha Pandemic continues to rage across the nation, the temporary relief provisions have expired. That said you have to do what is necessary for the borrower. I suggest adding a memo explaining your estimate of the property value and the circumstances that make it impossible to get an appraisal in a timely manner.
A loan, investment or a service receives CRA community development credit is provided if the activity has as it primary purpose:
(1) Affordable housing (including multifamily rental housing) for low- or moderate-income individuals;
(2) Community services targeted to low- or moderate-income individuals;
(3) Activities that promote economic development by financing businesses or farms that meet the size eligibility standards of the Small Business Administration’s Development Company or Small Business Investment Company programs (13 CFR 121.301) or have gross annual revenues of $1 million or less; or
(4) Activities that revitalize or stabilize—
(i) Low-or moderate-income geographies;
(ii) Designated disaster areas; or
(iii) Distressed or underserved nonmetropolitan middle-income geographies designated by the Board of Governors of the Federal Reserve System, FDIC, and Office of the Comptroller of the Currency, based on—
(A) Rates of poverty, unemployment, and population loss; or
(B) Population size, density, and dispersion. Activities revitalize and stabilize geographies designated based on population size, density, and dispersion if they help to meet essential community needs,
including needs of low- and moderate-income individuals.Your activity probably qualifies for credit. The fact that the students attend Title 1 schools helps with you case. Examiners probably expect documentation that the majority of the beneficiaries of the program are from low- or moderate-income families.
The TRID rules no not specifically addresses how to disclose builder risk premiums. The product is similar to inspection and handling fees. When inspection and handling fees are paid after closing they do not appear on the CD, but instead appear on an attachment to the CD. We believe that if the CFPB clarifies builders risk premiums paid after closing they would use the same logic as for the inspection and handling fees. Until the CFPB clarifies the proper handling of builder risk premiums, we suggest, if the borrower will pay the charge, that the charge be included included in the prepaids.
Single premium credit insurance has a few restrictions under federal laws, and some states prohibit the product. While it is not generally prohibited, it is considered to be a higher risk product. The sale of the product is not automatically considered an UDAAP practice, but it is higher risk. That is the point made in the risk assessment and the point I was making in the CMG session – it is not generally prohibited, but it is higher risk.
Use of the signature line is optional. When used, each consumer obligated on the transaction must sign.
The burden is on the creditor to provide proof that the CD was delivered three business days before closing. If a borrower is not available for face-to-face delivery three days before closing, then the disclosure should be mailed to the consumer six business days before closing.
This is unfortunate. You have violations. There is no cure for the failure to obtain flood insurance, but your suggested actions are the best course of action. The actions result in flood insurance for the loan and the consumer receiving correct disclosures.
HMDA uses the terms broker and investor. An institution that takes and processes a loan application and arranges for another institution to acquire the loan at or after closing is acting as a “broker,” and an institution that acquires a loan from a broker at or after closing is acting as an “investor.” The party making the credit decision is responsible for HMDA reporting. Depending on the facts, a broker may or may not make a credit decision on an application (and thus it may or may not have reporting responsibilities). If the broker makes a credit decision, it reports that decision; if it does not make a credit decision, it does not report. If an investor reviews an application and makes a credit decision prior to closing, the investor reports that decision. If the investor does not review the application prior to closing, it reports only the loans that it purchases; it does not report the loans it does not purchase. An institution that makes a credit decision on an application prior to closing reports that decision regardless of whose name the loan closes in.
These definitions and concepts come from Section 1003.1(c) of Regulation C.
Section 8 violations occur when a thing of value is given in return for a referral of mortgage business. In the described situation, the bank is arguably receiving a thing of value – the exclusive right to place an advertisement on the property. but there does not appear to be referral back to the builder. If the bank is making concessions on a builder loan and then the builder grants the exclusive right to list the property, then the quid pro quo requirement of Section 8 appears to come in to play.
Section 615a of the Fair Credit Reporting Act states, “If any person takes any adverse action with respect to any consumer that is based in whole or in part on any information contained in a consumer report, the person shall
(1) provide oral, written, or electronic notice of the adverse action to the consumer;”The notice is not required for a consumer for a consumer report was not obtained.
In a transaction involving multiple borrowers, the lender need only provide the Notice of Special Flood Hazards to any one of the borrowers in the transaction. Lenders may provide multiple notices if they choose. The lender and borrower(s) typically designate the borrower to whom the Notice of Special Flood Hazards will be provided.
For purposes of Regulation B, monitoring information must be collected if the loan is a purchase or a refinance. If the property transfers before closing, the loan is not a purchase. A refinance must involve the sake borrower. Apparently the existing debt is in the grandmother’s name; the new loan would be in the granddaughter’s name. Different borrowers, therefore not a refinance. If not purchase or refinance then monitoring information is not required for Regulation B.
There are a number of issues built into your question.
First, if the transaction meets certain criteria a risked-based pricing notice is needed unless a credit score notice is provided. A risk-based pricing notice is not required for a denied application. So a credit score notice is not required for a denied application. It is OK to still send one.
15 USC 1681(g) of the FCRA established the requirements for credit score disclosures. It does not address electronic disclosures. There are no implementing regulations for that section of the law. If electronic disclosures are used, compliance with E-Sign is advised.
15 USC1681(m) of the FCRA established the requirements for risk-based pricing notices. It does not mention electronic disclosures. Section 1022.73(b)(1) of Regulation V implements the risk-based pricing notice rules. It allows electronic disclosures, but does not mention E-Sign. Compliance with E-Sign is not required.
