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When you look to 41(d)-4 and 41(d)(2)-2 it seems to imply statements will continue during the temporary loss mitigation program timeframe. But this could be assuming a situation when the payment is simply reduced and not deferred. In 41(b) regarding the timing of statements it says:
1026.41(b) Timing of the periodic statement. The periodic statement must be delivered or placed in the mail within a reasonably prompt time after the payment due date or the end of any courtesy period provided for the previous billing cycle.
Official Interpretation
41(b) Timing of the periodic statement.
1. Reasonably prompt time. Section 1026.41(b) requires that the periodic statement be delivered or placed in the mail no later than a reasonably prompt time after the payment due date or the end of any courtesy period. Delivering, emailing or placing the periodic statement in the mail within four days of close of the courtesy period of the previous billing cycle generally would be considered reasonably prompt.2. Courtesy period. The meaning of “courtesy period” is explained in comment 7(b)(11)-1.
When you look at 7(b)(11)-1 it mentions the due date per the legal agrement. You may be able to rely on the a modification as the legal agreement and the dates reflected in there could possibly determine your periodic statement requirements.
When you look to 41(d)-4 and 41(d)(2)-2 it seems to imply statements will continue during the temporary loss mitigation program timeframe.
This is one of those situations where I think it could be argued either way. Talk with your regulator and legal counsel as you are making these decisions so no one is surprised later.
For business with gross revenue of $1M or less, yes the “notice of right to a statement of reasons” (which also includes the ECOA notice) should always be in writing unless the application is taken entirely by phone. If it is taken entirely by phone you can provide the notice of action taken and the notice of rights verbally, but make sure the notice of rights verbalized includes all the info in C-8. The AAN rules for businesses are in 1002.9(a)(3). See below -the rules for $1M or less gross revenue are highlighted. If you aren’t providing the reasons for action and someone asks for it you’d be required to comply with the timing requirements in 1002.9(a)(2).
For businesses with gross revenue in excess of $1M you’d be required to provide the notice of action taken (orally or in writing) in a reasonable time and give a written statement of reasons if the borrower requests it within 60 days of notification of action take.
Of course, you can apply the consumer rules to all businesses or you can apply the small business rules. Some banks find that it is easier to do this (one set of rules for all or one set of consumer/one set of business rules) so they don’t have to remember three sets of rules.
Follow-up question:
Thanks – your comments and materials help! I just want to make sure I am clear that the ECOA statement and right to reasons ALWAYS have to be in writing. We do not take written applications for business loans – only for consumer loans. After reading a little more it looks like the requirement for these things to be in writing is covered under 12 CFR 1002.9(a) (2). Is that your understanding.If there additional SBA notification requirements for SBA loan denials I am not aware of those. In regards to Reg B, for a business with gross revenue of $1 million or less you could provide the statement of action taken either verbally or in writing. However, you would be required to give the other notifications (ECOA statement and right to reasons) in writing; this can be done at the time of application (model form c-8) and then you’d only have to provide a verbal statement of action at the time you take action.
answer by Deb Crawford:
I have not heard of “contractually” changing regulation. The regulation was put in place because of the various practices like these for banks. If the funds are coming in ACH they are available when they are received.I think you will probably get different opinions on this depending on who you ask.
I prefer to see the disclosures provided unless it is clearly stated that the consumer is applying only for a fixed rate product; meaning for all applications where the loan type isn’t specified (and there is a possibility the customer is interested in an ARM/rate may increase), I would prefer to provide the disclosures, as you would when it is indicated that the app is for an ARM product, due to a strict reading of the regulation below.
1026.19(b) (I have bolded for emphasis.)
Except as provided in paragraph (d) of this section, if the annual percentage rate may increase after consummation in a transaction secured by the consumer’s principal dwelling with a term greater than one year, the following disclosures must be provided at the time an application form is provided or before the consumer pays a non-refundable fee, whichever is earlier (except that the disclosures may be delivered or placed in the mail not later than three business days following receipt of a consumer’s application when the application reaches the creditor by telephone, or through an intermediary agent or broker):However, some read this as if you don’t know that the rate could increase because the customer hasn’t indicated an interest in an ARM product, you aren’t required to provide the disclosures until they express that interest. Again, I prefer to provide the disclosurs unless you know the customer is applying for a fixed rate loan. If your system allows the consumer to apply for a loan but doens’t allow them to indicate what type of loan they are interested in/applying for, I think this could be viewed as a way to avoid providing the required disclosures at the time of application.
Check out the Department of Labor’s website for updates on paid time off: https://www.dol.gov/newsroom/releases/whd/whd20200401.
There are many different ways to structure a skip-a-pay transaction. Not all systems hold the interest until the end of the loan. Generally, you can only offer options that are available through your core accounting system. The core system provides options you select during the setup of the system. Check with your system provider to determine if other options are available for handling interest on deferred payments.
Question from our recent webinar, Pandemic Relief – Manging Compliance Issues:
If we do a skip a payment on an amortized mortgage the interest still accrues and will just sit there until the end of the loan. What we do for the principal is during the first recast the core will reamortize based on the current balance but how can we recoup the interest before the end of the loan?Yes, fee waivers for deposit account holders could be considered for CRA credit. The “Joint Statement on CRA Consideration for Activities in Response to the COVID-19” issued on March 19 (and page 61-62 of the training manual), states,
Pursuant to the Community Reinvestment Act (CRA), the agencies will favorably consider retail banking services and retail lending activities in a financial institution’s assessment areas that are responsive to the needs of low- and moderate-income individuals, small businesses, and small farms affected by COVID-19 and that are consistent with safe and sound banking practices. These activities may include, but are not limited to
• Waiving certain fees, such as:
o Automated teller machine (ATM) fees for customers and non-customers,
o Overdraft fees,
o Late payment fees on credit cards and other loans, and
o Early withdrawal penalties on time deposits;
• Easing restrictions on cashing out-of-state and non-customer checks;
• Expanding the availability of other short-term, unsecured credit products for creditworthy borrowers;
• Increasing credit card limits for creditworthy borrowers;
• Providing alternative service options to customers in light of limited ability to access branches; and
• Offering payment accommodations, such as allowing borrowers to defer or skip payments or extending the payment due date, which would avoid delinquencies and negative credit bureau reporting, caused by COVID-19-related issues.The OCC and FDIC, through bulletins and FILs, encouraged financial institutions to work with affected customers and communities. As a result, it seems you could limit the fee waivers to affected customers. If you plan to implement procedures to verify customers have been affected by coronavirus versus those who have not may be difficult, direct correlation may be impossible in some cases, and the effort may prove too time consuming. We recommend financial institution consider COVID-19 related assistance they anticipate offering to customer and vet such assistance and programs through a specialized committee that would consider the impact to the institution and customers, as well as compliance and legal issues. Keep in mind that assistance you offer needs to be conducted with appropriate management oversight and must be consistent with safe and sound banking practices and applicable laws. If waivers are not universal, track who receives a waiver and why they received it.
MIRE events trigger the flood rules; MIRE is an acronym for make, increase, renew or extend. If you accomplish the accommodation using a new note, you are MAKING a new loan. If you extend the maturity date you are EXTENDING the loan. If you increase the loan balance you are INCREASING the loan. If you modify a loan without extending the loan term, without using a new note (which would be considered making a loan), without increasing the balance, and the loan isn’t being renewed, then it seems you have modified the loan in a way that would not trigger the flood requirements.
The issue is how do you plan to accomplish the deferral – by refinance or by modification. A refinance is a new transaction subject to all of the rules and limitations of § 1026.35. A modification is not a new transaction and therefore does not trigger the requirements and limitations.
One waiver could technically satisfy multiple disclosure requirements if the respective requirement allows for a waiver (HMPL appraisal rule does not) and doesn’t prohibit a combined waiver. However, it may not be as easy as it seems as each rule waived would have to be considered independently. First, the waiver for the Regulation B valuation rule would need to be obtained before the TRID and rescission waivers because the valuation is required to be given “promptly upon completion” or three business days before closing, whichever is earlier; the waiver would need to be obtained early in the loan process. Second, the TRID and rescission waiver should not be obtained until after the respective disclosures are provided. Finally, the waiver for TRID and rescission would need to be in writing and describe the bona fide personal financial emergency of the borrower. Also, any combined waiver must list all of the disclosures/rights the borrower is waiving to ensure the borrower knows/intends to waive their rights under each respective rule.
