Forum Replies Created
-
Posts
-
Owner’s title saved me when I sold my first home – an owner two transactions back in her 90’s hadn’t sign over the deed to the next owner. It was a laborious process as she had to be tracked across the country and fortunately, for many reasons, she was still living. So I certainly understand wanting to protect the consumer, especially right now if title searches aren’t able to be done expediently or at all. Of course, you’ll require the lender’s title policy, however, I’m not sure the bank has the right to require the consumer to purchase an owner’s title policy since it will protect only the owner and it is up to them if they want to take that risk. I’m thinking you get your attorney’s opinion on using a special disclosure stating the facts of the situation (Pandemic, clerks office closed and impact on title work, risk to consumer, lender is covered by lender’s title, recommendation and reason, etc.) provide to consumer as soon as possible and have them sign it.
I’ll send this over to Jack to get his thoughts too.
We anticipate you have criteria for those who have been affected by the pandemic and need assistance. For those customers, I would not advise charging a fee. Whether formalized or not, you probably have a team of individuals in your institution, which I’m guessing you are likley a part of, that is working on determine what kind of assistance to offer and how to determine to whom the assistance is extended. There should be a process for qualifying and documentation who qualifies. Perhaps this is as simple as a questionnaire. For those not negatively affected by the pandemic, I do not see an issue with charging your normal fee.
The regulators are encouraging banks to communicate with them. That might be something you want to do as you work through the details of your assistance program so there are no surprises at the next exam.
You would need to talk to an attorney to determine if you could accomplish this through a change in terms as that is a contractual issue. If the approach you take to accomplish the deferment does not qualify as a refinancing under 1026.20 then new disclosures would not be required; if it does meet the criteria for a refinancing under 1026.20 it would be treated as a new transaction with full disclosures.
As for rescission, since you would be adding to the loan balance/increasing the security interest in their home I would say this would be rescindable. You would need to provide the rescission disclosures before the customer could waive their right to rescind so they know their rights and what they are waiving. Reg Z says, “[t]o modify or waive the right, the consumer shall give the creditor a dated written statement that describes the emergency, specifically modifies or waives the right to rescind, and bears the signature of all the consumers entitled to rescind. Printed forms for this purpose are prohibited.”
Regarding HELOC’s, 1026.40(f)(3) says a change in terms is not permitted on a HELOC unless it meets one of 6 criteria; number 4 on that list is that it will “unequivocally benefit the consumer throughout the remainder of the plan.” And when looking to the subsequent disclosure rules say, the change in terms section states:
1026.9(c)
Change in terms. (1) Rules affecting home-equity plans. (i) Written notice required. For home-equity plans subject to the requirements of §1026.40, whenever any term required to be disclosed under §1026.6(a) is changed or the required minimum periodic payment is increased, the creditor shall mail or deliver written notice of the change to each consumer who may be affected. The notice shall be mailed or delivered at least 15 days prior to the effective date of the change. The 15-day timing requirement does not apply if the change has been agreed to by the consumer; the notice shall be given, however, before the effective date of the change.(ii) Notice not required. For home-equity plans subject to the requirements of §1026.40, a creditor is not required to provide notice under this section when the change involves a reduction of any component of a finance or other charge or when the change results from an agreement involving a court proceeding.
1026.9(c)(1)(ii)-2
2. Skip features. If a credit program allows consumers to skip or reduce one or more payments during the year, or involves temporary reductions in finance charges, no notice of the change in terms is required either prior to the reduction or upon resumption of the higher rates or payments if these features are explained on the initial disclosure statement (including an explanation of the terms upon resumption). For example, a merchant may allow consumers to skip the December payment to encourage holiday shopping, or a teachers’ credit union may not require payments during summer vacation. Otherwise, the creditor must give notice prior to resuming the original schedule or rate, even though no notice is required prior to the reduction. The change-in-terms notice may be combined with the notice offering the reduction. For example, the periodic statement reflecting the reduction or skip feature may also be used to notify the consumer of the resumption of the original schedule or rate, either by stating explicitly when the higher payment or charges resume, or by indicating the duration of the skip option. Language such as “You may skip your October payment,” or “We will waive your finance charges for January,” may serve as the change-in-terms notice.In this situation I don’t anticipate excessive fees or usury laws being an issue, but that might be something to consider under state law. Here’s a link that summarizes Ky’s usury law (https://statelaws.findlaw.com/kentucky-law/kentucky-interest-rates-laws.html). I have not verified it is accurate, but it might get you started. You’d want to look to the state law cited in your contract.
Answer from Jholzknecht:
all of the requirements of the flood insurance regulations kick in whenever you make, increase, renew or extend (MIRE) a loan. Here are a few thoughts for your consideration:
• You cannot MIRE a loan unless adequate flood insurance is in place.
• If you MIRE a loan a new flood determination is needed, unless the existing determination was initially recorded on the Standard Flood Hazard Determination Form (SFHDF), the prior determination is not more than 7 years old, and no new or revised FIRM or FHBM has been issued for the area in which the property is located since the last determination was obtained
• If you obtain a new determination can a determination fee be imposed? If you are making, increasing, renewing or extending a loan you may impose a new determination fee.
• Does SAP impact the life of loan protection from your determination company. Your contract with the determination company will spell out any situation which voids or impacts the life of loan provision in the contract.
• If you MIRE a loan you must provide a Special Flood Hazard Notice.
• If you Mire a loan you must establish an escrow for flood insurance premiums unless a loan level exception applies or your bank is covered by the small creditor exception.
• When you MIRE, sell or transfer a loan you must notify FEMA, or FEMA’s designee, of the identity of the servicer.12 USC 376 (https://www.law.cornell.edu/uscode/text/12/376): No member bank shall pay to any director, officer, attorney, or employee a greater rate of interest on the deposits of such director, officer, attorney, or employee than that paid to other depositors on similar deposits with such member bank.
member bank
(a) The terms “banks”, “national bank”, “national banking association”, “member bank”, “board”, “district”, and “reserve bank” shall have the meanings assigned to them in section 221 of this title .This would apply to the OCC since they would be considered a member bank under that definition. The FDIC released this in 1998 (https://www.fdic.gov/news/news/inactivefinancial/1998/fil9841a.html). It does say “inactive” in the webaddress, but the webpage does not indicate that. I would suggest confirming this with the FDIC before relying on it. And, of coure, it would be a fine to comply with the requirement as a best practice even if it isn’t technically applicable. Again, check with the FDIC to ensure there isn’t a more current information.
“…While section 22(e) of the Federal Reserve Act (12 U.S.C. 376) generally limits a member bank’s authority to pay employees a greater rate of interest than the rate paid to other depositors on similar deposits, the FDIC is not aware of any current regulatory restrictions directly prohibiting a nonmember bank from doing so, assuming there were no implications of insider abuse or of evading certain limited regulatory requirements concerning executive compensation.”
Chris mentioned HELOC’s. 1026.40(f)(3) says a change in terms is not permitted on a HELOC unless it meets one of 6 criteria; number 4 on that list is that it will “unequivocally benefit the consumer throughout the remainder of the plan.” And when looking to the subsequent disclosure rules say, the change in terms section states:
1026.9(c)
Change in terms. (1) Rules affecting home-equity plans. (i) Written notice required. For home-equity plans subject to the requirements of §1026.40, whenever any term required to be disclosed under §1026.6(a) is changed or the required minimum periodic payment is increased, the creditor shall mail or deliver written notice of the change to each consumer who may be affected. The notice shall be mailed or delivered at least 15 days prior to the effective date of the change. The 15-day timing requirement does not apply if the change has been agreed to by the consumer; the notice shall be given, however, before the effective date of the change.(ii) Notice not required. For home-equity plans subject to the requirements of §1026.40, a creditor is not required to provide notice under this section when the change involves a reduction of any component of a finance or other charge or when the change results from an agreement involving a court proceeding.
1026.9(c)(1)(ii)-2
2. Skip features. If a credit program allows consumers to skip or reduce one or more payments during the year, or involves temporary reductions in finance charges, no notice of the change in terms is required either prior to the reduction or upon resumption of the higher rates or payments if these features are explained on the initial disclosure statement (including an explanation of the terms upon resumption). For example, a merchant may allow consumers to skip the December payment to encourage holiday shopping, or a teachers’ credit union may not require payments during summer vacation. Otherwise, the creditor must give notice prior to resuming the original schedule or rate, even though no notice is required prior to the reduction. The change-in-terms notice may be combined with the notice offering the reduction. For example, the periodic statement reflecting the reduction or skip feature may also be used to notify the consumer of the resumption of the original schedule or rate, either by stating explicitly when the higher payment or charges resume, or by indicating the duration of the skip option. Language such as “You may skip your October payment,” or “We will waive your finance charges for January,” may serve as the change-in-terms notice.In this situation I don’t anticipate excessive fees or usury laws being an issue, but that might be something to consider under state law. Here’s a link that summarizes Ky’s usury law (https://statelaws.findlaw.com/kentucky-law/kentucky-interest-rates-laws.html). I have not verified it is accurate, but it might get you started. You’d want to look to the state law cited in your contract.
Mary Frances,
Thanks for the question. I agree – you want to get it right. We’ll discuss this and get back to you asap.
Thanks for your patience!I think that is exactly what happened – the customer chose a provider that wasn’t on the shopping list so it shifted the attorney fee to the “no tolerance” category and out of the 10% which means it doesn’t factor into the aggregate calculation.
1026.19(e)(3)(ii)-3:
3. Services for which the consumer may, but does not, select a settlement service provider. Good faith is determined pursuant to § 1026.19(e)(3)(ii), instead of § 1026.19(e)(3)(i), if the creditor permits the consumer to shop for a settlement service provider, consistent with § 1026.19(e)(1)(vi)(A). Section 1026.19(e)(3)(ii) provides that if the creditor requires a service in connection with the mortgage loan transaction, and permits the consumer to shop for that service consistent with § 1026.19(e)(1)(vi), but the consumer either does not select a settlement service provider or chooses a settlement service provider identified by the creditor on the list, then good faith is determined pursuant to § 1026.19(e)(3)(ii), instead of § 1026.19(e)(3)(i). For example, if, in the disclosures provided pursuant to §§ 1026.19(e)(1)(i) and 1026.37(f)(3), a creditor discloses an estimated fee for an unaffiliated settlement agent and permits the consumer to shop for that service, but the consumer either does not choose a provider, or chooses a provider identified by the creditor on the written list provided pursuant to § 1026.19(e)(1)(vi)(C), then the estimated settlement agent fee is included with the fees that may, in aggregate, increase by no more than 10 percent for the purposes of § 1026.19(e)(3)(ii). If, however, the consumer chooses a provider that is not on the written list, then good faith is determined according to § 1026.19(e)(3)(iii).Vicki – thanks for the question.
Insurance, investments, and credit card prducts are the most common type of joint marketing agreements I’ve seen. I think you need to look closely at the defintion of a “financial product or service” and “financial istitution” (see Reg P for definitions) to determine if the products and the provider qualify as such and therefore for the JMA exception. Then you’d also need to make sure the agreement constitutes a JMA (see below). If you have a joint marketing agreement and are providing information under that you would not be required to provide an opt-out. If you are able to utilize the JMA exception, I think you would need to send a revised privacy policy since you are entering into a new agreement related to new products/services jointly offering that wasn’t previously disclosed (under 1016.13 disclosure prior to sharing under the JMA is required). This Q&A from the FDIC may also be helpful (see section J): https://www.fdic.gov/news/news/press/2001/pr9301a.html#J. J4 discusses the issue of jointly marketing (rather than just handing names over for them to market to your customers) and examples of what that should look like in order to qualify.
12 CFR 1016.13:
(b) Service may include joint marketing. The services a nonaffiliated third party performs for you under paragraph (a) of this section may include marketing of your own products or services or marketing of financial products or services offered pursuant to joint agreements between you and one or more financial institutions.(c) Definition of joint agreement. For purposes of this section, joint agreement means a written contract pursuant to which you and one or more financial institutions jointly offer, endorse, or sponsor a financial product or service.
…and the agreement must prohibit the third party from disclosing or using the information other than to carry out the purposes for which you disclosed the information under the agreement. (1016.13(a))Ann Marie from Bankers Service Corportation asked us to post the following:
“Most banks we have been in have loan officers or processors verifying the borrower’s status on consumer loans using one of the safe harbors for MLA, and more often than not, they are checking it whether the transaction is subject to MLA or not. The original poster contact us if he or she would like to discuss further.”
I think this will answer your question. From the Department of the Treasury’s “Guidelines for Garnishment
of Accounts Containing Federal Benefit Payments”: https://www.fiscal.treasury.gov/files/eft/garnishment-guideline.pdf.page 7:
5. Separate account reviews: The financial institution shall perform the account review separately for each account in the name of an account holder against whom a garnishment order has been issued. In performing the account reviews for multiple accounts in the name of one account holder, a financial institution shall not trace the movement of funds between accounts by attempting to associate funds from a benefit payment deposited into one account with amounts subsequently transferred to another account.For example, a $500 SSA benefit payment is deposited into the account holder’s deposit account (Account A). On the same day, the account holder transfers $300 of the $500 to another account in his/her name (Account B) at the same financial institution. The next day, a garnishment order against the account holder is received. The financial institution will be required to conduct separate account reviews for Account A and Account B. The $500 will be included in the protected amount that is established for Account A. However, the $300 that was transferred to Account B will not be included in calculating the protected amount for Account B.
I’m not familiar with Arkansas’ usury rules. I’ve sent this to a member who might be familiar with AR law and can possibly help you out.
You might also check with the Arkansas Bankers Association or the Arkansas Department of Financial Institutions.
Thanks for the question.I believe most banks are coding these loans in order to track them in their systems – that is something that needs to be done. Without that it is going to be difficult for you to have an accurate list for review. You might take various approaches to identify them… 1) poll loan staff, 2) work with your LOS and loan ops to indenfitfy loans where a MLA disclosure was provided/MAPR was calculated, 3) look at interest rate reports to identify loans with lower rates which might indicate a covered MLA loan. Talk with loan ops and see what other options you might have to identify these loans. It will likely be piecing the list together.
I’ve sent this to a couple of auditors – hopefully they can tell what they’re seeing in banks and might have some additional ideas to help you.
I believe you do need to reference the point when the interest rate can first change and the frequency of change thereafter.
1026.19(b):
(2) A loan program disclosure for each variable-rate program in which the consumer expresses an interest. The following disclosures, as applicable, shall be provided:…
…(vi) The frequency of interest rate and payment changes.Official Interpretation
Paragraph 19(b)(2)(vi)
1. Frequency. The frequency of interest rate and payment adjustments must be disclosed. If interest rate changes will be imposed more frequently or at different intervals than payment changes, a creditor must disclose the frequency and timing of both types of changes. For example, in a variable-rate transaction where interest rate changes are made monthly, but payment changes occur on an annual basis, this fact must be disclosed. In certain ARM transactions, the interval between loan closing and the initial adjustment is not known and may be different from the regular interval for adjustments. In such cases, the creditor may disclose the initial adjustment period as a range of the minimum and maximum amount of time from consummation or closing. For example, the creditor might state: “The first adjustment to your interest rate and payment will occur no sooner than 6 months and no later than 18 months after closing. Subsequent adjustments may occur once each year after the first adjustment.” (See comments 19(b)(2)(viii)(A)–7 and 19(b)(2)(viii)(B)–4 for guidance on other disclosures when this alternative disclosure rule is used.)
