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I am not aware of any specific guidance on HELOC carve-outs or hybrid HELOCs. If a HE loan is the original transaction or if you are refinancing into a closed end HE loan TRID would apply. If this is a modification and not a new transaction I don’t believe it would trigger TRID. (My understanding of these products is that the HELOC available balance increases as the fixed-rate carve-out portion is paid down, so it is still part of the HELOC even though part of is fixed for a term).
I’d suggest reviewing the HELOC requirements in Regulation Z, 1026.40, (and also consider consulting an attorney) before implementing to ensure you meet all requirements of modifying the HELOCs. You may also want to consult with your examiner to get their opinion since they will be the one reviewing your files.
Comment 1026.23(f)-4 states:…If the refinancing involves a new advance of money, the amount of the new advance is rescindable. In determining whether there is a new advance, a creditor may rely on the amount financed, refinancing costs, and other figures stated in the latest Truth in Lending disclosures provided to the consumer and is not required to use, for example, more precise information that may only become available when the loan is closed. For purposes of the right of rescission, a new advance does not include amounts attributed solely to the costs of the refinancing. These amounts would include §1026.4(c)(7) charges (such as attorneys fees and title examination and insurance fees, if bona fide and reasonable in amount), as well as insurance premiums and other charges that are not finance charges…
1026.4(c)(7) lists the following fees:
Real-estate related fees. The following fees in a transaction secured by real property or in a residential mortgage transaction, if the fees are bona fide and reasonable in amount:(i) Fees for title examination, abstract of title, title insurance, property survey, and similar purposes.
(ii) Fees for preparing loan-related documents, such as deeds, mortgages, and reconveyance or settlement documents.
(iii) Notary and credit-report fees.
(iv) Property appraisal fees or fees for inspections to assess the value or condition of the property if the service is performed prior to closing, including fees related to pest-infestation or flood-hazard determinations.
(v) Amounts required to be paid into escrow or trustee accounts if the amounts would not otherwise be included in the finance charge.
From what you described it sounds you may have funds that that would be exempt from the RofR requirement on new funds. (Review the information above.) If in doubt/if you still have questions, we recommend you give the RofR.
1. the loan officer is telling me that they are taking land only, but the customer lives on the property in a mobile home. We are not taking the mobile home as collateral. WOULD THERE BE A ROR?
Looking ahead to number 2, below, it looks like they will be purchasing the mobile home with the proceeds. It seems like either you have a residential mortgage transaction which is exempt:
1026.2(a)(24) Residential mortgage transaction means a transaction in which a mortgage, deed of trust, purchase money security interest arising under an installment sales contract, or equivalent consensual security interest is created or retained in the consumer’s principal dwelling to finance the acquisition or initial construction of that dwelling.
Or you have a loan secured only by land with no dwelling which is not rescindable.
1026.23(a) Consumer’s right to rescind. (1) In a credit transaction in which a security interest is or will be retained or acquired in a consumer’s principal dwelling, each consumer whose ownership interest is or will be subject to the security interest shall have the right to rescind the transaction, except for transactions described in paragraph (f) of this section.
If in doubt though you can apply RofR.
2. There is not a lien on the property? WILL THIS BE HOME EQUITY? The proceeds of the loan will be for the customer to purchase a mobile home from a relative and to move it onto the property that we are taking as collateral? When I try to use purchase the title company says that this is not a purchase because real property is not being purchase.
You would look at the purposes listed below from the regulation and work your way down. From what you’ve described it sounds like a HE.
1026.37(a)9) Purpose. The consumer’s intended use for the credit, labeled “Purpose,” using one of the following terms:
(i) Purchase. If the credit is to finance the acquisition of the property identified in paragraph (a)(6) of this section, the creditor shall disclose that the loan is for a “Purchase.”
(ii) Refinance. If the credit is not for the purpose described in paragraph (a)(9)(i) of this section, and if the credit will be used to refinance an existing obligation, as defined in § 1026.20(a) (but without regard to whether the creditor is the original creditor or a holder or servicer of the original obligation), that is secured by the property identified in paragraph (a)(6) of this section, the creditor shall disclose that the loan is for a “Refinance.”
(iii) Construction. If the credit is not for one of the purposes described in paragraphs (a)(9)(i) or (ii) of this section and the credit will be used to finance the initial construction of a dwelling on the property identified in paragraph (a)(6) of this section, the creditor shall disclose that the loan is for “Construction.”
(iv) Home equity loan. If the credit is not for one of the purposes described in paragraphs (a)(9)(i) through (iii) of this section, the creditor shall disclose that the loan is a “Home Equity Loan.”
3. Will I use Real Estate (mobile Home) as the collateral will I use land only since we are just taking the land.
You will list what you are taking as collateral. If you are not taking the MH it will not be listed.
1026.37(a)(6) Property. The address including the zip code of the property that secures or will secure the transaction, or if the address is unavailable, the location of such property including a zip code, labeled “Property.”
4. Will I put the new mobile home in as a Title collateral and then have a security agreement.
If you are taking it as collateral then I would believe that would be appropriate.Please let us know if you additional questions.
Regulation C commentary to 1003.4(a)(10) allow banks to report NA for income on employee loans. However, neither the regulation nor the commentary provide the same exception for DTI at 1003.4(a)(23) or Credit Score at 1003.4(a)(15).
According to 1024.17(f) you would need to refund the surplus to the customer. As a result, I recommend that you reissue the check. If the customer decides to apply to the surplus to the loan balance he/she can do so. I would keep documentation of the actions taken to correct the surplus (record of initial refund, cancellation, and reissuance of refund) so it is clear the bank took appropriate action.
1024.17(f):
(2) Surpluses. (i) If an escrow account analysis discloses a surplus, the servicer shall, within 30 days from the date of the analysis, refund the surplus to the borrower if the surplus is greater than or equal to 50 dollars ($50). If the surplus is less than 50 dollars ($50), the servicer may refund such amount to the borrower, or credit such amount against the next year’s escrow payments.(ii) These provisions regarding surpluses apply if the borrower is current at the time of the escrow account analysis. A borrower is current if the servicer receives the borrower’s payments within 30 days of the payment due date. If the servicer does not receive the borrower’s payment within 30 days of the payment due date, then the servicer may retain the surplus in the escrow account pursuant to the terms of the federally related mortgage loan documents.
(iii) After an initial or annual escrow analysis has been performed, the servicer and the borrower may enter into a voluntary agreement for the forthcoming escrow accounting year for the borrower to deposit funds into the escrow account for that year greater than the limits established under paragraph (c) of this section. Such an agreement shall cover only one escrow accounting year, but a new voluntary agreement may be entered into after the next escrow analysis is performed. The voluntary agreement may not alter how surpluses are to be treated when the next escrow analysis is performed at the end of the escrow accounting year covered by the voluntary agreement.
Answer from Terri Sands:
This question can be answered best by referring directly to Regulation E. Regulation E states that: (iii) Written notice is considered given at the time the consumer mails the notice or delivers it for transmission to the institution by any other usual means. Notice may be considered constructively given when the institution becomes aware of circumstances leading to the reasonable belief that an unauthorized transfer to or from the consumer’s account has been or may be made.
With that said, I do know of situations where the consumer made a claim to the consumer bureau because of the confusion with who they were making the claim to and dropped it after contacting the third party. The best business practice to have here is education. From a compliance perspective you want to be very transparent with the customer regarding who to contact with the dispute. With that said, as part of your dispute resolution notification information to the consumer, make certain they know to contact the financial institution. Also ensure that your terms and conditions agreement are specific regarding who to contact and make certain it doesn’t allow them to contact the third-party for a disputed transaction.Anything is a valid concern with USAAP as this is a significant regulation and something of great reputational value. As provided above, it is important to be transparent with the customer in all financial institution documentation to ensure they understand (1) to contact the financial institution if there is an unauthorized entry and (2) provide education on contacting a third-party for fraud vs. contacting the financial institution for an unauthorized transaction.
Hi amberb!
We’ve sent your question to Terri Sands who presented the debit card fraud program for us this week. She will be getting back to you very soon.
Thanks!There is a prohibition on imposing/collecting a fee before you provide the LE disclosure to the consumer and they have given their intent to proceed. If your bank is allowing appraisals to be ordered before the LE is given/intent to proceed is received, but then the LE is never provided and/or the consumer never provides intent to proceed, your bank will be responsible for that fee (you can not require the borrower to pay for it without those criteria being met). Whether the bank wants to take that risk is a business decision it needs to make. Most banks I hear from will not order an appraisal until the LE is provided and intent to proceed with the transaction is received from the consumer, because they do not want to be left paying for the appraisal if the transaction never reaches the point where they can charge the appraisal fee.
If the appraisal fee is associated with the transaction, which it is, then it should be listed on the LE, but again you can’t collect the fee until you provide the LE and receive intent to proceed.
1026.19(e)(2) Predisclosure activity.
(i) Imposition of fees on consumer.
(A) Fee restriction. Except as provided in paragraph (e)(2)(i)(B) of this section, neither a creditor nor any other person may impose a fee on a consumer in connection with the consumer’s application for a mortgage transaction subject to paragraph (e)(1)(i) of this section before the consumer has received the disclosures required under paragraph (e)(1)(i) of this section and indicated to the creditor an intent to proceed with the transaction described by those disclosures. A consumer may indicate an intent to proceed with a transaction in any manner the consumer chooses, unless a particular manner of communication is required by the creditor. The creditor must document this communication to satisfy the requirements of § 1026.25.
I hope I’ve understood your question correctly. If not, or if you have additional questions, please let us know.
Thanks!If you’re not required to provide an GLBA/Reg P opt-out and your policy hasn’t changed that is correct. See excerpt from Reg P 1016.5(e) below:
Exception to annual privacy notice requirement. (1) When exception available. You are not required to deliver an annual privacy notice if you:
(i) Provide nonpublic personal information to nonaffiliated third parties only in accordance with the provisions of § 1016.13, § 1016.14, or § 1016.15; and
(ii) Have not changed your policies and practices with regard to disclosing nonpublic personal information from the policies and practices that were disclosed to the customer under § 1016.6(a)(2) through (5) and (9) in the most recent privacy notice provided pursuant to this part.
You would still need to consider opt-out disclosures required under the Fair Credit Reporting Act (FCRA) – see Regulation V, 1022 subpart C. I believe this can generally be satisfied with the initial privacy notice you provide to consumers (not required annually), but if there is a change or the opt-out expires you would need to provide that option again.
Hi Todd. Thanks for the question.
If you meet the business function test (to make loan disbursements, to open new “loan” accounts, and to handle credit transaction inquiries) than I think you would consider Saturday a business day. I’m not sure if you’re are or are not meeting that criteria; if you are then Saturday is a business day for you. I have always considered business day to be determined at the bank level rather than branch level and I don’t know of any information that directly disputes that so my opinion is, if you determine you are carrying on substantially all of your business functions on Saturday it would also be a business day for the two branches as well.
The FDIC regulation states:
12 CFR 328.3(a) Advertisement defined. The term “advertisement,” as used in this part, shall mean a commercial message, in any medium, that is designed to attract public attention or patronage to a product or business.I think generally press releases that are not advertising a product or service of the FI have not been viewed as advertisements. Some banks include them on all information that leaves the bank (press releases and advertisements) which makes the marketing and compliance staff’s jobs easier (i.e. include them on everything that isn’t Non-Deposit Investment Related – separate Not, Not, May disclosures required for those – so they don’t have to decide which items to include them on). This is my preference and recommendation.
You might consider it a “recommended action” to adjust the procedure related to use of logos to ensure consistency and compliance (less room for errors). Just be sure if you bank is releasing information or doing ad on NDIP they follow the NDIP disclosure requirements.
It will depend on the specific circumstances and actions of the CLO, but I will say that I think most people in this position are registered because they will likely be acting as an MLO and will not meet the deminis exception. You will need to look at the definition of MLO below (also see Appendix A for examples of taking application and offering/negotiating terms) as well as the de minis exception. Your conclusion needs to be well documented. Again, I think you would find that most CLOs are registered. The appendix linked above should be very helpful when evaluating his expected actions/duties.
An MLO is:
(1) An individual who:(i) Takes a residential mortgage loan application; and
(ii) Offers or negotiates terms of a residential mortgage loan for compensation or gain.
There is a de minis exception:
(2) De minimis exception. (i) This part and the requirements of 12 U.S.C. 5103(a)(1)(A) and (2) of the S.A.F.E. Act do not apply to any employee of a national bank, member bank, insured state nonmember bank, savings association, Farm Credit System institution, or credit union who has never been registered or licensed through the Registry as a mortgage loan originator if during the past 12 months the employee acted as a mortgage loan originator for 5 or fewer residential mortgage loans.
(ii) Prior to engaging in mortgage loan origination activity that exceeds the exception limit in paragraph (c)(2)(i) of this section, an employee must register with the Registry pursuant to this part.
(iii) Evasion. National banks, member banks, insured state nonmember banks, savings associations, Farm Credit System institutions, and credit unions are prohibited from engaging in any act or practice to evade the limits of the de minimis exception set forth in paragraph (c)(2)(i) of this section.
I think you can utilize targeted marketing for deposit advertisements without the same fair lending risk associated with lending products. However, I would recommending ensuring that your overall marketing strategy is inclusive of all areas and demographics. As you mentioned, regulations have not kept up with marketing tools and we don’t have a lot of information from regulators on digital marketing; however, I think the rules and expectations applied to more long standing marketing tools also apply to digital marketing. This is the perfect example of a good opportunity to have a discussion with your examiners to determine their views since they will be the one evaluating your practices.
There was a good article on digital marketing in the Jan./Feb. 2019 edition ABA Bank Compliance publication. If you are CRCM you have access to it for free. I believe ABA members may also have access.
This would not seem to violate the federal anti-tying provision of Regulation Y (https://www.newyorkfed.org/banking/circulars/11230.html) as it would meet the “traditional bank product” exception. As to whether it would be a considered unfair under UDAP/UDAAP you would have to look at the definition/criteria of “unfair” – and I would suggest to also evaluate the product for “abusive” or “deceptive” triggers as well – and compare it to your product (along with associated processes, disclosures, verbal communication, advertisements, etc.) to avoid potential issues. Another potential issue you should consider is fair lending – could this policy have a disparate impact on certain protected groups (i.e. are minority groups less likely to have a checking account and therefore less likely to qualify for the product/favorable pricing because of this policy)?
