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Commentary to Regulation Z indicates a written agreement is required for a rate lock.
37(a)(13) Rate lock.
1. Interest rate. For purposes of § 1026.37(a)(13), the interest rate is locked for a specific period of time if the creditor has agreed to extend credit to the consumer at a given rate, subject to contingencies that are described in any rate lock agreement between the creditor and consumer.1026.19(3)(3)(iv)(D) also discusses rate lock implying a written agreement.
Finally, the preamble (. 191) to the TRID final rule states the following:
Regarding the situation where the
creditor has a policy to honor the rate
quoted without a rate lock agreement,
both proposed § 1026.37(a)(13) and
comment 37(a)(13)–1 expressly
contemplate a rate that is locked for a
specific period of time pursuant to a rate
lock agreement. Accordingly, where a
creditor has a policy to honor the
quoted rate, but does not lock the rate
pursuant to a written agreement with
the consumer, the creditor would
disclose ‘‘no’’ pursuant to
§ 1026.37(a)(13)(i). The Bureau believes
this disclosure is appropriate to aid the
consumer’s understanding of the
transaction, because the creditor would
not be bound by an agreement to
provide the interest rate to the consumer
at consummation.This is not something you want to try to conceal or hide from examiners. If you have documented the issues/violations in your monitoring and audit report, reported those on to the board and senior management, and implemented appropriate controls/training/other corrective actions to correct and prevent such violations in you have taken necessary steps.
Your examiners will likely ask for your monitoring and audit reports when they return and assess your performance since the violations.
As the power of attorney the son should be able to request copies of his mother’s credit report from the credit reporting agencies.
31 CFR 1010.230(b):
With respect to legal entity customers, the covered financial institution’s customer due diligence procedures shall enable the institution to identify the beneficial
owner(s) of each legal entity customer at the time a new account is opened, unless the
customer is otherwise excluded pursuant to paragraph…31 CFR 1010.230(g): New account means each account opened at a covered financial institution by a legal entity customer on or after the applicability date.
31 CFR 1020.100:
Account means a formal banking relationship established to provide or engage in services, dealings, or other financial transactions including a deposit account, a transaction or asset account, a credit account, or other extension of credit. Account also includes a relationship established to provide a safety deposit box or other safekeeping services, or cash management, custodian, and trust services.
I do not believe what you described would meet the definition of a new account. My interpretation of the second sentence in the definition of account is that the relationship would be newly established to facilitate the cash management function. In your case, the account has already been established. With that being said, this is an area that has been debated. If you’re still questioning your procedure, you may choose to take the more conservative approach and obtain the certification at the time the customer obtains the CM service/signs the agreement or you might consider talking to you examiner or FinCEN about this issue.I agree with your thoughts, Chris. This does not meet a permissible purpose for pulling an credit report. If you pull a report for non-permissible purpose it could potentially void your contract with the credit bureau(s) and cause substantial issues for your financial institution.
If elder abuse is actually occurring, or has occurred, it is unfortunate and needs to be addressed. Your staff should be aware of warning signs and potential actions to take to help the victim. The CFPB has issued guidance on elder abuse (https://www.consumerfinance.gov/about-us/newsroom/cfpb-issues-advisory-and-report-for-financial-institutions-on-preventing-elder-financial-abuse/) and there is also interagency guidance (https://www.fdic.gov/news/news/press/2013/interagency-guidance-on-privacy-laws-and-reporting-financial-abuse-of-older-adults.pdf?source=govdelivery).
You want to ensure that in this particular case, since the son of the potential victim is also an employee, that a non-family member employee is in charge of assessing and helping to manage the issue. And you can encourage your customer to access free copies of her credit report on an annual basis to ensure there is no fraudulent activity – this is a sound practice for anyone.
I hope this helps.
I think it depends on the circumstances of the transaction, but generally, as the lender, you are probably familiar with when property taxes are due and that determines if they need to be disclosed as a prepaid on the LE.
The Small Entity Compliance Guide (https://s3.amazonaws.com/files.consumerfinance.gov/f/documents/2017-10_cfpb_KBYO-Small-Entity-Compliance-Guide_v5.pdf, p. 52) states it well in regards to tolerances for property taxes: Creditors may only charge consumers more than the amount disclosed when the original estimated charge, or lack of an estimated charge for a particular service, was based on the best information reasonably available to the creditor at the time the disclosure was provided. (§ 1026.19(e)(3)(iii)). Thus, these charges are subject to a “best information reasonably available” standard.…
If a creditor has reason to know that property taxes will be required at consummation, failure to estimate those taxes or providing an unreasonably low estimate of those taxes is not an estimate based on the best information reasonably available, and as a result, is subject to the zero tolerance standard. (Comment 19(e)(3)(iii)-3)
7.4If the LE was issued but the applicant never gave intent to proceed before the expiration date you can issue a revised estimate of charges leaving the date the same – there is no requirement to change the date. You may extend the date if you choose. This would be the same if you are within the original 10 day timeframe.
If the applicant has given intent to proceed then on any revised LE’s you would leave the expiration date/time blank.
1026.37(a)(13)-2 states:
2. Expiration date. The disclosure required by § 1026.37(a)(13)(ii) related to estimated closing costs is required regardless of whether the interest rate is locked for a specific period of time or whether the terms and costs are otherwise accepted or extended. If the consumer fails to indicate an intent to proceed with the transaction within 10 business days after the disclosures were originally provided under § 1026.19(e)(1)(iii) (or within any longer time period established by the creditor), then, for determining good faith under § 1026.19(e)(3)(i) and (ii), a creditor may use a revised estimate of a charge instead of the amount originally disclosed under § 1026.19(e)(1)(i). See comment 19(e)(3)(iv)(E)-2.1026.37(a)(13)-4 states: 4. Revised disclosures. Once the consumer indicates an intent to proceed within the time specified by the creditor under § 1026.37(a)(13)(ii), the date and time at which estimated closing costs expire are left blank on any subsequent revised disclosures. The creditor may extend the period of availability to expire beyond the time disclosed under § 1026.37(a)(13)(ii). If the consumer indicates an intent to proceed within that longer time period, the date and time at which estimated closing costs expire are left blank on subsequent revised disclosures, if any. See comment 19(e)(3)(iv)-5.
As you know, the notification of a map change from your flood vendor is a triggering event to begin your force-place procedures as you now know there is not adequate coverage in place. The flood regulations state:
(FDIC’s regulation)
§ 339.7 Force placement of flood insurance.(a) Notice and purchase of coverage. If an FDIC-supervised institution, or a servicer acting on its behalf, determines at any time during the term of a designated loan, that the building or mobile home and any personal property securing the designated loan is not covered by flood insurance or is covered by flood insurance in an amount less than the amount required under § 339.3, then the FDIC-supervised institution or its servicer shall notify the borrower that the borrower should obtain flood insurance, at the borrower’s expense, in an amount at least equal to the amount required under § 339.3, for the remaining term of the loan. If the borrower fails to obtain flood insurance within 45 days after notification, then the FDIC-supervised institution or its servicer shall purchase insurance on the borrower’s behalf. The FDIC-supervised institution or its servicer may charge the borrower for the cost of premiums and fees incurred in purchasing the insurance, including premiums or fees incurred for coverage beginning on the date on which flood insurance coverage lapsed or did not provide a sufficient coverage amount.
You would need to send a letter informing the borrower of the map change and their requirement to purchase insurance (force-place procedures) promptly upon learning of the change. You would include the flood notice with the letter; you can also ask them to sign and return the notice, but they may not return it. Another option is to send the force-place letter and notice via certified mail and you will receive a signed receipt you can put in file as “acknowledgement”.
The FEMA 2011 Flood Q&A, p. 7 addresses map changes:https://www.fema.gov/media-library-data/20130726-1742-25045-5644/interagency_q_as.pdf.
1030.4(b)(1)(I)-3. Tiered-rate accounts. Each interest rate, along with the corresponding annual percentage yield for each specified balance level (or range of annual percentage yields, if appropriate), must be disclosed for tiered-rate accounts. (See Appendix A, Part I, Paragraph D.)
I think as long as you are meeting this requirement it should be fine to combine them as you referenced above.
12 CFR 2013.4(b) states:
Content of account disclosures. Account disclosures shall include the following, as applicable:(1) Rate information. (i) Annual percentage yield and interest rate. The “annual percentage yield” and the “interest rate,” using those terms, and for fixed-rate accounts the period of time the interest rate will be in effect.
With that in mind I would be cautious about abbreviating on your disclosures. Work with your vendor and possibly your regulator, if you are comfortable seeking their opinion, prior to implementation to get it right and avoid any issues down the road.
You are aware of the escrow and appraisal requirements and it seems you meet the small creditor threshold to qualify for the escrow exemption – those are the major pieces for HMPLs.
Are you required to escrow for flood insurance or are you exempt from those escrow requirements?
If the requirement to provide the appraisal applies to a renewal (see below) then the disclosure requirement applies as well. I would also note if you aren’t sure whether you’ll use an existing appraisal/valuation or order a new one you may want to consider giving the notice. If not, ensure your procedures require sending it once the decision is made to obtain a new appraisal/ valuation.
Comment 1002.14(a)(1)-2 tells us:
Section 1002.14(a)(1) [the requirement to provide an appraisal or valuation] applies when an applicant requests the renewal of an existing extension of credit and the creditor develops a new appraisal or other written valuation. Section 1002.14(a)(1) does not apply to the extent a creditor uses the appraisals and other written valuations that were previously developed in connection with the prior extension of credit to evaluate the renewal request.As you mentioned comment (19)(e)(3)(iv)-5 states:
Regardless of whether a creditor may use particular disclosures for purposes of determining good faith under § 1026.19(e)(3)(i) and (ii), except as otherwise provided in § 1026.19(e), any disclosures must be based on the best information reasonably available to the creditor at the time they are provided to the consumer. See § 1026.17(c)(2)(i) and comment 17(c)(2)(i)-1.Due to this any disclosed information should be updated with the best information available at the time the revised disclosure is provided.
As an aside, keep in mind what the last part of that comment says when dealing with revised charges, which is increases in other charges unrelated to the changed circumstance may not be used for the purposes of determining good faith.
Yes, that is correct. It would need to correspond with the settlement services for that transaction.
1026.19(e)(1)(vi)-3 states: The settlement service providers identified on the written list required by § 1026.19(e)(1)(vi)(C) must correspond to the required settlement services for which the consumer may shop, disclosed under § 1026.37(f)(3).
