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You will need to document that you have provided letters. If possible, I suggest maintaining the actual letters. However, I believe some banks do use the master letters/log process. I suggestion you have a conversation with your examiners to see what they expect and comply with that. In my opinion this isn’t an issue worth arguing and complying with their expectation will make your life easier.
You may have already done this but if you have not, I would very carefully consider whether this is a business or consumer purpose – take a close look at the exemption language in 1026.3 and the details of the transaction. If it is, indeed, a consumer purpose loan you have a violation. I would provide the disclosure, determine the cause for this error (are enhanced procedures necessary, etc.). As you mentioned, training is a must in this situation and a good reminder to lenders is, when in doubt give it out.
It will not be required unless you have investors purchasing or funding your loans that require it. You should check into that, if applicable.
Here are the instructions but I don’t believe you’ll find any specific information on this section. I recommend you complete it to the best of your ability based on how you receive the information. For the scenarios you mentioned:
1)Officer e-mails a loan application to the client and the client e-mails the application back, would the loan officer complete this section as “mail?” I would mark “email or internet”
2)Same goes, if a client is e-mailed the application and then the client drops off the application to loan officer (without speaking any further details of the transaction),
I would mark “face to face”.I was wondering if it was an ARM because of the CHARM booklet being delivered electronically, but that shouldn’t be an issue as long as you provide it with the application. Generally for most disclosures it is acceptable to provide to the primary applicant. I can’t think of where this would be an issue for early disclosures. It would be an issue for the CD in a rescindable transaction. Also, the FCRA RBP or exception notice is require to be provided to each consumer but your probably aren’t giving that out with early disclosures.
You are not permitted to use a number that will identify the customer.
1003.4(a)(1):
…Follows the LEI with up to 23 additional characters to identify the covered loan or application, which:(1) May be letters, numerals, or a combination of letters and numerals;
(2) Must be unique within the financial institution; and
(3) Must not include any information that could be used to directly identify the applicant or borrower; …
Commentary:
2. ULI—privacy. Section 1003.4(a)(1)(i)(B)(3) prohibits a financial institution from including information that could be used to directly identify the applicant or borrower in the identifier that itassigns for the application or covered loan of the applicant or borrower. Information that could be used to directly identify the applicant or borrower includes, but is not limited to, the applicant’s or borrower’s name, date of birth, Social Security number, official government-issued driver’s license or identification number, alien registration number, government passport number, or employer or taxpayer identification number.I believe you are asking if it would apply to open-end loans because of where it is housed. There is specific information in 1026.26(a) pertaining to open-end credit:
(a) Open-end credit. In an oral response to a consumer’s inquiry about the cost of open-end credit, only the annual percentage rate or rates shall be stated, except that the periodic rate or rates also may be stated. If the annual percentage rate cannot be determined in advance because there are finance charges other than a periodic rate, the corresponding annual percentage rate shall be stated, and other cost information may be given.
Official Interpretation
26(a) Open-End Credit
1. Information that may be given. The creditor may state periodic rates in addition to the required annual percentage rate, but it need not do so. If the annual percentage rate is unknown because transaction charges, loan fees, or similar finance charges may be imposed, the creditor must give the corresponding annual percentage rate (that is, the periodic rate multiplied by the number of periods in a year, as described in §§1026.6(a)(1)(ii) and (b)(4)(i)(A) and 1026.7(a)(4) and (b)(4)). In such cases, the creditor may, but need not, also give the consumer information about other finance charges and other charges.There is also information on closed-end credit.
I’m not sure exactly what the CFPB was talking about but I assume it was in regards to those individuals with the right to rescind. You are not required to provide the LE, which is for shopping purposes, to a non-applicant that will have the right to rescind. However, you are required to provide the CD to anyone with the right to rescind, including a non-obligor in whose principal dwelling a security interest is or will be retained or acquired, if that person’s ownership interest in the dwelling is or will be subject to the security interest.
See the preamble to the final rule which says(p. 79783)https://www.gpo.gov/fdsys/pkg/FR-2013-12-31/pdf/2013-28210.pdf:
In rescindable transactions, the CD must be given separately to each consumer who has
the right to rescind under § 1026.23. In transactions that are not rescindable, the
CD may be provided to any consumer with primary liability on the obligation.There is not a regulation that controls the interest rate you will pay on a deposit account. Some banks negotiate rates for certain (usually high dollar) customers. Also, there isn’t a regulation that would mirror fair lending, but I would argue that you need to apply the same principles and negotiate rates on an equitable basis, regardless of a prohibited basis, due to reputational risk.
There are prohibitions on preferential rates being paid to a director, officer, attorney, or employee. (https://www.law.cornell.edu/uscode/text/12/376).
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After reading your question more carefully and looking at the rules, the force-placement provisions puts limits on charging the borrower for force-placed insurance rather than requiring you to purchase as the flood insurance rules do. When force-placing hazard insurance you need to follow the servicing rules force-placement provisions.
You can add this cost to the escrow balance or otherwise seek reimbursement from the borrower for the funds you advance, which may include adding it to the loan balance or as a payoff fee if your contract allows for that. I believe some of the regulators have informally said that adding premiums in, if the contract allows, would not be a MIRE event, but you may want to check with your specific examiners to get their take before you make a decision.
I assume your files already include information documenting the reason for the denial. If it does not, you will want to create a process to document that in the file. The process you choose is up to you.
Since it is a non-participating community flood insurance through NFIP is not available and therefore you do not have to require it under the flood regulations. However, as the lender, you may still require it (through a private provider) to cover your collateral.
You will still need to provide the notice. The regulations say when institution makes, increases, extends, or renews a loan secured by a building or a mobile home located or to be located in a special flood hazard area, the FDIC-supervised institution shall mail or deliver a written notice to the borrower and to the servicer in all cases whether or not flood insurance is available under the Act for the collateral securing the loan.
