[rcooper]

You’re correct that Reg CC commentary 229.21(g) indicates that you are required to keep copies of the notice for reasonable cause to doubt collectability exception holds and that for other hold notices your proof would be your procedures/processes/training, etc. There is also a specific record retention requirement in 229.13(g)(5) and its commentary “reasonable cause” exception holds. And you’ll see this reflected in the interagency exam procedures (see Reg CC checklist beginning on p. 29); the “reasonable cause” portion has a question asking if copies of notices were retained for two years. You don’t see that specific question in the other sections of the checklist. With that said, examiners may still want to look at records to see if you applied and released holds appropriately, so if you have been providing the hold notices and you change that process you might have to look up check information and provide reports with hold information so they can validate accuracy:

g) Record retention.
(1) A bank shall retain evidence of compliance with the requirements imposed by this subpart for not less than two years. Records may be stored by use of microfiche, microfilm, magnetic tape, or other methods capable of accurately retaining and reproducing information.

So I would consider whether your current process of retaining the hold notices makes that process easier than having to look up information for examiners to validate the accuracy of your holds? Since examiners are accustomed to looking at your notices, I’d want to have a discussion with them to see what alternative information they would request, if any, and determine if you are able to produce that and with what effort. Also, if you think there are areas that may be of concern (manual hold forms) if you change your process, that would need to be worked through to ensure compliance is documented before a change is made.

[rcooper]

Thanks for the question. I believe we already answered in a different forum: https://mycomplianceresource.com/forums/topic/avm-as-evaluation/#post-33236. If you need further clarification please let us know.

[rcooper]

Thanks for the info. I’m not familiar with this service, but it seems you are requiring it as part of the settlement and you are requiring a particular provider. In that case, Services You Cannot Shop For would be appropriate.

[rcooper]

I’d suggest looking at the Interagency Appraisal Guidelines, specifically section XV on Reviewing Appraisals and Evaluations, which discusses Resolution of Deficiencies (XV.C) and Documentation of Review (XV.D).

If your bank’s review of the appraisal determines there are deficiencies in the appraisal, then you would follow the rules in Section C of the Guidelines. If a second appraisal is warranted follow your bank’s same independent process for ordering a second appraisal and reviewing that appraisal. The borrower needs to be separated from determining the value of the property.

[rcooper]

If you are including the historical example I think you would include the margin and see comment (b)(viii)(A)-3. Also, see model form H-4(c) for the sample historical example.

[rcooper]

I don’t believe the explanation of the interest rate/payment rules in 1026.19(b)(2)(iii) or the maximum interest rate/payment example rules in (viii) state that the margin needs to be disclosed.

Comment 1026.19(b)(2)(iii)-1 states:
Paragraph 19(b)(2)(iii)
1. Determination of interest rate and payment. This provision requires an explanation of how the creditor will determine the consumer’s interest rate and payment. In cases where a creditor bases its interest rate on a specific index and adjusts the index through the addition of a margin, for example, the disclosure might read, “Your interest rate is based on the index plus a margin, and your payment will be based on the interest rate, loan balance, and remaining loan term.” In transactions where paying the periodic payments will not fully amortize the outstanding balance at the end of the loan term and where the final payment will equal the periodic payment plus the remaining unpaid balance, the creditor must disclose this fact. For example, the disclosure might read, “Your periodic payments will not fully amortize your loan and you will be required to make a single payment of the periodic payment plus the remaining unpaid balance at the end of the loan term.” The creditor, however, need not reflect any irregular final payment in the historical example or in the disclosure of the initial and maximum rates and payments. If applicable, the creditor should also disclose that the rate and payment will be rounded.

19(b)(2)(iv) states you must include statement that the customer should ask about current rate and margins.

If you have more information or a specific section of the rules you’d like us to look at further, we’re happy to do that.

[rcooper]

I don’t know of anything that would prohibit it. The CFPB’s Guide to TILA-RESPA Integrated Dislcosures references different payment frequencies. https://files.consumerfinance.gov/f/201404_cfpb_tila-respa-integrated-disclosure-form.pdf (see p. 48)

37(i)(5) Principal and interest payments.
1. Statement of periodic payment frequency. The subheading required by § 1026.37(i)(5) must include the unit-period of the transaction, such as “quarterly,” “bi-weekly,” or “annual.” This unit-period should be the same as disclosed under § 1026.37(b)(3). See § 1026.37(o)(5)(i).

[rcooper]

I apologize we overlooked your question earlier. My interpretation is you would need to wait the three business days for them to be considered delivered if you don’t have evidence they received them earlier. Here’s why…

1026.17(d):
2. Multiple consumers. When two consumers are joint obligors with primary liability on an obligation, the disclosures may be given to either one of them. If one consumer is merely a surety or guarantor, the disclosures must be given to the principal debtor. In rescindable transactions, however, separate disclosures must be given to each consumer who has the right to rescind under § 1026.23, although the disclosures required under § 1026.19(b) need only be provided to the consumer who expresses an interest in a variable-rate loan program. When two consumers are joint obligors with primary liability on an obligation, the early disclosures required by § 1026.19(a), (e), or (g), as applicable, may be provided to any one of them. In rescindable transactions, the disclosures required by § 1026.19(f) must be given separately to each consumer who has the right to rescind under § 1026.23. In transactions that are not rescindable, the disclosures required by § 1026.19(f) may be provided to any consumer with primary liability on the obligation. See §§ 1026.2(a)(11), 1026.17(b), 1026.19(a), 1026.19(f), and 1026.23(b).

Since each consumer who has the right to rescind must receive the disclosure you need to provide in line with the 1026.19(f)(1)(ii)and(iii). Comment 1026.19(f)(1)(iii)-2 delivery rules which says:

2. Other forms of delivery. Creditors that use electronic mail or a courier other than the United States Postal Service also may follow the approach for disclosures provided by mail described in comment 19(f)(1)(iii)-1. For example, if a creditor sends a disclosure required under § 1026.19(f) via email on Monday, pursuant to § 1026.19(f)(1)(iii) the consumer is considered to have received the disclosure on Thursday, three business days later. The creditor may, alternatively, rely on evidence that the consumer received the emailed disclosures earlier after delivery. See comment 19(e)(1)(iv)-2 for an example in which the creditor emails disclosures and receives an acknowledgment from the consumer on the same day. Creditors using electronic delivery methods, such as email, must also comply with § 1026.38(t)(3)(iii). For example, if a creditor delivers the disclosures required by § 1026.19(f)(1)(i) to a consumer via email, but the creditor did not obtain the consumer’s consent to receive disclosures via email prior to delivering the disclosures, then the creditor does not comply with § 1026.38(t)(3)(iii), and the creditor does not comply with § 1026.19(f)(1)(i), assuming the disclosures were not provided in a different manner in accordance with the timing requirements of § 1026.19(f)(1)(ii).

Delivery via email is assumed to comply with esign. Like with snail mail, the consumer is considered to have received the CD three business days after they are placed in the mail. If you received evidence that the the disclosures were received earlier than three business days after mailing(emailing) you can relay on that date.

[rcooper]

I want to make sure I understand the situation. Can you give more details on how this process will work?

[rcooper]

I know this is frustrating.

In an effort to get on the same page with the agent and understand what kind of policy the borrower has, I would ask the agent to show you the customer’s policy and what type of coverage it provides (ACV, RCV). The agent should also be able to show you if there is co-insurance (80% or XX% insured required for coverage) language in the general property form like there is the dwelling form. Also, provide him the flood faqs (linked below), highlighting the language on ACV/ for non-dwelling properties.

Here’s the 2011 FAQ (see #9): https://www.bankersonline.com/sites/default/files/tools/flood_faq_2011_10_17.pdf

And here’s the proposed flood faqs (see Amount 2): https://www.govinfo.gov/content/pkg/FR-2020-07-06/pdf/2020-14015.pdf

Here is a commercial coverage fact sheet from FEMA that discusses ACV on page 2: https://www.fema.gov/sites/default/files/2020-05/fema_NFIP_Summary_Coverage_aug292013.pdf

Safety and soundness risk is a legitimate concern and in many cases and you may require more insurance beyond the minimum required by the flood rules. However, requiring the borrower to over-insure if the policy would never pay in the event of a loss is not beneficial to the customer and will not mitigate the bank’s risk. Ultimantely, you need to know what you should require. What you want to avoid is “requiring” the customer to purchase an amount that exceeds what they would receive in coverage. If the customer, per the agent’s advice, decides to insure it for more than you have required that is their decision to do so. If your determination of what you are requiring continues to differ from what the agent recommends, then your letter should outline what you are requiring.

I’ll send this over to Jack to see if he has any additional advice.

[rcooper]

I believe you are talking about the appraisal requirement in the Reg Z HPML rule, correct? The HPML rule outlines certain requirements for appraisals on HPMLs and also has a second appraisal requirement for flip transactions. There is an exemption in 1-26.35(c)(2)v)from the requirements for “a loan with maturity of 12 months or less, if the purpose of the loan is a “bridge” loan connected with the acquisition of a dwelling intended to become the consumer’s principal dwelling.”

You need to follow the interagency appraisal guidelines and your agency’s appraisal regulations. If an appraisal isn’t required an evaluation should be performed. Here’s a link to the FDIC’s appraisal regulations https://www.fdic.gov/regulations/laws/rules/2000-4300.html#fdic2000part323.3 and a link to the interagency FAQs https://www.occ.treas.gov/news-issuances/bulletins/2018/bulletin-2018-39a.pdf.

Let us know if you have additional information or questions.

[rcooper]

Take a look atthe commentary to 1026.19(e)(3)(iv)(D) https://www.consumerfinance.gov/rules-policy/regulations/1026/19/#e-3-iv-D.

Regulation Z oreferences rate locks as those executed through a rate locked agreement, therefore, we believe you should have a separate rate lock agreement. Once you lock the rate you have three business days (general) to issue a revised loan estimate. Also, take a look at preamble discussion from the TRID final rule on pages 379 and 697 of the final rule. https://files.consumerfinance.gov/f/201311_cfpb_final-rule_integrated-mortgage-disclosures.pdf.

1026.19(e)(3)(iv)
(D) Interest rate dependent charges. The points or lender credits change because the interest rate was not locked when the disclosures required under paragraph (e)(1)(i) of this section were provided. No later than three business days after the date the interest rate is locked, the creditor shall provide a revised version of the disclosures required under paragraph (e)(1)(i) of this section to the consumer with the revised interest rate, the points disclosed pursuant to § 1026.37(f)(1), lender credits, and any other interest rate dependent charges and terms.

Even if the rate is not changing you shoud reissue the LE reflecting the rate lock information. See page 101 of the 2017 TRID amendment https://files.consumerfinance.gov/f/documents/201707_cfpb_Final-Rule_Amendments-to-Federal-Mortgage-Disclosure-Requirements_TILA.pdf, where you’ll find the excerpt stated below.

“As noted above, § 1026.19(e)(3)(iv)(D) explicitly
requires the creditor to provide a revised Loan Estimate when the initial Loan Estimate did not
disclose an interest rate subject to a rate lock agreement, even if the terms and charges disclosed
are the same.”

Let us know if you have any other questions.

[rcooper]

Take a look atthe commentary to 1026.19(e)(3)(iv)(D) https://www.consumerfinance.gov/rules-policy/regulations/1026/19/#e-3-iv-D.

Regulation Z oreferences rate locks as those executed through a rate locked agreement, therefore, we believe you should have a separate rate lock agreement. Once you lock the rate you have three business days (general) to issue a revised loan estimate. Also, take a look at preamble discussion from the TRID final rule on pages 379 and 697 of the final rule. https://files.consumerfinance.gov/f/201311_cfpb_final-rule_integrated-mortgage-disclosures.pdf.

1026.19(e)(3)(iv)
(D) Interest rate dependent charges. The points or lender credits change because the interest rate was not locked when the disclosures required under paragraph (e)(1)(i) of this section were provided. No later than three business days after the date the interest rate is locked, the creditor shall provide a revised version of the disclosures required under paragraph (e)(1)(i) of this section to the consumer with the revised interest rate, the points disclosed pursuant to § 1026.37(f)(1), lender credits, and any other interest rate dependent charges and terms.

Even if the rate is not changing you shoud reissue the LE reflecting the rate lock information. See page 101 of the 2017 TRID amendment https://files.consumerfinance.gov/f/documents/201707_cfpb_Final-Rule_Amendments-to-Federal-Mortgage-Disclosure-Requirements_TILA.pdf, where you’ll find the excerpt stated below.

“As noted above, § 1026.19(e)(3)(iv)(D) explicitly
requires the creditor to provide a revised Loan Estimate when the initial Loan Estimate did not
disclose an interest rate subject to a rate lock agreement, even if the terms and charges disclosed
are the same.”

Let us know if you have any other questions.

[rcooper]

I think that is a reasonable means of determining the cost of the foundation. Make sure it is well documented.

You mention that the appraisal is not specific as to the value of the building. You also mention that decpreciaion of 40% is listed in the cost approach. To what does the 40% depreciation apply? I would want to ensure that the 40% aligns with the depreciation of the building. The 40% may be accurate; however, you may also talk to the insurance agent to help you determine what the depreciation amount should be (what it would be if he/she was writing an ACV policy) or the agent/underwriter may be able to refer you to a third party who specializes in caclulating ACV/depreciated value.

[rcooper]

It doesn’t sound like a changed circumstance so I would say you need to comply with the tolerance cure requirements. If there is something that you think qualifies this situation as a CoC let me know.

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