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I agree that under 1026.4(c)(7) the appraisal review fee to an independent third party would be excluded from the finance charge for a loan secured by real estate or a RMT if the fee is bona fide and reasonable.
Correct. If it is a loan with a transaction value of $250,000 or less you can utilize an evaluation. The business loan exemption allows for certain higher dollar business transactions that don’t rely on the sale of real estate or rental income to repay the loan to utilize an evaluation.
I don’t believe you’ll find anything in the guidelines that specifically spell out an answer to your issue. However, there is plenty of information on independence and selection of an appraiser. Neither the loan production staff or the customer should have an impact on the selection of the appraiser. By allowing the customer to select the appraisal that they are willing to pay for it could be deemed as compromising the independence and validity of the process.
Take a look at the interagency guidelines, specifically sections iv-vi, and compare how your program matches up to those guidelines.
1. Does the fact that this customer requests us to force-place flood insurance matter? Do we still have to give him a 45 day notice?
Why does the customer want you to force-place the policy? If it is due to the paymen, have you considered escrowing for the flood insurance?
Regardless of the circumstances, if the customer has not obtained adequate flood insurance you would need to follow your force-placement procedures.2. Am I worrying over nothing because we were one day late sending out the letter? We did have some issues with flood insurance on our most recent Compliance Examination.
Is the force-placed policy a MPPP policy? The MPPP has separate notification requirements, so your pre-expiration notice may or may not be a problem. This excerpt from the final rule highlights the difference:
Some commenters, including trade association commenters, recommended the Agencies issue guidance that would authorize a lender to follow a notification process similar to FEMA’s Mortgage Portfolio Protection Program (MPPP). The Agencies are aware of these alternative notification processes and appreciate the benefits of additional notices. The Agencies note that a regulated lending institution or its servicer, at its discretion, may send one or more additional notices prior to the expiration date as a courtesy to assist the borrower. However, in order to comply with this section, the regulated lending institution or its servicer still would be required to send the mandated 45-day notice following the lapse of the borrower’s policy.
https://www.gpo.gov/fdsys/pkg/FR-2015-07-21/pdf/2015-15956.pdfHere’s a link to the MPPP notification requirements: https://www.fema.gov/media-library-data/1478271984247-21328c353d6c693452112933906eb219/MPPP_Guidelines_Requirements_2017FY.PDF
Yes, the rules will apply to a real estate-related transaction, unless one of the exceptions apply.
A real estate-related financial transaction means any transaction involving:
(1) The sale, lease, purchase, investment in or exchange of real property, including interests in property, or the financing thereof; or
(2) The refinancing of real property or interests in real property; or
(3) The use of real property or interests in property as security for a loan or investment, including mortgage-backed securities.Here is a link to the exceptions: https://www.law.cornell.edu/cfr/text/12/323.3
Answer by Don Blaine:
So we have a state levy against a business account at the bank and in that account, there has been an electronic payment of some type of protected funds made to an individual. Nothing in the Section 212 Garnishment Rule distinguishes (specifically includes or excludes) between personal and business accounts and both could be open to the account review process.Specifically, in the Preamble of the rule, the agencies decided to not limit the definition to an account held for personal, family or household purposes. The agencies noted that while a direct deposit of a benefit payment to a business account might be uncommon, they saw no reason to exclude such accounts from coverage so the business account, at this point, is still in play as having a protected amount.
Typically, the only non-personal entities that can open an account with a SSN instead of an EIN would be a sole proprietorship or single-member LLCs. I can therefore envision a situation where a bank could allow an accountholder, who is a natural person, to have his/her federal benefit payment, such as Social Security, direct deposited to a sole proprietorship business account or 1-member LLC account in the individual’s name. If so, the protected amount provision would likely apply since any entity (the sole proprietorship or the individual) would essentially be the same entity so the rule would tend to apply and there could be a protected amount based on the account review.
212.5(a) references timing of an account review and specifically states when “served a garnishment order issued against a debtor, a financial institution shall perform an account review. – Therefore, looks like the bank must perform an account review – good so far.
212.5(c) If the account review shows that a benefit agency deposited a benefit payment into the account during the lookback period, then the financial institution shall follow the procedures in Sec. 212.6. Therefore – looks like the bank must follow 212.6 procedures and freeze protected funds – at this point but wait for 212.5(f).
212.5(f) states that the bank “shall perform the account review separately for each account in the name of an account holder against whom a garnishment order has been issued. This is where it just got tricky as while the definition of Account provides no clarity, the definition of Account Holder does state this must be a “natural person” against whom a garnishment order is issued and whose name appears in the bank’s records as the direct or beneficial owner of an account. Since the garnishment order was not issued for a natural person (John Doe) but was instead issued in the name of a corporate entity ABC Corporation, the direct or beneficial ownership by John Doe in ABC Corporation is likely a moot issue which would mean no protected funds.
In other words, for the garnishment protections to apply, the “account holder” would have to be a natural person against whom a garnishment order was issued. The garnishment order was not issued against a natural person (it was issued against ABC Corporation). Therefore, I do not think that any of the benefit payment into the business accounts can be protected by the garnishment rule.
However, your state law may provide additional protections in this case. State law can’t provide fewer protections but may provide additional protections. You can contact your state’s consumer protection office for additional information. The federal government maintains a website that will allow you to link directly to a list of state and county consumer protection offices at Federal Citizen Information Center’s website which is at usa.gov. You can then select your state and should be directed to your state’s consumer protection office.
Generally the Federal Garnishment rules will not apply to a corporate account because the debtor (corporation) is not a natural person. The fact that there were federal benefit payments payable to a natural person coming into the corporate account makes things less than clear. Don and I will discuss and get back to you.
1. Does the fact that the Retail staff is making the referral negate the FCRA affiliate sharing information? No, you would still be sharing eligibility information with an affiliate for marketing purposes.
2. Our affiliate already has access to obtain information about Bank customers (through a CRM platform). Do you think this raises red flags? Yes, it does raise red flags. 1022.21(b)(2) says:
“Receiving eligibility information from an affiliate, including through a common database. You may receive eligibility information from an affiliate in various ways, including when the affiliate places that information into a common database that you may access.”It could be difficult to determine/prove that your affiliate didn’t access the database for marketing purposes or that one of the exceptions to the opt-out applied (pre-existing relationship, communication initiated by consumer, authorization/request by consumer to receive solicitations, etc.) Either your affiliate shouldn’t have access to your database or you should provide the opt-out.
3. If we begin sharing information, are we correct in:
a. We would need to revise our Privacy Policy to include an opt-out option? Correct 1022.24 provides details on what is considered a reasonable opportunity to opt-out.
b. We would need to mail our revised Privacy Policy to each consumer who has a relationship with us? Correct
c. The current alternative delivery method we use would cease because consumers would have opt-out rights?
Probably, but take a look at pages 28-30 of the final rule linked here: https://files.consumerfinance.gov/f/201410_cfpb_final-rule_annual-privacy-notice.pdf.
And this article seems to provide a good summary: https://bankbryancave.com/2015/03/complying-with-the-rules-when-posting-privacy-notices-online/4. Is there a timing requirement in which we must provide the revised Privacy Policy. We understand that we can’t share until we have provided the consumer a reasonable time to opt-out. Review 1022.24.
Per 32 CFR 232:
A creditor may conclusively determine whether credit is offered or extended to a covered borrower, and thus may be subject to 10 U.S.C. 987 and the requirements of this part, by assessing the status of a consumer in accordance with this paragraph (b).Covered borrower means a consumer who, at the time the consumer becomes obligated on a consumer credit transaction or establishes an account for consumer credit, is a covered member (as defined in paragraph (g)(2) of this section) or a dependent (as defined in paragraph (g)(3) of this section) of a covered member.
You first need to determine if the transaction is a new transaction (e.g. refinancing rather than renewal of existing obligation). Look to Regulation Z, 1026.20 to determine if the transaction is a refinance (see 1026.20(a)(4) regarding new amounts financed). If the transaction is not a new transaction and is simply a renewal then I don’t believe this would be considered a new obligation or extension of credit and would not require a new covered borrower determination. However, if there is any question surrounding whether a transaction is actually a renewal or a refinance I recommend taking the conservative approach and do the covered borrower determination.
Great question. Section 1026.19(b) applies to all closed-end variable-rate transactions that are secured by the consumer’s principal dwelling and have a term greater than one year. You would provide the required HELOC disclosures.
We have agreement in our office. You would need to pay it out of the escrow account unless the insurance has been cancelled by the provider for some reason (other than the borrower not paying the premium) or the property is vacant. You should be able to recoup the advance but you should consult with legal counsel before you take any foreclosure action.
Here’s the regulatory cite as support: (1024.17(k)(5))
Timely payment of hazard insurance. (i) In general. Except as provided in paragraph (k)(5)(iii) of this section, with respect to a borrower whose mortgage payment is more than 30 days overdue, but who has established an escrow account for the payment for hazard insurance, as defined in § 1024.31, a servicer may not purchase force-placed insurance, as that term is defined in § 1024.37(a), unless a servicer is unable to disburse funds from the borrower’s escrow account to ensure that the borrower’s hazard insurance premium charges are paid in a timely manner.(ii) Inability to disburse funds. (A) When inability exists. A servicer is considered unable to disburse funds from a borrower’s escrow account to ensure that the borrower’s hazard insurance premiums are paid in a timely manner only if the servicer has a reasonable basis to believe either that the borrower’s hazard insurance has been canceled (or was not renewed) for reasons other than nonpayment of premium charges or that the borrower’s property is vacant.
(B) When inability does not exist. A servicer shall not be considered unable to disburse funds from the borrower’s escrow account because the escrow account contains insufficient funds for paying hazard insurance premium charges.
(C) Recoupment of advances. If a servicer advances funds to an escrow account to ensure that the borrower’s hazard insurance premium charges are paid in a timely manner, a servicer may seek repayment from the borrower for the funds the servicer advanced, unless otherwise prohibited by applicable law.And the definition of hazard insurance from 1024.31:
Hazard insurance means insurance on the property securing a mortgage loan that protects the property against loss caused by fire, wind, flood, earthquake, theft, falling objects, freezing, and other similar hazards for which the owner or assignee of such loan requires insurance.I believe you would need to pay it out of the escrow but I’m going to kick this around our office to get some additional opinions.
This would be a change requested by the consumer so it would be changed circumstance. If there are no fees that you need to re-disclose you could still issue an informational LE reflecting the change in purpose or you could reflect it on the CD. Be sure your file is well documented showing why there was a change.
