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Pcorder,
I apologize we overlooked your question until now. We view this similarly to adding a force-placed premium to the loan balance. In that regards, we have heard that some regulators/agencies view it as a MIRE event while others do not. We believe the safest course of action, until we have definitive guidance, is to consider increasing the principal balance due to the addition of insurance premiums, or other fees as you mentioned, as a MIRE event.The rate change notice for accounts with no look back period or a short look back period, that are originated prior to January 10, 2015, can be sent 25 days prior to the first payment at the adjusted level.
Here’s an article we posted on this topic: https://mycomplianceresource.com/45-day-look-back-period-for-arms-are-you-set/
After posting the answer above we have discussed this in our office and believe the safest course of action is to disclose the NADA information on the AAN as some examiners may view this as providing information on the creditworthiness of the applicant.
We suggest you follow the advice of your regulator.
You are required to disclose the costs associated with the transaction (see 19(e)(3)(I), 37(f)). If you know for certain you will not be obtaining a new appraisal then you would not include the fee on the LE. If there is any chance that you will be ordering a new appraisal I would suggest that you include the fee.
Since the fee was disclosed correctly on the LE, we believe you could re-disclose the CD and wait three business days to close.
There is no requirement for the form of documentation you should use for counteroffers. As long as you have documented the file in some way that will show the actions that were taken that is fine. I would recommend that your note to the file be something that well documented with the date, time, person making the verbal counteroffer, the counteroffer terms, and any other pertinent information. From what you’ve said it seems your process is fine.
Keep in mind that if the applicant doesn’t accept the counteroffer then you are required to send a AAN within 90 days of the counteroffer. You can send a combined counteroffer/AAN form when making the counteroffer and then you would not need to send a second adverse action notice if the applicant does not accept the counteroffer. A sample of a combined notice is contained in form C–4 of Appendix C to the regulation.
We have copied this question to the private CMG Members Only forum to allow more member to review and respond. To access the question in that forum topic please click here.
Thank you!
I assume you are asking if you should add the NADA information under the “outside source other than consumer reporting agency” portion of the AAN that is required by the FCRA, if applicable. The requirement in section 615(b)(1) of the FCRA states:
(1) In general. Whenever credit for personal, family, or household purposes involving a consumer is denied or the charge for such credit is increased either wholly or partly because of information obtained from a person other than a consumer reporting agency bearing upon the consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living, the user of such information shall, within a reasonable period of time, upon the consumer’s written request for the reasons for such adverse action received within sixty days after learning of such adverse action, disclose the nature of the information to the consumer. The user of such information shall clearly and accurately disclose to the consumer his right to make such written request at the time such adverse action is communicated to the consumer.
You would not disclose NADA on the AAN because information from that source relates to the value of the collateral; it does not provide information related to the consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living.
Your LOS should provide an acceptable application. You might consider how you plan to document joint intent under Reg B. I have also seen commercial applications that include the Reg B appraisal notice. You should be able to find some samples online for comparison.
Answer by Kowsley and Rcooper:
If you are collecting them at or before consummation they would be PPFCs. If you collect them out of draws we suggest you disclose them in Block A (if they are being paid to you) or Block B (if being paid to appraiser) and not consider them as a PPFC.In the proposed amendment to the disclosure rules issued on August 1, 2016 (p. 54339) the CFPB is proposing if they are collected out of the draws after consummation, they shouldn’t be on the disclosures at all because they are not being charged until after closing. They are proposing they are to go on an addendum to the LE and CD but shouldn’t impact any numbers on the disclosures. We’ll see…
Answer by Don Blaine:
Section (a)(2)(i) requires banks to obtain customer information such as: name, DOB, physical street address and TIN for any customer that opens an account. The TIN, for a U.S. citizen, is normally a SSN. Section (a)(2)(ii) requires customer verification.Banks normally verify customer information through documentary methods and the examples used in the regulation are a Drivers License and Passport. If your bank is using documentary methods, and every bank normally uses this methods for U.S. citizens, the bank must verify through an unexpired, government issued identification evidencing nationality or residence which bears a photograph or similar safeguard. Social Security cards do not have a photograph and do not have an expiration date so they would not serve as a verification of identity under the documentary method. While there is no prohibition on obtaining and maintaining a copy of a social security card on file there is no requirement to do so.
The Social Security Administration periodically sends out communications warning people to keep their card in a safe place. Most banks do not wish to inconvenience customers by informing them to go home or to their safe deposit box to obtain their social security card and bring it back to the bank. Most banks validate the social security number either through ChexSystems, a credit bureau or IRA E-Services.
A bank’s CIP written policy, that is incorporated within its BSA policy, must state whether the bank is using documentary or non-documentary verification processes so your actual practice for verifying customer identity must be spelled out in your written policy. Be careful of indicating in your policy that you will obtain a copy of the social security card when your bank’s process does not require such documentation and vice versa. You need to do what your policy states or risk a CIP violation during your exam. In essence – your written policy and actual practices, or processes, must agree. The regulation encourages, although does not require, more than one identifying document.
I have also gone through the BSA Examination manual and there is no instructions for examiners to review to determine whether the bank obtained a copy of a customer’s social security card.
I’ve attached the 14-page CIP FAQs from April 2005. These FAQs are far more expansive than the regulation itself and obtaining a copy of the social security card is never mentioned.
If a bank force places flood insurance and adds the cost to the loan, is that considered an increase subject to providing a notice to the borrower that the property is located in a SFHA?
We don’t have a definitive answer. We heard different opinions from the regulators, none of them official. We believe the safest course of action, until we have consistent guidance from the regulators is to consider it an increase to the loan.
If force placed flood insurance is in place at loan maturity and the loan is renewed, is it acceptable for that same forced placed flood insurance policy to remain in place?
Again, this is something that isn’t clearing stated. Your regulator may deem it acceptable or they may not. It may be best to talk to your regulator and understand their position. Also, I’m not sure of the circumstances, but consider if you want to renew or refinance the loan if the borrower isn’t willing to purchase flood insurance.The flood regulation states the following about qualifying for the small lender exception to escrowing for flood insurance:
Small lender exception–(1) Qualification. Except as may be required under applicable State law, paragraphs (a), (b) and (d) of this section do not apply to an FDIC-supervised institution:
(i) That has total assets of less than $1 billion as of December 31 of either of the two prior calendar years; and
(ii) On or before July 6, 2012:
(A) Was not required under Federal or State law to deposit taxes, insurance premiums, fees, or any other charges in an escrow account for the entire term of any loan secured by residential improved real estate or a mobile home; and
(B) Did not have a policy of consistently and uniformly requiring the deposit of taxes, insurance premiums, fees, or any other charges in an escrow account for any loans secured by residential improved real estate or a mobile home.
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If your bank only offered escrows when requested by the borrower that is not “consistently and uniformly” and does not disqualify you from utilizing the flood escrow small lender exemption. Likewise, if on or before July 6, 2012 you escrowed for HPMLs as required by law, that does not disqualify you from utilizing the flood escrow small lender exemption since escrow was not required for “the life of the loan” and could be cancelled after 1 or 5 years, respectively.The FDIC has a video on its director resource page titled “Flood Insurance – FAQ” https://www.fdic.gov/regulations/resources/director/technical/flood.html#four. They discuss the small lender exemption around the 28 minute mark.
You can not cure the violation. Be glad that you caught it and not an examiner. Now that you know about it, take the opportunity to determine the root cause of the error and take corrective action to prevent it going forward. Typically examiners will give you a little slack if you find the issue on your own and take corrective action to ensure it doesn’t happen again. Lowering the rate would show an effort fix the issue and may help mitigate action taken by examiners, but it will not cure the original violation.
Find the answer to the second part of your question here: https://mycomplianceresource.com/forums/topic/account-bonuses/.
As for the first part of the question, the minimum balance required to open the account should not affect whether the direct deposit and signature based transaction requirements are considered a bonus.
