Forum Replies Created
-
Replies
-
As long as you obtain a separate authorization from that obtained for the credit report fee (after the LE has be received by the consumer and the consumer has indicated their intent to proceed) and it is clearly documented, the authorization can be either verbal or written.
From the preamble of the Intergrated Disclosure Ruels, page 305-306: The Bureau believes that the term “separate authorization,” as used in the comment, clearly means a new authorization, whether verbal or written, from the consumer for the creditor to charge new fees. The Bureau believes that an expression of a consumer’s intent to proceed with a transaction is not the same as an authorization to the creditor to charge additional fees.
The prior question and answer you mention as via email. I have resent that to you. But if the transaction is deemed to be an extension of credit under the Tangible Economic Benefit rule then, yes, you would include it. Here is the section on Tangible Economic Benefit – also review 215.4.
215.3(f) Tangible economic benefit rule–(1) In general. An extension of credit is considered made to an insider to the extent that the proceeds are transferred to the insider or are used for the tangible economic benefit of the insider.
(2) Exception. An extension of credit is not considered made to an insider under paragraph (f)(1) of this section if:
(i) The credit is extended on terms that would satisfy the standard set forth in Sec. 215.4(a) of this part for extensions of credit to insiders; and
(ii) The proceeds of the extension of credit are used in a bona fide transaction to acquire property, goods, or services from the insider.Is this the newsletter that came out in June on Best Practices for Contents Coverage? If this is what you’re referring to, it is informing you that your security agreement/mortgage instrument might state that the building contents/business assets are securing the loan as well as the building. And in this situation, even if you don’t perfect the lien on the contents (i.e. by filing a UCC on the contents), you would still need to obtain flood insurance if your mortgage instrument states you have a security interest in all business assets/contents (or something similar) and the building securing the loan is in a SFHA.
So, you are correct that if the building housing the contents does not secure the loan then you are not required to have flood insurance on the contents even if it is in a flood zone. In other words no building, no flood insurance required.
If you are referring to a different newsletter, please let me know.
You would not need a separate program disclosure for each discount amount. You would need a separate disclosure for ARMs with a discount, ARMs with a premium and for those without a discount or a premium. You can combine all three into one disclosure if you include all the information about each one (see Commentary 1026.19(b)(2)-3 linked here: https://www.bankersonline.com/regs/12-1026/12-1026-019.html). You would base your example on a discount used recently – the commentary to the historical example says to use a discount or premium that was used within the six months preceding preparation of the disclosure. Both the historical example and the interest rate/payment example should be updated annually.
Here’s the commentary to Reg Z on what constitutes a program:
1026.19(b)(2)-2
2. Variable-rate loan program defined. i. Generally, if the identification, the presence or absence, or the exact value of a loan feature must be disclosed under this section, variable-rate loans that differ as to such features constitute separate loan programs. For example, separate loan programs would exist based on differences in any of the following loan features:
A. The index or other formula used to calculate interest rate adjustments.
B. The rules relating to changes in the index value, interest rate, payments, and loan balance.
C. The presence or absence of, and the amount of, rate or payment caps.
D. The presence of a demand feature.
E. The possibility of negative amortization.
F. The possibility of interest rate carryover.
G. The frequency of interest rate and payment adjustments.
H. The presence of a discount feature.
I. In addition, if a loan feature must be taken into account in preparing the disclosures required by §1026.19(b)(2)(viii), variable-rate loans that differ as to that feature constitute separate programs under §1026.19(b)(2).
ii. If, however, a representative value may be given for a loan feature or the feature need not be disclosed under §1026.19(b)(2), variable-rate loans that differ as to such features do not constitute separate loan programs. For example, separate programs would not exist based on differences in the following loan features:
A. The amount of a discount.
B. The amount of a margin.
I agree with you, the form needs to be substantially similar (i.e. everything needs to be pretty much the same). Where the Reg and Appendix C do recognize some change may be needed is in the reasons for adverse action. I think an institution can add or adjust reasons to fit their institution as long as they are specific enough for the customer to recognize what the reason was and, therefore, what they need to improve. With that said, even if there are some changes or additions, the list of reasons will in all likelihood be very similar to the list in the sample form. The only reason you listed that concerns me is the “unsatisfactory credit” – I think regulators want banks to be more specific so borrowers know why their credit was unsatisfactory.
From the information you’ve given, it sounds like your action is permitted under Reg Z and that you would not need to send an AAN notice under Reg B within 30 days of taking in the adverse action (i.e. freezing the account). However, I still suggest that you review 1026.40(f) to make sure your action is permitted and also 1002.2(c) and it’s commentary for AAN information.
You may also have notification requirements under Reg Z which requires that in certain circumstances you must notify the customer of the account restriction. See the excerpt from Reg Z and its commentary below to determine if this notification would apply to your specific situation.
1026.9(c)(1)(iii):
(iii) Notice to restrict credit. For home-equity plans subject to the requirements of §1026.40, if the creditor prohibits additional extensions of credit or reduces the credit limit pursuant to §1026.40(f)(3)(i) or (f)(3)(vi), the creditor shall mail or deliver written notice of the action to each consumer who will be affected. The notice must be provided not later than three business days after the action is taken and shall contain specific reasons for the action. If the creditor requires the consumer to request reinstatement of credit privileges, the notice also shall state that fact.Commentary 9(c)(1)(iii) Notice to Restrict Credit
1. Written request for reinstatement. If a creditor requires the request for reinstatement of credit privileges to be in writing, the notice under §1026.9(c)(1)(iii) must state that fact.
2. Notice not required. A creditor need not provide a notice under this paragraph if, pursuant to the commentary to §1026.40(f)(2), a creditor freezes a line or reduces a credit line rather than terminating a plan and accelerating the balance.
You can access the regulations here: https://www.gpo.gov/fdsys/browse/collectionCfr.action?collectionCode=CFR&searchPath=Title+12%2FChapter+X%2FPart+1026&oldPath=Title+12%2FChapter+X%2FPart+1026&isCollapsed=false&selectedYearFrom=2014&ycord=880
Note Added: You must also consider your contract and state law requirements, as well as the adverse action notification requirements under FCRA.
Hi tstrait,
Compliance Resource focuses on federal laws and regulations. Since this is a state law issue, we recommend you contact your state bankers association for assistance.
Thank you.The KRS does state that as a requirement. You may have already done so, but I suggest contacting the KDFI to find out how to get a copy of the DVD.
Lexegay,
I answered your similar question here: https://mycomplianceresource.com/forums/topic/flood-notice-not-in-sfha/.No. The Notice of Special Flood Hazards is required to be given when a bank 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. If the property securing the loan isn’t in a flood zone you do not have to give the flood notice.
You also need to review your process of having the borrower sign the flood notice at closing – it makes it appear it isn’t given in a reasonable time to allow the borrower to comply with NFIP requirements/obtaining flood insurance. Give the notice and have it signed earlier in the process – 10 days prior to closing is generally deemed a reaonable time but there may be instances when you may only have 7 days. Either way you need to give it/have it signed a reasonable time before closing to allow the customer to get flood insurance. There is an excerpt from the flood reg below:
§ 339.9 Notice of special flood hazards and availability of federal disaster relief assistance.
(a) Notice requirement. When a bank 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 bank 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.
(c) Timing of notice. The bank shall provide the notice required by paragraph (a) of this section to the borrower within a reasonable time before the completion of the transaction, and to the servicer as promptly as practicable after the bank provides notice to the borrower and in any event no later than the time the bank provides other similar notices to the servicer concerning hazard insurance and taxes. Notice to the servicer may be made electronically or may take the form of a copy of the notice to the borrower.
(d) Record of receipt. The bank shall retain a record of the receipt of the notices by the borrower and the servicer for the period of time the bank owns the loan.Yes it is required under the Interagency Appraisal and Evaluation Guidelines. Take a look at pages 77462-77464 for details: https://www.occ.gov/news-issuances/federal-register/75fr77450.pdf.
You can accept and use an appraisal assigned to you by another financial institution if you meet certain requirements such as proper consideration, evaluation and documentation. Take a look at the Interagency Appraisal and Evaluation Guidelines, found here in the Federal Register on page 77463: https://www.occ.gov/news-issuances/federal-register/75fr77450.pdf
It depends on whether the loan is being made to: an EO, a partnership where the EO has a majority interest or a related interest.
Regulation O, 12 CFR 215.5, sets forth additional limits on extensions of credit to Executive Officers, but not their related interests. These restrictions apply to a partnership where an EO holds a majority interest as stated in 215.5(b). Also, if the EO is guaranteeing a related interest loan that would be subject to the $100,000 due to 215.3(7).
You’ll have a hard time finding anything that specifically spells this out other than the regulation and statute, but here is a link to the OCC Insider Handbook that has a statement agreeing with my opinion: https://www.occ.gov/publications/publications-by-type/comptrollers-handbook/_pdf/m-ia.pdf. See page 11.
The email acknowledgement from the consumer would indicate they had received the disclosures via email, not necessarily that they had opened/read it. If you plan to email the disclosures you must also comply with the E-SIGN Act which will include, among other things, evidence that the consumer can access documents in the form they will be sent (demonstrable consent).
Here’s a link to the E-SIGN act on BOL: https://www.bankersonline.com/regs/esign/esign.html
