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I recommend using your regulator’s fair lending exam manual as a guide for your internal fair lending review. It will likely give you sample questions to use to determine if a spouse’s information was used without cause. And ways you can determine if discrimination may have occurred is a file comparison where you compare originated vs. denials and originated control group vs. originated prohibited basis group and compare the underwriting criteria to determine if the denial or different terms were justifiable. In the case of discrimination against a pregnant person, I would think that would have to be through a note in the file, observation, or reported by the customer.
Again, your regulator’s fair lending exam manual is a good place to start your internal assessment.
You’re right. However, it only applies to HELOCs if they are secured by the principal dwelling. See 12 CFR 1026.36(b) below for the scope of 1026.36(i) Prohibition on Financing Single Premium Credit Insurance:
(b) Scope. Paragraph (c) of this section applies to closed-end consumer credit transactions secured by a consumer’s principal dwelling. Paragraphs (d), (e), (f), (g), (h), and (i) of this section apply to closed-end consumer credit transactions secured by a dwelling. This section does not apply to a home equity line of credit subject to § 1026.40, except that paragraphs (h) and (i) of this section apply to such credit when secured by the consumer’s principal dwelling. Paragraphs (d), (e), (f), (g), (h), and (i) of this section do not apply to a loan that is secured by a consumer’s interest in a timeshare plan described in 11 U.S.C. 101(53D).
I think tackling UDAAP by department makes sense. Many banks have implemented UDAAP checklists for product development and marketing as part of their procedure. Through these channels is where your major contact with consumers occurs and it reaches products/marketing for all departments. Then you could work your way through other departments (i.e. electronic banking, lending, retail deposit, etc.) and the products they offer making sure your current procedures/products aren’t unfair, deceptive or abusive to customers.
If you haven’t done so already, you should consider training for staff, especially those who create policies and procedures, develop products and work in the marketing department.
Another option you might consider is a board resolution (see excerpt from Reg O below) to determine who is an executive officer. Through board resolution you could exclude all that you don’t deem executive officer (i.e. vice presidents, chairman, cashier, etc.) and declare through name and title who is an executive officer. This is something that would need to be renewed annually or sooner if there are changes in your list of executive officers. You would still need to do your related interest questionnaire to determine related interested of all insiders.
12 CFR 215.2(e)(1) states: Executive officer of a company or bank means a person who participates or has authority to participate (other than in the capacity of a director) in major policymaking functions of the company or bank, whether or not: the officer has an official title; the title designates the officer an assistant; or the officer is serving without salary or other compensation.1 The chairman of the board, the president, every vice president, the cashier, the secretary, and the treasurer of a company or bank are considered executive officers, unless the officer is excluded, by resolution of the board of directors or by the bylaws of the bank or company, from participation (other than in the capacity of a director) in major policymaking functions of the bank or company, and the officer does not actually participate therein.
I have never seen this arrangement, so I agree, it would probably help you to find a bank that does something similar to see how their examiners have reacted to it. From my experience, I’ve also found it helpful to run the idea by your regulator before implementing – they may offer some good suggestions and, at the leas,t they have less argument against it if they contributed to the setup. A few things to think about when considering this arrangement are: 1) your privacy policy (make sure it accurately reflects how you’ll be handling customer information, determine if any exceptions apply and, if required, give them the option to opt-out); 2) ensure disclosures are given timely – who’s taking the application/soliciting (12 CFR 1026.46(d) discusses the timing requirements for disclosures applicable to private education loans); and 3) Section 8 of RESPA shouldn’t apply if it is a private education loan per Reg Z as they aren’t secured by real estate, but be aware if you refer a RESPA covered loan there are prohibitions against kickbacks.
The flood regulations state that a bank shall not make, increase, extend or renew any designated loan unless the building or mobile home and any personal property securing the loan is covered by flood insurance.
A designated loan means a loan secured by a building or mobile home that is located or to be located in a special flood hazard area in which flood insurance is available under the Act.
And finally, building means a walled and roofed structure, other than a gas or liquid storage tank, that is principally above ground and affixed to a permanent site and a walled and roofed structure while in the course of construction, alteration or repair.
If the building is or will be affixed to a permanent site a flood determination should be completed.
Is there an effective way to ensure the third parties are only using the information as intended – for commercial credit?
Charges may be listed as POC on the HUD, but should not be listed as POC on the GFE. As for the initial escrow deposit, I think it would depend on how the customer is actually funding the initial deposit. They are probably either paying in cash at closing or financing the initial escrow deposit. In my opinion, neither of these would be POC.
Is this a purchase where the seller is giving a credit toward roof repairs? Can you give more details?
You may or may not have a joint marketing agreement with a financial company. 12 CFR 1016.13 governs the joint marketing agreement exception. The definition of a financial company in Regulation P, 12 CFR 1016.3 references 12 USC 1843(k) (see section 4https://www.law.cornell.edu/uscode/text/12/1843). Most of the time the relationship you described does qualify as a financial company. But make sure your third party provider doesn’t meet the definition of what is “not” a financial company under 12 CFR 216.3(l). Also take a look at https://www.federalreserve.gov/regulations/cg/faq.pdf, specifically Q&A J1, J4 and J5. They tell you exactly what you need to ensure you have a joint marketing agreement. I recommend you summarize what type of joint marketing agreement you have in your privacy policy. For example, “we have a joint marketing agreement to market and provide you with investment and insurance products” – take a look at 12 CFR 1016(c)(4)(ii) for what should be included in your privacy policy.
Most banks I have talked to either already have escrow in place for their flood loans or are waiting until July 2014 to implement escrow on flood loans if they aren’t exempt from the requirement. Your bank may implement escrow for existing flood loans by having the borrowers sign an escrow agreement and sending them the initial escrow statement within 45 days of establishing the escrow account. However, there will likely be more guidance on this process as regulations are written so it may be prudent to wait and see what the regulations require.
I’m assuming this loan isn’t for the purchase or construction of their principle dwelling. If this is correct, you’re right; the non-borrower spouse who has ownership in the property to be taken as collateral will have to sign the security instrument and will, along with the borrower, have the right of rescind if the collateral is their principle dwelling. However, if she has not applied for the loan she will not receive, nor need to sign, the early disclosures.
The National Flood Insurance Act of 1968/the Flood Disaster Protection Act of 1973, the flood regulations and the Flood Q&A all refer to record retention requirements for the SFHD and the Notice of Special Flood Hazards disclosure. For these documents the retention requirement is for as long as the lender owns the applicable loan. However, retention of proof of flood insurance is not specifically spelled out. Of course, what is stated in the flood regulations is that: 1) a loan cannot be made, increased, extended or renewed without proper flood insurance in place; and 2) if at any time flood insurance is determined to be inadequate then the lender must initiate the 45 day notification process with the borrower and potentially force place flood insurance if the borrower doesn’t comply. Evidence of insurance, in part, shows compliance with these two requirements and, I would say, should be kept in the file as long as your bank retains loan files per your internal record retention schedule.
Here are links to a few flood resources:
https://www.fema.gov/library/viewRecord.do?id=2216
https://www.bankersonline.com/tools/flood_faq_2011_10_17.pdf
“These are my opinions and they do not constitute legal advice.”
Take a look at 12 CFR 1026.7(a)(6). It gives you a roadmap of how the finance charge on HELOC statements should be laid out. Basically, you need to identify the finance charges in general and then list the specific charge(s) that make up the finance charge. This will include the interest/periodic rate. For example, you may have a header on your statement that says “Finance Charge Calculation” then you would list specific charge(s) that makes up the FC and show the dollar amount of that charge as the FC. The individual items that make up the FC are detailed and if that includes interest/period rate then it is labelled as such. The commentary below breaks out how you may and may not itemize your finance charges.
Regulation Z Official Interpretation:
1026.7(a)(6)(i): Finance Charges
1. Total. A total finance charge amount for the plan is not required.
2. Itemization—types of finance charges. Each type of finance charge (such as periodic rates, transaction charges, and minimum charges) imposed during the cycle must be separately itemized; for example, disclosure of only a combined finance charge attributable to both a minimum charge and transaction charges would not be permissible. Finance charges of the same type may be disclosed, however, individually or as a total. For example, five transaction charges of $1 may be listed separately or as $5.
3. Itemization—different periodic rates. Whether different periodic rates are applicable to different types of transactions or to different balance ranges, the creditor may give the finance charge attributable to each rate or may give a total finance charge amount. For example, if a creditor charges 1.5% per month on the first $500 of a balance and 1% per month on amounts over $500, the creditor may itemize the two components ($7.50 and $1.00) of the $8.50 charge, or may disclose $8.50.Keep in mind that the periodic rate(s) along with the corresponding APR are required to be disclosed as well. See 12 CFR 1026.7(a)(4) and the Official Interpretation at https://www.bankersonline.com/regs/12-1026/12-1026-007.html.
“These are my opinions and they do not constitute legal advice.”
