Pub. 4 2016 Issue 3

16 The Community Banker www.mibonline.org COMPLIANCE — FALL 2016 By Bill Showalter, Senior Consultant, Young & Associates, Inc. Young & Associates provides banks and thrifts with support for their compliance programs, independent reviews, and in-bank training, as well as a full menu of management consulting, loan review, IT consulting, and policy systems. Compliance Q&A — Fall 2016 TILA/RESPA. Q: We are getting involved in a new loan product for Jumbo loans, and doing a new product set up on our LOS sys- tem. This product will involve large residential loans to be sold on the secondary market. One of the fees involved is a $225 delivery fee (payable to the investor and is an underwriting/processing fee). The borrower will not be able to shop for this service. Where would this fee appear on the Loan Estimate and Closing Disclo- sure? Also, would this be a pre-paid finance charge? A: This fee would go in the “Origination Charges” section on the LE and CD (on each disclosure under Closing Cost Details, Loan Costs on pg. 2). This fee is definitely a finance charge and, since it will be paid in cash/check by the borrower before/at closing or withheld from the proceeds at any time, it is a “prepaid finance charge.” BSA. Q: Is a NAICS code required on each Currency Transaction Report, even those for individuals? A: In the past, the general line of thinking has been that the NA- ICS code field was for a business. Some banks did complete it for individual occupations, but not many. In a telephone conversation with FinCEN, the FinCEN represen- tative stressed that FinCEN expects field 9 (Occupation or Type of Business) to always be completed, unless truly unknown, but field 9a (NAICS code) should be completed only if an exact or very close line of business matched. More recently, we received an email from FinCEN stating that the NAICS code field should be completed for an occupation or line of business if a code matches on each CTR. MLA. Q: Is the bank allowed to exercise its right of set-off for a loan covered by the MLA rule? A: Yes. According to Q&A #18 in the Interpretive Rule that the Department of Defense issued in August, lenders may exercise a “statutory right” to take a security interest in funds deposited into a covered borrower’s account, which means banks may apply a statutory right of set-off. ECOA. Q: We received a request from a consumer for a copy of her decline letter from February 2016. Her credit union is request- ing proof of the decline as part of their loan application process. We have not been able to locate the original adverse action notice, but the consumer acknowledges receiving, then losing, the notice. We have the credit report, and know the loan was denied. The lender that denied the loan is no longer with the bank so we can- not confirm with certainty what decline reasons were listed on the AAN. How should the bank proceed? A: The bank has a record retention problem. I hope this is not indicative of a wider problem. You should investigate that and reinforce to loan staff the importance of retaining documentation. If the bank cannot uncover the information about why the orig- inal request was turned down (e.g., by looking at notations that should be in the application file, perhaps on the credit report, etc.), then a possible alternative is to find out if a letter confirming the denial (without reasons) would be sufficient for the credit union’s purposes. CRA. Q: We opened a branch in a contiguous county that is in a Metropolitan Statistical Area. Our current CRA assessment area is in a non-MSA area. Can we just add that county to our existing CRA AA? A: No. With the opening of the new branch, which is located in an MSA, the bank now needs to delineate two CRA AAs. The CRA rules prohibit delineating an AA that extends “substantially” out- side of an MSA. One AA would be comprised of your new market area within the MSA and the other could be your current non-MSA AA. HPA. Q: Is a private mortgage insurance notice required for a loan secured by non-owner-occupied rental property? A: No, the Homeowners Protection Act (which gives us the PMI disclosure and limitation requirements) covers only a loan secured by a mortgage/deed of trust in “a single-family dwelling that is the primary residence of the mortgagor.” EFAA. Q: I am confused by a paragraph in the FRB guide to Regu- lation CC: "Deposits into accounts of new customers (open for less than 30 days) – Next-day availability applies only to cash, electronic payments, and the first $5,000 of any other next-day items; the remaining amount from next-day items must be available by the ninth business day. You may choose any availability schedule for deposits of other checks into the accounts of these new custom- ers." What does this last paragraph mean? Can our hold be longer than nine days for other checks? A: Yes. Deposits beyond what is listed (cash, etc., first $5,000 of next-day items – next day; other next-day items – ninth business day) do not have any specific required availability time frame. The bank sets that on its own. Remember, this provision applies only to “new accounts” – those in the first 30 calendar days after the account is established. And, the bank must include the “new account” hold in its initial funds availability policy disclosure given to the customer when he opens a new transaction account. Young & Associates provides the popular Community Bankers for Compliance Program sponsored by MIB. Discover more about this affordable, comprehensive compliance pro- gram at http://mibonline.org/cbc-program/.