Pub. 5 2017 Issue 2

TILA. Q: If there is an error found on an ARM Notice (not the initial rate/payment change notice, but a subsequent one), andwe re- disclose with the correct information, dowe need tomake the first payment with the cor- rect information due on the same payment date as the incorrect initial notice or dowe need to change that payment date? A: If the timing of the corrected notice meets the general timing requirement for such an adjustment notice (at least 25 days before the first payment at the new amount is due), there is no need to change that first new-payment due date. If you are under the 25 days, then it would be best to push the first due date for the new payment amount back one month. Flood Insurance/RESPA. Q: A customer has force-placed insurance that has been in effect for threemonths, and our policy is to escrowwhen force-placed insurance is enforced. Now the customer had provided us with their own insurance coverage, and they do not escrow. The customer is also delinquent on his loan. Canwe hold the escrow funds that we do have until the loan is current, or canwe apply the escrow funds to themortgage? A: Neither. The bank will have to refund any premiums, etc. for any period of overlapping coverage (any time when both the customer’s and the forced-placed coverage were both in ef- fect) and funds held for future coverage. There is no provision in either the flood hazards regu- lations (for flood insurance) or in Regulation X, which implements the Real Estate Settlement Procedures Act/RESPA, (for general property in- surance) that would allow the institution to hold such premiums for an extended time because of customer delinquency. TILA/RESPA. Q: Many times, loan applicants give their intent proceed at the time they submit a loan application, whichmay also be prior to receiving the Loan Estimate (LE). Our institution does not charge fees prior to loan closing. Because of this, is there any concern about documenting intent to proceed prior to an LE being issued? Can an intent to proceed be at closing? A: Technically, the LE must be given to appli- cants before you get their intent to proceed. Applicants have considerable flexibility in how they show their intent to proceed, unless the lender imposes some particular method. May an“intent to proceed”be given at closing? That really is not in line with the intent of that notice requirement. The intent to proceed is supposed to show that the applicant wants to go ahead with the loan, to inform the lender that it can proceed with its mortgage process. By the time of closing, the process is nearly finished (other than servicing). So, it would be best to get an intent to proceed earlier in the loan/application process – but after the LE has been given to the applicant. BSA. Q: Some questions have come up over how to complete the occupation or business space on the CurrencyTransaction Report (CTR). Would stating simply“Retired”for the “Occupation”be sufficiently specific? Or, do the instructions still call for including the oc- cupation the person retired from, if known? And, would saying simply“Dealership”for a business that is an automobile dealership be sufficient (since there are automobile, motor- cycle, marine, airplane, etc. dealerships)? A: The Financial Crimes Enforcement Network (FinCEN) states in it’s Frequently Asked Ques- tions document on BSA reporting (FAQ #20) that when we record an occupation (or line of business), we should be specific. The agency says if you use“self-employed, retired, unem- ployed,”you should also state the specifics of the former profession if known. When you see a pattern of such generic terms, it usually indi- cates frontline staff who will not ask questions or look up a profile and this could be a good item for the BSA Officer to discuss at their next training session. EFTA. Q: A customer has notified us both verbally and inwriting onOctober 5 that her daughter took her debit cardwithout her au- thorization. Her daughter completed several point of sale (POS) transactions, starting on September 29 throughOctober 5. She stat- ed in her comments that the card has been missing for almost twoweeks. Evidently, she has kept the card locked up at home with the PIN, which her daughter found. Her daughter also performed three automated teller machine (ATM) withdrawals on Septem- ber 29 (two transactions) and October 3 (one transaction). She had the card in her possession on Septem- ber 24 and then locked it up with the PIN. On September 26, she went to get it and it was not there. We have cancelled the card so that there can be nomore transactions made. I am trying to figure out if the bank owes her anything. The POS transactions totaled $163.26 and the ATM transactions $110.50. A: Regulation E is very pro-consumer, but does place some responsibility on the customer to notify the bank promptly, which your customer did not. When notice is not given to the bank within two business days of discovery of the loss/theft of an access device, then the bank may hold the customer liable for up to $500 – or the sumof $50 (or amount of unauthorized electronic fund transfers/EFTs within two busi- ness days after learning of the theft/loss, if less than $50) plus the amount of unauthorized EFTs occurring after the first two business days and before the bank is notified – whichever is less. Your customer discovered that the card was missing on September 26. The first unautho- rized transactions were on September 29, the third business day after discovery. The unautho- rized EFTs (POS and ATM) total $273.76. So, you do not have to consider the $50 limit for the first two business days since no unautho- rized EFTs occurred then. The rest were after the first two business days, so they are subject to the $500 limit. That means that Regulation E does not require the bank to refund anything to this customer because of her late notice to the bank – on October 5 instead of by September 28. 20 The Community Banker COMPLIANCE Q&A – SUMMER 2017 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 — Summer 2017