Pub. 6 2018 Issue 2

13 The Community Banker COMPLIANCE Q&A – SUMMER 2018 By Bill Showalter, Senior Consultant, Young & Associates, Inc. HMDA. Q: We know Regulation C provides that a loan to purchase property used primarily for agricultural purposes is not a “home purchase loan” even if the property includes a dwelling. But, this is the only place an agricultural exception is mentioned. What about the case of a refinancing? That definition indicates that the original pur- pose of the loan is not material, just that there is a dwelling-secured loan which is satisfied and replaced by another dwelling-secured loan. A: Actually, that treatment was true under the “old” HMDA rule, a lender would report a “refinancing” of a farm loan. The reasoning was just as you mentioned – the exception was only for purchases. How- ever, that changed with the 2018 New Year. The revised Regulation C exempts all loans with a primary agricultural purpose. TILA. Q: When giving out the list of homeownership counselors to customers who apply for a mortgage we were under the impression that the list needs to be generated using the address of the property being purchased, not by the customers’ current property address. Is this correct? A: You are to use the borrowers’ current address/zip code, unless you have given them a choice of what location to use (not required) and they tell you to use some other specified location. BSA. Q: Could you please clarify for me whether or not we would need to complete a Beneficial Owner Form on the individual signing for a loan for our local village (municipality)? A: No, local governments are not included in the definition of “legal entity customer.” The definition excludes, among others, divisions, agencies, and so forth of federal, state, or local government – just like the definition of “exempt person” (for currency transaction reporting purposes). TILA. Q: We refinanced the customer’s loan secured by their principal dwelling and added new funds to build an addition. Do we disclose the loan purpose as “construction” on the TRID disclosures? A: No, “construction” is to be used as the disclosed loan purpose only when none of the loan is to be used for “purchase” or “refinance,” and the funds are being used for the initial construction of the dwelling. EFTA. Q: May the bank limit the applicability of its funds availabil- ity policy to just its transaction accounts, and not cover its savings deposits? A: Yes, you may. The Expedited Funds Availability Act (EFAA), as implemented by Regulation CC, applies only to “transaction ac- counts,” as spelled out in the definition of the term “account” for Reg- ulation CC purposes – except for the Check 21 Act provisions found in Subpart D of Regulation CC. However, if your bank has branches in more than one state, you should check the individual states’ laws to make sure they do not have their own funds availability law that applies within their borders, and possibly may differ from the federal law. The EFAA does not super- sede state laws that are more protective of the consumer – such as by applying funds availability rules to more types of accounts. RESPA. Q: Regarding force placed insurance, does Regulation X allow us as a servicer to backdate a force placed insurance policy? A: The Small Entity Compliance Guide on the Regulations X and Z mortgage servicing rules clearly states that the lender/servicer may put insurance in place when it does not receive evidence that the borrower has insurance in place but may not charge them for the coverage until the required notices have been sent (45-day notice and 15-day reminder notice). BSA. Q: If a suspicious transaction is stopped, do we report on the Suspicious Activity Report “No Amount Involved” or do we report the amount the transaction would have posted for? A: You report the amount involved of what would have posted. The reporting requirement is not just any amount that “slips through,” etc. It is whatever the amount or potential amount of the suspicious transaction(s) or potential transaction(s). TILA. Q: When quoting a rate for an agricultural operating line of credit, are we required to quote the annual percentage rate as well? A: No, loans that are primarily agricultural in purpose are exempt from Regulation Z – all of the regulation – disclosures, quoting rates, advertising, rescission, etc. There is one exception – agricultural credit remains subject to at least some of the rule’s special credit card provi- sions (when there is a credit card involved with a line). TISA. Q: Does “annual percentage yield” have to be spelled out on lobby rate boards? A: No, the bank may use either the full term “annual percentage yield” or the abbreviation “APY” on indoor signs (including lobby rate boards). CRA. Q: Are we required to have the CRA assessment area map approved by our board annually, or just when it changes? A: No, there is no requirement for board approval of the assess- ment area map. Twenty years ago, when banks & thrifts had to have a CRA statement (that included the map of their delineated communi- ty), the board had to approve that each year. But, now the assessment area map is one thing that is required in the CRA public file, and the bank/thrift is required to make sure this is updated to reflect any changes by April 1 each year – but there is no requirement for board approval. On the other hand, if the bank/ thrift wants to have its board review and approve its map, there is no prohibition against it, either. 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.