Pub. 7 2019 Issue 3

9 The Community Banker COMPLIANCE Q&A – FALL 2019 HMDA. Q: We are a HMDA reporting bank. We have a bridge loan, which is a 12-month interest-only loanwith the principal balance and any unpaid interest due at maturity. Collateral for this loan is their current house that is on themarket to be sold. The proceeds from this loanwill be used to purchase a newhouse, whichwill be their primary residence. Is this loan HMDA reportable or is it excepted because it is short-term? It will not be refinanced at maturity – but will be paid in full at maturity with the sale of their current home. A: Yes, the loan is HMDA reportable since there is no permanent financing intended to take this out – just being paid off when the current home sells. So, it is not considered exempt “temporary financing.” TILA. Q:We have a customerwhowould like a $1,000unsecured term loan for 12 monthswhere the proceedswill be used to pay offa student loan.Would this be con- sidered a “private education loan” under RegulationZ? A: Yes, it is a “private education loan,” as long as the student loan being paid off was for “postsecondary educational expenses,” as defined in Regulation Z. This means that all the Reg Z private education loan disclosures must be provided to such an applicant – application/solicitation disclosures, approval disclosures, and final disclosures when the borrower accepts the loan. The loan is also subject to all the special provisions in Reg Z for private education loans, including the bor- rower’s right to cancel the loan after closing. TISA. Q: We plan to introduce a chil- dren's savings account that rolls into a regular savings account at age 13. They will get a preferred interest rate, and it will be variable. We will send out addition- al disclosures at age 13 to provide the new interest rate tiers. I believe we need to send these additional disclosures 30 days before the change since the regular tier rates are currently lower than the children's account. There will also be an increase in the minimumbalance requirement. The marketing staff wanted me to double check if the disclosures had to be sent out 30 days before the change. A: Yes, despite what the marketers might hope, these accounts are subject to the requirements spelled out in Regulation DD (Truth in Savings), including that for advance notice of such changes in terms. SCRA. Q: For delinquent real estate loans, what is the timing requirements for delivering the SCRA Notice ? A: The notice must be sent within 45 days after the missed payment was due, as stated in a 2006 Notice from HUD. The notice must be sent for all mortgage loans, including conventional mortgages and mortgages insured by HUD. The notice is required to be sent to all homeowners who are in default on a residential mortgage and must include the toll-free Military OneSource number. Insider Credit. Q: I amwondering about an insider loan. The situation is: the insider is the President, CEO, andmajor- ity shareholder of the bank; the loan is to purchase their primary residence; the loan amount is $450,000; 5%of our tier 1 capital is $427,000; and the insider has no other extensions of credit. Do we have a violation or does the credit just need prior board approval? A: The bank needs to get prior approval – with the insider abstaining – before the loan is extended. Also, you need to make sure Regulation O lending limits (individual insid- er and aggregate insiders) are not exceeded. CRA. Q: Dowe still need to provide a public LAR in our CRA files for themain office and branches inMSAs? I thought I remembered reading that we don’t have to as long as we say the CFPB offers it online. A: You remember correctly, for the most part. Effective in the last year or so, the bank- ing agencies changed their Community Re- investment Act (CRA) rules to require Home Mortgage Disclosure Act (HMDA) reporters to merely put a notice in their CRA public files that their HMDA disclosure statements are available online – at the same time as the Consumer Financial Protection Bureau (CFPB) changed the HMDA requirement about making HMDA disclosure statements avail- able under Regulation C from having them available for five years to pointing anyone interested to the online repository. The CRA rules did not require that the Loan/Application Register (LAR) be made available in the CRA public file, but the public disclosure statements based on the LAR data submitted to regulators. Flood Insurance. Q: What do we do when the flood zone on the flood insur- ance policy comes back as something less hazardous than the flood zone on the flood hazard determination from our vendor (who guarantees its work)? A: What you do is remind the flood insurance agent of the 2008 Memorandum (W-08021) release from the Federal Emer- gency Management Administration (FEMA) that requires the flood insurance provider to use the more hazardous flood determination when presented with two different flood hazard determinations. 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