Pub. 7 2019 Issue 4

11 The Community Banker Flood Insurance. Q: I need your help, please. The flood de- termination and the appraisal for a parcel we are supposed to close on tomorrow indicate that the property is in a “special flood hazard area” (Zone A) and I need your help determin- ing if we are required to have flood insurance on the land. The loan is to be secured by vacant land — a campsite — in a rural county. Are we required to have flood insurance on this property? A: No, you are not. Flood insurance is required only when some eligible building on a property is in a flood zone. Since this proper- ty is vacant land (no buildings) flood insurance is not required for this loan (as long as no building is going to be built/placed on this property at this time). TILA. Q: To obtain income tax transcripts, the IRS is charging a $2.00 fee (per transcript) to the bank. This cost will is passed on to the consumer. Is this an “APR” fee? A: If the bank requires the tax return transcripts in connection with loan applications, then the IRS fee seems to fit the definition of “finance charge” in Regulation Z — and does not seem to fit any of the exceptions/exclusions from the finance charge. So, it seems it is an “APR” fee, though it is a small enough amount and insignifi- cant in relation to the size of a mortgage loan. EFAA. Q: Lately, we have had a lot of “cashier’s checks” be- ing returned as fraudulent checks. We call and verify the funds with the issuing bank, and they will indicate the check is good. But the check we have is a duplicate of an original cashier’s check so they are returned to us as fraudulent. The customer has already sent the money to the scammer, so they are out the money also. My question is: can we place a hold on a cashier’s check due to the possibility the check may be fraudulent, without actually calling the issuing bank, or could we place a hold on all cashier’s checks being issued by a certain bank because of a history of fraudulent cashier’s checks we are receiving from that bank? If so, what would the reason be — reasonable cause to doubt col- lectibility — or what? And, if we can place a hold on the check, how long would we be able to place the hold on the account? The amount of the checks so far have ranged from $1,000 to $7,000. If we cannot place the hold, are there other alternative ways we can hold the funds to make sure the check is good, not just to protect the bank but also the customer that is getting scammed? A: As you know, generally, cashier’s checks deposited in person to bank staff into an account of the payee (and using a special deposit slip/envelope, if required and disclosed) must be made available the next business day after the banking day of deposit. If not deposited in person (but meeting the other criteria), the requirement is to make those funds available on the second business day after the banking day of deposit. Exception holds may be imposed on cashier’s check deposits and will have to be made available within a “reasonable time” after the funds from the deposit would have had to be made available if the cashier’s check was just a normal “local check” [12 CFR 229.13(h)(2)]. The “reasonable cause to doubt collectability” could be invoked for a cashier’s check that purports to be drawn on a financial institution that has been the purported paying bank for previous fraudulent checks — in other words, if there is a history of a particular bank’s name being used by the fraudsters, and the check being presented resembles those previous fraudulent checks, the “reasonable cause” exception could be used. Normal hold notice requirements come into play, as well as normal exception hold availability (meaning “next day” requirements do not apply for all exceptions except the “large deposit” exception). Of course, using the exception only buys you a limited amount of time — until the seventh business day after the banking day of depos- it — but that often may be enough time for the fraud to be detected. Alternatives might need to be discussed with legal counsel, though you may be able to send these checks for collection rather than ac- cepting them for deposit. 650 power street | p.o. box 1198 | helena, montana | 406.443.2340 | www.cwg-architects.com