Pub. 8 2020 Issue 1

9 The Community Banker relevant — meaning she is not performing the transaction on her own behalf — and she would be listed as “Person conducting transaction for another.” HMDA. Q: Is a loan to refinance a primary residence and purchase farm equipment with the remaining funds considered reportable under HMDA? The regulation doesn’t mention any- thing about farm equipment under its exception for agricultur- al purpose transactions. A: Unfortunately, Regulation C and its Commentary are not very enlightening on what “agricultural purpose” entails. However, if we look at the Official Staff Commentary on Regulation Z for its exemp- tion of agricultural purpose credit, we find that “agricultural purpose” is a broad category. So, using this yardstick, if a loan is primarily for an agricultural purpose, it would be exempt from HMDA reporting (as well as Regulation Z disclosure and other requirements.) Flood Insurance. Q: Our bank is refinancing a loan to a hotel. When we made the first loan, the flood determination said the property is not located in a flood zone. However, when process- ing the refinance application, our new flood hazard determina- tion vendor states that the deck attached to the property is in a flood zone, but not the hotel itself. We are still working to verify that this is correct. If the flood hazard determination vendor concludes that the deck is in a flood zone, but the hotel is not, is flood insurance required for the entire structure? A: The first flood hazard determination vendor missed this one. The Federal Emergency Management Administration (FEMA) has con- sistently required such a structure to be covered by flood insurance. In fact, in its old Mandatory Purchase Guidelines publication, FEMA made very clear that “[e]ven though a portion of real property on which a building is located may lie within an SFHA, the purchase and notice requirements do not apply unless the building itself, or some part of the building, is in the SFHA. However, even if that part of the building within the SFHA is not subject to coverage (e.g., a deck), the entire building is considered to be in the SFHA.” So, if the final determination is that the deck (or any other part of the hotel) is located in the special flood hazard area, flood insurance is required on the hotel, the whole hotel structure. TISA/UDAAP. Q: We are looking at offering a reward check- ing account to customers. What are some of the compliance requirements that we need to follow? A: Compliance issues for rewards checking center around disclosures and advertising, and involve TISA and UDAAP requirements/concerns. The rewards typically amount to a “bonus” under Regulation DD (TISA), things valued over $10 given for opening, maintaining, etc. a deposit account. The term does not include interest, other consider- ation worth $10 or less given during a year, the waiver or reduction of a fee, or the absorption of expenses” [12 CFR 1030.2(f)]. A bonus must be disclosed on the “account disclosure” (given at account opening), as well as details about when the bonus is paid, etc. In addition, mention of a bonus in any advertising for the account is a “triggering term,” requiring disclosure of the APY (and all the terms that mention of the APY triggers). Beyond the technical issues of terms to be disclosed and adver- tised, you need to make sure that the account disclosures accurately reflect the terms of the account and that any advertising is not misleading or inaccurate. This latter point ties into the general UDAAP issue, particularly the “deceptive” part of UDAAP. The primary concern in this area is that any advertising, promotion, etc. (whether through media, website, personal interactions, etc.) fairly represent the ac- count and do not mislead customers to take on something that is not appropriate for them. There is also a discussion of best practices in the FDIC Supervisory Insights from winter 2012. The FDIC was speaking of high-interest checking accounts, but the issues are pretty much the same. Trusted in Montana for over 60 years