Compliance Question of the Week

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Regulations and Guidance

Compliance Question of the Week

QUESTION: The bank has changed servicer providers, the provider processes transactions. Does the bank need to provide disclosures and opt out information when the bank changes servicer providers?

ANSWER:

There is an exception to the disclosure and opt out provisions of Regulation P pertaining to service providers. If the service provider meets the exception no opt out is necessary. Note that the Fair Credit Reporting Act and state law (if it is more restrictive) may be applicable.

Reference: Regulation P 12 CFR 1016.14

 

 

Q&A Archives

ANSWER:

Document preparation fees are to be considered finance charges unless the loan is secured by real property or is a residential mortgage transaction and the fees are "bona fide and reasonable" in amount. For services performed periodically during the loan term, the exclusion does not apply (i.e. construction inspection fees). There are many factors in which a bank must consider a fee "bona fide and reasonable". Your make will want to determine what is reasonable based on your banks costs for preparing loan documents, your geographic location, and your competitors current fees. Commonly banks charge between $50 and $250 and do not include the fee in the finance charge. 

Reference: 12 CFR 1026.4(c)(7)(ii).

 

ANSWER:

Yes, you may send the expired disclosure until HUD publishes an updated version. The form in its current version is correct. In May 2018, the Economic Growth, Regulatory Relief, and Consumer Protection Act was signed into law which provides for a permanent extension (Section 313) of Section 3953 (non-judicial foreclosure) one-year tail coverage period. HUD has not stated when or if it will be publishing an updated version to remove the expiration date.

ANSWER:

To be eligible under the Phase II exemption, a non-listed business must not receive more than 50% of its revenue from an ineligible business activity.

Ineligible business activities include but are not limited to:

  • professional service firm (i.e. law , accounting, medicine),
  • pawn shop,
  • gaming,
  • investment advisory services,
  • real estate brokers,
  • title insurance,
  • marijuana related business,
  • auto dealer, boat dealer, and any transportation related vessel. A rule of thumb is anything that rolls, floats or flies.
Reference: 31 CFR 1020.315(b)(6-7); 1020.315(e)(8).

ANSWER:

In general, a covered transaction receives a safe harbor for ability to repay (ATR) at the end of a seasoning period of at least 36 months as a Seasoned QM if it satisfied certain product restrictions, points ad fees limits and underwriting requirements, and it meets performance and portfolio requirements during the seasoning period.

Regulation Z: 12 CFR 1026.43(e)(1). See also: Final Rule, Federal Register, December 29, 2020, page 86402

ANSWER:

If the consumer sends a written confirmation of error to the wrong address, the financial institution must process the confirmation through normal procedures. But the institution need not provisionally credit the consumer's account if the written confirmation is delayed beyond 10 business days in getting to the right place because it was sent to the wrong address.

Reference: Official Staff Interpretation Regulation E 12 CFR 1005.11(b)(2)

 

ANSWER:

Yes. Keep in mind that although a text message may be going to a specific person, because of the platform used (e.g., computer, phone) it may not be secured, which in turn allows the message to be viewed by someone who is not the intended recipient. At this time, there are no exceptions from compliance requirements with regard to social media. Section 805 of the Fair Debt Collection Practices act states the requirements for communicating about debt collection.

Reference: Fair Debt Collection Practices Act §§ 1692-1692p

 

ANSWER:

RCBAPs (Residential Condominium Building Association Policies) are policies purchased by the condominium association on behalf of itself and the individual unit owners in the condominium.

A portion of the periodic dues paid to the association by the condominium owners applies to the premiums on the policy.

When a lender makes, increases, renews, or extends a loan secured by a condominium unit that is adequately covered by an RCBAP and dues to the condominium association apply to the RCBAP premiums, an escrow account is not required.

However, if the RCBAP coverage is inadequate and the unit is also covered by a dwelling form policy, premiums for the dwelling form policy would need to be escrowed if the lender requires escrow for other purposes, such as hazard insurance or taxes.

Reference: Interagency Flood Q&A 2009 & 2011, Q56.

 

ANSWER:

Under Regulation B, 62 is the age that can be used – i.e., favor the elderly. The target market would have to begin with people 62 or older for any credit related product.

As deposit products do not apply to the prohibitions of Regulation B, there would be no age restrictions for a deposit account. That said, using a subset of the original marketing, in order to market credit products would require using the age of 62 or older to be in compliance with Regulation B.

Reference: Regulation B: 12 CFR 1002.2(o); Official Staff Interpretation: 1002.6(b)(2)

 

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