Lending Compliance Hot Topics with ICS Compliance_January 2010


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Although there is much legislation in motion on Capitol Hill, financial institutions are already adapting to interim and/or final rules. This webinar will cover hot compliance issues affecting consumer lending, and will include flood insurance requirements, disclosures affecting mortgage loans, private student loans, and credit cards.

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Lending Compliance Hot Topics with ICS Compliance_January 2010

  1. 1. Welcome to HOT TOPICS in Lending Compliance Wednesday, 01/27/2010 @ 2:00 p.m. EST Please turn up your computer speakers to hear the webinar which will begin shortly To participate via phone dial: 877 669 3239 phone, 877.669.3239
  2. 2. Welcome to INSIGHTS John F. White, CEO and former Big Four partner, has 40 years of accounting & auditing experience, and founded ICS Compliance more than 10 y g p p years ago g with a mission to provide focused, outsourced compliance services to the financial services industry. Your host today is National Director Michael Pappolla who has more than 14 years i the fi in th financial services i d t i l i industry. Your presenter today is Compliance Services Director Roger Rumbaugh: – More than 40 years banking experience in legal & regulatory compliance – Expertise demonstrated through: • Authoring articles for distinguished publications, such as ABA Bank Compliance • Consultation with more than 75 banks in multiple states • Supplying expert testimony in more than a dozen civil & criminal court actions • Appearing on programs of the ABA’s National Conference for Compliance Managers, Bank Counsel & Auditors; Skylink Television Network; ABA’s ABA s Compliance Symposium; the Mid-Atlantic Compliance Conference, etc.
  3. 3. Today’s Program Changing Legislation g g g What’s the Threat? What s What’s the Response? Is Your Institution on Track? Questions? How to Learn More This presentation is being recorded and will be available for download next week from the News Center at www.ICScompliance.com
  4. 4. Changing Legislation Significant amendments to federal consumer protection statutes Lending-related examples: – The Credit Card Responsibility and Disclosure Act – The Mortgage Disclosure Improvement Act – The Home Ownership and Equity Protection Act (of 1994) – The Higher Education Opportunity Act – The Real Estate Settlement Procedures Act and implementing HUD Regulation X
  5. 5. What’s the Threat? Citations for violations of statutes and regulations g Assessment of penalties and other sanctions as a result of violations Reputational risk
  6. 6. What’s the Response? Understand the changes and assess impact on practices, policies, and procedures Amend policies and procedures Train applicable personnel Review (audit) to ascertain compliance Adjust Adj t as d deemed necessary d
  7. 7. Is Your Institution on Track (to avoid problems)? The Flood Disaster Protection Act of 1973 and The National Flood Insurance Reform Act of 1994 Although unchanged for years, financial institutions nationwide are consistently cited for violations of various provisions of: the statutes and their implementing regulations, which prohibit federally regulated lending institutions from making, increasing, extending, or renewing a loan secured by improved real estate or a mobile home located, or to be located in a Special Flood Hazard Area of a community participating in the National Flood Insurance Program, unless the property securing the loan is covered by flood insurance coverage compliance procedure amount of coverage
  8. 8. The Credit Card Responsibility & Disclosure Act Regulation Z amended to: – Require mailing of statements on credit card accounts (only) at least 21 days prior to the payment due date – Require a 45-day advance notice of significant changes in terms, as well as a specific format requirement for such notices p q – Require that the payment due date for payments on credit card accounts be the same numerical day of each month (effectively barring use of the 29th, 30th, or 31st of each month) – Require crediting of payments on credit card accounts as of the date of receipt, except when a delay does not result in a finance or other charge – Require uniform statement format – Require expanded “tabular format” disclosures, both on or with applications for credit cards, and on or with Account Agreements
  9. 9. The Credit Card Responsibility & Disclosure Act (cont’d) Additional Regulation Z amendments/restrictions affecting credit cards and open-end credit offered to college students: – Prohibits card issuers from opening a credit card account, or increasing a credit limit on an existing account unless the consumer’s ability to make minimum payments is determined using the consumer’s income or assets and current determined, consumer s obligations – Prohibits opening a credit card account for a consumer under 21 years old, u ess the consumer as submitted unless t e co su e has sub tted a written app cat o a d p o ded a qua ed tte application and provided qualified co-signer or joint obligor – Prohibits assessment of fees in excess of 25 percent of the credit limit of the credit card account within the first year after the account is opened (exception – late f fees, over-the-limit f fees, and returned-payment f fees) )
  10. 10. The Mortgage Disclosure Improvement Act Regulation Z amended to: Require early estimated Truth in Lending Disclosures in conjunction with an early, application for any consumer principal dwelling-secured loan Prescribe a 7 business day waiting period between early disclosures and consummation Require re-disclosure if/when the annual percentage rate changes, either up or down, by 1/8 or 1/4 of one percentage point (depending on the type of transaction), followed by a 3-day waiting period Define when either initial or corrected disclosures are mailed to consumers, the consumer is considered to have received the disclosures three business after mailing Prohibit fees (other than a nominal fee to obtain a credit report) from being imposed upon consumers before disclosures are provided
  11. 11. The Home Ownership and Equity Protection Act (of 1994) Regulation Z amended to define, and provide protections to consumers in conjunction with “higher-priced mortgage loans.” A higher-priced mortgage loan is a loan secured by a consumer’s principal dwelling, with an annual percentage rate equal to or greater than 1.5% above the Federal Reserve Board’s Average Prime Offered Rate (APOR) for a first lien-secured loan, or 3.5% above the APOR for a junior lien secured loan; lien-secured Lenders must determine a consumer’s ability to repay a higher-priced mortgage Lenders may not impose a penalty for prepayment of a higher-priced mortgage loan after the first two years, and may not impose a prepayment penalty at any time during the term of a higher-priced mortgage loan if prohibited by state law, or if the consumer’s payment can change during the first four years of the loan term. For applications received on or after April 1, 2010, which result in first lien secured 1 2010 lien-secured higher-priced mortgage loans, lenders must establish an escrow account for property taxes & mortgage-related insurance required by the lender. Mortgage-related insurance is essentially hazard (homeowner’s) insurance, & may also include flood insurance.
  12. 12. The Higher Education Opportunity Act Amendments to Regulation Z define a Private Education Loan as a loan made for postsecondary educational expenses. – Exclusions: open-end credit, real estate-secured loans, and Federal loans under title IV of the Higher Education Act of 1965 Applies to loans made for postsecondary education expenses even if the expenses, amount financed exceeds $25,000 Requirements: – Disclosures with applications (or solicitations that require no application) – Disclosures when the loan is approved – Disclosures at consummation – Consumers’ right to cancel
  13. 13. The Real Estate Settlement Procedures Act HUD’s Regulation X, which implements RESPA, amended to: Revise definition of application to include the borrower’s name monthly income, borrower s name, income social security number, property address, estimate of the value of the property, mortgage loan amount sought, & any other information deemed necessary by loan originator (lender) Completely reconfigure the format of the Good Faith Estimate of Settlement Costs Include a new definition changed circumstances added to define situations under which the originator/broker/lender would be required to issue an amended or revised Good Faith E ti t G d F ith Estimate, & requirement to maintain documentation in support of the i tt i t i d t ti i t f th change for 3 years from re-issue Completely reconfigure the format of the HUD-1 & HUD-1A Settlement Statements Impose strict tolerances, above which closing costs may not increase between the time the GFE is provided & settlement Requires the settlement agent to prepare HUD-1 & HUD-1A Settlement Statements (including any revisions thereto)
  14. 14. Questions? Please submit your questions through the Q&A panel to the right of your screen If you have questions specific to your Institution, feel free to e-mail them to Mike Pappolla at: mpappolla@ICScompliance.com or call him at: 856.220.2240
  15. 15. Thank you for participating in today’s webinar: today s HOT TOPICS in L di C i Lending Compliance li Visit the News Center at www.ICScompliance.com for: p For more information, please contact: • Recording of this webinar Michael Pappolla, Director • Answers to questions not discussed on this webinar mpappolla@ICScompliance.com • Details on our next webinar 888.250.4400 888 250 4400