Transcript FDIC Regulatory Update Flood Insurance and UDAP - Bcac

FDIC Regulatory Update
Bank Compliance Association of
Connecticut
October 2014
Hot Topics, Exam Findings and Best Practices
Sherry Antonellis
Field Supervisor
New England South Territory
FDIC Regulatory Update
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Servicemembers Civil Relief Act (“SCRA”)
Protecting Tenants at Foreclosure Act
Aftermath of Mortgage Rules
Overdraft Protection
EFT Error Disputes
Flood Insurance Reform
Social Media
CHFA and HMDA Reporting
Most Common Violations
Some Common CMS Issues
FDIC Regulatory Update
Hot Topics
SCRA
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Protections for servicemembers on active
duty (and their spouses) in relation to
interest and fees charged on certain
types of credit
Certain protections in the foreclosure
process as well
Applies to credit cards, student loans,
mortgages and consumer loans acquired
prior to service date
FDIC Regulatory Update
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SCRA
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Effective the date that the servicemember begins
active duty status.
Must be made retroactive to that date if request
is made within 180 days of active duty beginning.
Cannot require specific documents; must accept
any official document that includes date of active
duty.
Lenders and servicers cannot in any way
discourage servicemembers from requesting to
asserting their SCRA protections.
FDIC Regulatory Update
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SCRA
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Expectation from DOD and DOJ that lenders and
servicers be proactive in the use of the DOD web
site to determine if active duty status has ended
or been extended.
https://www.dmdc.osd.mil/appj/scra/welcome.xh
tml
Contacting servicemembers on active duty via
letter at last known address alone is not
considered adequate.
FDIC Regulatory Update
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SCRA Best Practices
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Have detailed, written procedures and training
that provide employees with specific guidance and
expectations.
Track all SCRA requests. Detail outcome and
maintain documentation for each request received
whether granted or not. Create an audit trail.
Include use of DOD web site in all aspects of
process. This will help to ensure that expectation of
proactivity is being met.
Provide for regular audits for SCRA compliance and
compliance with your own procedures across all loan
types and departments.
FDIC Regulatory Update
Hot Topics
Protecting Tenants at Foreclosure Act
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Originally passed in May 2009.
Was to expire in December 2012; extended to
December 31, 2014.
Applies to any residential property in foreclosure.
Bank assumes responsibility for ensuring the rights of
any tenants occupying the property.
Tenants must receive written notice of eviction at least
90 days prior to effective eviction date.
Tenants must be allowed to maintain residence until
the end of any lease unless the property is sold to
someone who will occupy as primary residence
(assuming no breach of lease by tenant).
FDIC Regulatory Update
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Protecting Tenants at Foreclosure Act
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If no lease, tenants must still receive 90-day notice.
Currently no pending legislation to extend.
No prohibition to pay tenants to vacate (“Cash for
Keys”).
Connecticut General Statutes section 47a-20f
applicable.
Tenants must receive the greater of:
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Double the total of security deposit plus unpaid interest;
Two months’ rent; or
$2,000.
FDIC Regulatory Update
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PTF Act Best Practices
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Have detailed, written procedures and training
that provide employees with specific guidance and
expectations If no lease, tenants must still receive 90day notice.
Ensure that Compliance Officer is notified of any
foreclosure involving tenants.
Maintain applicable disclosures on hand to avoid
confusion.
Ensure consideration of State laws and
regulations in the process.
FDIC Regulatory Update
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Aftermath of Mortgage Rules
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Amendments to Regulation Z enacted to preclude
making of unaffordable mortgage loans to consumers.
“Ability to Pay” requirements have made it more
difficult to originate low- or no-documentation loans.
We are starting to see community banks making these
loans again.
Banks are relying on Verifications of Income from
employers as the sole form of income verification or
are making Stated Income loans.
These loans are then being maintained in the banks’
own portfolios.
FDIC Regulatory Update
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Aftermath of Mortgage Rules
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The requirements of applicable guidance on
nontraditional mortgage products (FIL-2006-031) still
need to be followed in these cases.
Appropriate risk mitigation practices must still be
followed (e.g., reasonability of income related to
profession).
These products can also expose the bank to additional
Fair Lending risks such as steering.
FDIC Regulatory Update
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Aftermath of Mortgage Rules Best
Practices
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Ensure that formal written procedures include
details regarding risk mitigation practices outlined in
FIL-2006-031.
Provide for appropriate monitoring and audit of
these procedures and the loans themselves to ensure
that procedures are followed and “red flags” were
recognized and addressed.
Include these products in any Fair Lending reviews
and provide training on applicable risks to
employees.
FDIC Regulatory Update
Hot Topics
Overdraft Protection
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We continue to see issues in this area whether in
formal or ad hoc programs.
Disclosures do not match actual practices of the bank.
Use of disclosures provided with programs purchased
from third-party vendors that do not accurately
portray the bank’s program.
New fees are instituted without proper disclosure
ahead of time or at account opening.
“Continuous overdraft fees” are assessed daily and
these customers are not included in monitoring for
abuse or excessive negative balances.
FDIC Regulatory Update
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Overdraft Protection
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These issues can be violations of Truth-in-Savings
(Regulation DD) or Section 5 of the Federal Trade
Commission Act (UDAP).
In some cases, restitution can be required based on
the type of violation or the level of consumer harm.
FDIC Regulatory Update
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Overdraft Protection Best Practices
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Ensure that disclosures accurately reflect the
parameters of your ODP program.
If changes are made to your ODP program from a
systems standpoint, ensure that they are
accurately reflected in the applicable disclosures.
If fees are added to the ODP program, ensure that
appropriate notice is given to depositors as
required by applicable law and regulation.
Ensure that high balance/abuse reviews include those
primarily caused by the assessment of daily fees
and that bank policy is followed in these cases.
FDIC Regulatory Update
Hot Topics
EFT Error Disputes
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We continue to see issues with banks regarding the
processing of EFT error disputes.
Customers are being required to complete additional
steps in order to have their error claims investigated.
These include:
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Requiring police reports, notarized statements, or other
formal documents before acceptance of the dispute;
Requiring the completion of bank-developed forms before an
investigation will be commenced;
Charging a fee for investigating a dispute.
These are violations of Regulation E but in some cases
may also be violations of Section 5 (UDAP) and may
require customer restitution.
FDIC Regulatory Update
Hot Topics
EFT Error Disputes Best Practices
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Have detailed, written procedures and training
that provide employees with specific guidance and
expectations.
Track all error disputes regardless of how they are
received (e.g., in-person, telephonically, via e-mail).
Detail outcome and maintain documentation for each
dispute received whether granted or not. Create an
audit trail.
Provide for regular audits and monitoring for EFT
compliance and compliance with your own procedures.
across all loan types and departments.
FDIC Regulatory Update
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Flood Insurance Reform
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Homeowner Flood Insurance Affordability Act of 2014
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Limits annual flood insurance premium rate increases,
imposes an annual surcharge, and refunds excess premiums
paid under Biggert-Waters.
Restores “grandfathered” status to certain properties.
Permits assumption of an NFIP policy upon sale of a home.
Introduces optional high-deductible policies.
Requires escrow of FI premiums on a “tripwire” approach.
Excludes detached structures on residential property from FI
requirements.
FDIC Regulatory Update
Hot Topics
Flood Insurance Reform Best Practices
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Ensure that affected employees are trained on the
new requirements as well as the actual
procedures used by the bank.
Provide for regular monitoring of all loans requiring
flood insurance. Track all policies on a monthly
basis.
Develop detailed, written procedures that reflect
the new requirements.
Provide for regular audits of loan files.
FDIC Regulatory Update
Hot Topics
Social Media
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Final FFIEC Guidance issued December 11, 2013
Provides a guide highlighting the applicability of
existing requirements and supervisory expectations.
No new regulatory requirements were created.
Social media defined as:
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A form of interactive online communication in which users can
generate and share content through text, images, audio or
video;
Excludes e-mails and texts not sent through social media
platforms;
Includes Facebook, Twitter, Yelp, LinkedIn.
FDIC Regulatory Update
Hot Topics
Social Media
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Existing laws and regulations apply to activities
conducted through social media as they would when
conducted through other channels.
Address disclosures, marketing, privacy:
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Truth in Lending;
Truth in Savings;
Fair Lending;
Section 5 of Federal Trade Commission Act and Sections 1031
an 1036 of Dodd-Frank (UDAAP);
Electronic Funds Transfer;
GLB Privacy;
Advertisement of Membership; and
CRA.
FDIC Regulatory Update
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Social Media Best Practices
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Management of third parties through due diligence,
monitoring, and contract.
Regular monitoring of bank-owned or -sponsored
sites, pages, blogs, e-mails, texts, etc. for
compliance with applicable laws, regulation and
guidance.
Training of employees to ensure that any bankrelated social media for which they are responsible is
compliant.
FDIC Regulatory Update
Hot Topics
Connecticut Housing Finance Agency
and HMDA Reporting
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Are loans made through the CHFA reportable on a
bank’s HMDA LAR?
Some banks have been cited for not reporting, others
for doing so.
No clear guidelines to follow. \
CRA credit?
FDIC Regulatory Update
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Connecticut Housing Finance Agency
and HMDA Reporting Best Practices
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Contractually, who is making the loan decision? If
the bank makes the credit decision, it must report the
loan.
Consult legal counsel with regard to existing
contracts and ask their assistance in drafting new
ones.
Review different loan products/programs
separately as requirements may be different for
reporting.
Please feel free to contact FDIC with any questions
and for assistance.
FDIC Regulatory Update
Hot Topics
Most Common Violations
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RESPA
TILA
Flood Insurance
TISA
ECOA
HMDA
FCRA
EFT
FDIC Regulatory Update
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Common CMS Issues
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Training not reflecting actual bank procedures.
Procedures too general.
Lack of independence in monitoring.
Scope, breadth, and frequency of audit.
Lack of authority for Compliance Officer.
Lack of planning for employee absence/turnover.
Lack of follow-up ion audit/exam findings.
Lack of compliance involvement in new/revised
products or services.
Lack of third-party oversight.
Lack of appropriate realistic risk assessment.
FDIC Regulatory Update
Hot Topics
Questions/Comments?
FDIC Regulatory Update
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Thank you!
Sherry Antonellis
[email protected]
508-698-0361, x8012