NAFCU Compliance Blog

Google; Adverse Actions and Loan Mods

Posted by Anthony Demangone

Oh, Google.  How I love thee.  Seriously.

Every compliance officer should remember how powerful Google is when doing compliance research.  And Google is more than you think.  Here are two examples.

1. Google Scholar.  "We're enabling people everywhere to find and read full text legal opinions from U.S. federal and state district, appellate and supreme courts using Google Scholar. You can find these opinions by searching for cases (like Planned Parenthood v. Casey), or by topics (like desegregation) or other queries that you are interested in. For example, go to Google Scholar, click on the "Legal opinions and journals" radio button, and try the query separate but equal. Your search results will include links to cases familiar to many of us in the U.S. such as Plessy v. Ferguson and Brown v. Board of Education, which explore the acceptablity of "separate but equal" facilities for citizens at two different points in the history of the U.S. But your results will also include opinions from cases that you might be less familiar with, but which have played an important role."  Wow.  Is is good?  Yes.  I googled my name in this search engine and found this.
2. Google U.S. Government Search.  This search engine only looks at Federal, State and local government web pages.  Nice.

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Recently, the Federal Reserve released a Consumer Affairs letter that touches upon whether you need to send an adverse action notice when a member requests a loan modification but does not get it.  The letter is highly detailed and really walks you through the thought process of whether a Reg B adverse action notice is needed in a given situation.   This is a very good read. 

Here's a link to all the CA letters.  They are a nice resource.

1 + 1 = 2; Uh-oh, they did it again

Posted by Anthony Demangone

Sometimes, an issue can be as easy as a math equation.

The GAO issues a report critical of NCUA in the area of fair lending. (Here's an earlier post about the GAO report.)

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NCUA issues NCUA Regulatory Alert 09-RA-09 to highlight new interagency fair lending examination procedures.

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A greater emphasis by NCUA on fair lending in general.  You've been warned. 

What is stressed in the new procedures? According to NCUA:

The FFIEC updated the procedures previously in effect since 2000 to expand upon the general guidance for identifying areas of potential risk. In addition, the procedures also address important contemporary issues such as:

1. The risks and potential fair lending implications associated with using brokers or other third party entities for various aspects of lending operations;
2. Management’s practices relative to loan pricing and procedures for detecting potential disparities; and
3. Management’s practices for ensuring policies and procedures do not result in the inappropriate steering of borrowers to higher priced loan products.

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I think HUD updated their FAQ document.  Again.   This is the third version of the FAQ.  And the new versions of the FAQ are issued with little fanfare.  We'll have to keep a close eye on this.

A Little of This, A Little of That

Posted by Anthony Demangone

There's just a ton of stuff to talk about.  Tons.

RESPA.  Despite push back from virtually every possible direction, HUD promises to move forward with RESPA reform.  Note that HUD is withdrawing its "Required Use" provision.  They indicate that they'll replace it with something else.  Also remember that there is some Congressional movement toward forcing HUD's hand on this issue (withdrawing its current reform efforts), but whether that succeeds remains to be seen.

MSBs.  FinCEN announces that they've issued a proposed change to the definition of a money services business.

Currently, to meet one definitional threshold of an MSB a person must conduct $1,000 of transactions per person per day. This applies to all categories of MSBs except for "money transmission." This NPRM solicits comment on either raising or lowering the definitional threshold. If a person meets the definition for an MSB, they are subject to the applicable recordkeeping and reporting requirements of the BSA rules. An entity that engages in money transmission in any amount is subject to the BSA rules and the solicitation for comment on revising the threshold is directed to the other categories of MSB. FinCEN will address regulation changes concerning stored value providers in a future rulemaking. In this rulemaking, however, FinCEN solicits comments on stored value issues in an effort to have a better-informed subsequent rulemaking confined to providers of stored value.

Discrimination.  The FTC has issued a complaint against a lender claiming discrimination against Hispanic borrowers.

The complaint alleged that the company’s policy and practice of allowing loan officers to charge discretionary overages resulted in Hispanics being charged higher prices because of their national origin – price disparities that are “substantial, statistically significant, and cannot be explained by factors related to underwriting risk or credit characteristics of the applicants.”

BSA Blast.  Hey NAFCU members: The May 2009 BSA Blast is available.

RESPA; The High Court and Preemption; Discrimination

NAFCU has signed on to a letter urging  Congress to support HR 1728.  It would require HUD to repeal the current RESPA rule and then work with the Federal Reserve to issue a joint rulemaking to deal with mortgage disclosures.  Read the letter here.  Download RESPA amendment to HR 1728 - letter of support. 

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The Supreme Court is hearing arguments in an important case involving preemption.  Here's a good overview of the case.  And why don't you read this guy's blog post.  He's very good, in my humble opinion.  In short, state attorney generals are challenging an OCC reg that claims the OCC has exclusive authority to enforce state fair lending regs against national banks. While this case involves the OCC, it will be interesting to see in which direction the preemption winds are blowing these days.

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The OCC has issued a consent order against the former VP and branch manager of a Mississippi bank.  Since 1993, this fellow has been doing the following, as alleged by the OCC:

(1) While employed at the Bank, from at least February 1993 until his employment was terminated in May 2004, Respondent violated ECOA and the FHA. Respondent discriminated against female applicants for credit, female borrowers and female accountholders by subjecting them to severe, pervasive, and unwelcome sexual harassment in connection with credit transactions and real estate-related transactions.
(2) Respondent breached his fiduciary duty and engaged in a pattern of unsafe or unsound practices contrary to generally accepted standards of prudent operation.
(3) Respondent’s conduct caused more than a minimal loss and other harm to the Bank and resulted in other benefit to the Respondent.
(4) Respondent’s conduct involved personal dishonesty and demonstrated a continuing disregard for the safety and soundness of the Bank.

The fellow is banned from working at financial institutions.   From the tone of the order, I wonder if he'd be able to work at a convenience store if that store had an ATM.  Such consent orders are a good reminder why we need to train, train, train and train employees on matters of discrimination.  One branch manager can wreck your reputation.  Not to mention all of the individuals who were violated.  And from a business point of view, think of all the business this bank may have lost from 1993 until 2004.  The last time I checked, a performing loan has no gender, race, religion or creed.

Hold Your Horses; Electronic Stop Payments?; Allen Wrenches

President Obama has asked federal regulators to hold off on finalizing new or proposed regulations.  His request also includes possible extensions on existing compliance deadlines.  Read all about it here, in a very good NAFCU Today article.   The article provides a good overview, as well as a link to the White House Memorandum. 

NCUA has already pulled one final rule back due to the memo.  NCUA officials report that it is possible that other rules, including UDAP, could be affected.  Stay tuned.

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Electronic stop payment orders?  You bet, says NCUA, as far as it is concerned.  In Legal Opinion Letter 08-1122 (January 5, 2009), NCUA indicates that NCUA regs do not require a signed, paper form.  But they do ask that credit unions look at state law requirements on the subject.  The letter is a good refresher on NCUA's recordkeeping requirements.

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The two cribs are built.  So is a chest of drawers.  I have two words to describe my recent long weekend: allen wrench.  A bunch of folks have been asking, so I just wanted to pass along that Mandy is doing well and that the dynamic duo should be along in mid-March.

A Little of This; A Little of That

Posted by Anthony Demangone.

Here are a number of things that caught my eye recently:

1. If you're credit union does "drawings" or other types of incentive-based marketing contests, please read this blog postingby Robert Rutkowski.   Good, good stuff.  There are more compliance issues than meet the eye.

2. Our paralegal, Shari Pogach, wrote a nice summary of a Federal Reserve study that examined violations by banks and thrifts in the areas of Regulations Z, B, DD (Truth in Savings), CC, E, and P (privacy).  Available for members here, the article could serve as a simple auditing tool.  Review the errors made by others to see how you measure up.

3. Here's a good flood insurance update that I recently read.

4. Our Book of Answers keeps being updated.  NAFCU members can access the latest version here.

5. NCUA has released the agenda for next week's board meeting.  The only compliance related item will be a final rule concerning the "Official Sign."  Access the agenda here.

6. It is official.  HUD has delayed enforcement of the "required use" provision from the RESPA final rule for 90 days.  Access its Federal Register notice here.

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NAFCU's offices will be closed next Monday and Tuesday.   My goals are to finish assembling the twins' cribs and watch my Steelers win against Baltimore.  I mentioned those goals to someone else earlier this week, and this is what following:

 

Coworker: You should really enjoy the game this weekend.
Compliance Guy:  I plan on it.

Coworker: I don't think you understand.  This may be the last time you get to see the Steelers play in peace for the next 18 years.  Once the twins come, forget about it.

Compliance Guy: (Blank stare.)
Coworker: You know that I'm serious, right?  And that assumes they leave the house at age 18.  It could be 20 years.

Compliance Guy: (Blank stare.)

 

Have a great weekend, everyone!  Even you Ravens' fans!  Until Wednesday, stay warm!

No, not that deadline; Married Life

There's a compliance deadline coming October 1.  And I'm not talking about Affiliate Marketing.

Last year, the Federal Reserve announced final rules to amend Regs B, E, M, Z and DD.  The amendments address the delivery of electronic disclosures.   Here's the Fed's press release, which includes links to each final rule.  Remember, NCUA has to ensure that our Truth in Savings rule closely mimics their Reg DD, so expect changes in the not too distant future. 

Don't blame the messenger.

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My father said something funny the other day.  He grew up in Latrobe, Pennsylvania, which is 40 or so miles outside of Pittsburgh.  He played tennis for Duquense, which is in downtown Pittsburgh.  He may live in north-central Pennsylvania, but he's a Pittsburgh boy, through and through. After the Steeler's victory last week, I called to chat.  Both my Mom and Dad were on the line. 

Mom: Your father said something that made me laugh this weekend.  He said that at his age, the only thing that he gets excited for is the Steelers.
Dad: It's true.  I was sick to my stomach all day Sunday.

I told Mandy, and I think she saw her future.  She looked worried.

Editor's note: The editor isn't watching as much football as he did as a bachelor.  Mandy says this is a good thing.  The editor is not so sure. 

NCUA Express and other Gems

At a recent board meeting, NCUA Chairman Johnson commented that only 24 percent of credit unions are using NCUA Express.  NCUA Express is a vehicle through which NCUA communicates electronically with federally-insured credit unions.  With this service, credit unions will receive Regulatory Alerts, Legal Opinion Letters, Letters to Credit Unions and other important notifications as they become available from NCUA.  Sign up for NCUA Express here. 

Other agencies have similar services as well. 

Sign up for the FinCEN notification service here.
Sign up for the U.S. Treasury notification service here. (Can include OFAC notifications.)
Sign up for the Federal Reserve notification service here.

The Compliance Guy loves this stuff.  He goes on vacation.  He may miss work due to illness.   But he always checks his email.  With email notifications, it is far less likely that I'll be blindsided by compliance-related developments.

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NAFCU has published a Final Regulation that covers the Federal Reserve's recent final regulations that amend Regs (take a deep breath) B, E, M, Z and DD.  The final rules address electronic communications with members.  The compliance deadline for these is October 1, 2008.  You can access NAFCU's Final Regulation here. (NAFCU members only.)

Odds and Ends, and Electronic Alphabet Soup

Late last week, the Federal Reserve announced final rules to amend Regs B, E, M, Z and DD.  The amendments address the delivery of electronic disclosures.   Here's the Fed's press release, which includes links to each final rule.  Remember, NCUA has to ensure that our Truth in Savings rule closely mimics their Reg DD, so expect changes in the not too distant future. 

While amendments to all these regs may seem dauting, it really is a good thing.  For example, the changes generally will allow credit unions to give electronic disclosures to members who access applications or advertisements electronically.  Mandatory compliance with this regs will be October 1, 2008.  

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NAFCU members, the following is for you.

• The November BSA Blast is available here.   (NAFCU member log in needed.)
• NAFCU's Regulatory Affairs Department has updated a very useful tool.  Especially those who lose track of which FACT Act provisions are on the books and which are not.  Access a handy-dandy chart on this page (Scroll to bottom.)