Temenos USA, Inc All rights reserved.

Transcription

1 Temenos USA, Inc All rights reserved.

2 TRID: THE REALLY IMPORTANT DETAILS Temenos USA, Inc All rights reserved.

3 WHAT YOU WILL LEARN 3 1. Brief Overview a) Coverage b) Key Definitions c) Timing d) Revised Disclosures 2. Tolerances and Cures 3. Amendments to the Final Rule

4 BRIEF OVERVIEW Temenos USA, Inc All rights reserved.

5 COVERAGE Closed-end consumer loans secured by real property, including: Mortgage loans Temporary or construction-only loans Loans secured by vacant land or by 25 or more acres Certain consumer purpose trusts Personal, family or household trusts established for tax or estate planning purposes is considered to be extended to a natural person rather than to an organization even if a legal entity Exemptions Business, commercial, agricultural, or organizational credit HELOCs and other open-end credit Reverse mortgages Mobile home loans with no land

6 APPLICATION 1. Name 2. SSN 3. Income 4. Property Address 5. Estimated value of property 6. Loan amount No additional items permitted to be considered an application for triggering requirement to provide LE You may request additional information for credit-decisioning

7 TWO DEFINITIONS OF A BUSINESS DAY General definition A day on which the creditor's offices are open to the public for carrying on substantially all of its business functions, including opening new accounts and making loan disbursements Specific definition All calendar days except Sundays and legal public holidays (New Year's Day, the Birthday of Martin Luther King, Jr., Washington's Birthday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving Day, and Christmas Day)

8 LOAN ESTIMATE MODEL FORM H-24 Must be in writing and separate from any other disclosures Must contain accurate good faith estimate of the transaction terms and costs May be provided by creditor or broker Not required to be signed by consumer, however, if signed, LE must contain disclosure: By signing, you are only confirming you have received this form. You do not have to accept this loan because you have signed or received this form.

9 TIMING OF LOAN ESTIMATE Must be provided within 3 business days of application At least 7 business days before consummation If mailed, is considered received 3 business days after the mailing Electronic delivery subject to E-SIGN Must complete all components of E-SIGN before sending electronically Notice, consent, and reasonable demonstrate Considered received 3 business days after sending Unless consumer acknowledges earlier receipt

10 REVISED LOAN ESTIMATE Six events that justify revised LE: Changed circumstances that cause an increase to settlement charges Changed circumstances that affect the consumer s eligibility for the loan or affect the value of the property securing the loan A change request by the consumer Locking of the interest rate (if not locked at application) Includes re-locks, modifications, extensions Expiration of the original Loan Estimate Construction loan settlement delays

11 CHANGED CIRCUMSTANCE For purposes of a revised LE, a changed circumstance is: An extraordinary event beyond the control of any interested party or other unexpected event specific to the consumer or transaction (i.e. war or natural disaster); Information specific to the consumer or transaction that the creditor relied upon when providing the Loan Estimate and that was inaccurate or changed after the disclosures were provided; or New information specific to the consumer or transaction that the creditor did not rely on when providing the Loan Estimate

12 CHANGED CIRCUMSTANCE Must document Original estimate Reason for revision How affected costs Only increased to extent of change Timing requirements met (must be documented within 3 business days of changed circumstance event) No model form

13 REVISED LOAN ESTIMATE: TIMING Must be provided to the consumer within three business days of the changed circumstance Must be received at least four business days prior to consummation Cannot be issued on the day of or after the Closing Disclosure is issued Changed circumstance must be documented

14 SERVICE PROVIDER LIST Lists the service providers for which consumers are allowed to shop Must identify at least one provider for each service for which a consumer can shop Must include a statement that the consumer may choose a different provider if they wish Must be a separate document and provided same timing as Loan Estimate

15 INTENT TO PROCEED LE must be provided prior to obtaining intent to proceed; Creditor may not accept or obtain intent to proceed until Loan Estimate is provided Must be obtained prior to charging or imposing a fee other than a reasonable credit report fee No post-dated check No collecting credit card info to charge later No model form but must be documented Memo in file or loan system notes Use consistent form and process to avoid violations No new or additional intent to proceed needed for revised LE or CD Not subject to E-SIGN

16 CLOSING DISCLOSURE: MODEL FORM H-25 Must be in writing and disclose only required information Reflects the actual terms and costs of the transaction Must be provided separately to each consumer with the right to rescind May be provided by the creditor or settlement agent

17 CLOSING DISCLOSURE: TIMING Must be received by consumer at least 3 business days prior to consummation If rescindable, all consumers with right to rescind must receive Closing Disclosure at least 3 business days prior to consummation If mailed, considered received 3 business days after mailing Certain changes require re-disclosure Electronic delivery subject to E-SIGN Must complete all components of E-SIGN before sending electronically Notice, consent, and reasonable demonstrate Considered received 3 business days after sending Unless consumer acknowledges earlier receipt

18 RECORD RETENTION Loan Estimate Must maintain records of compliance with LE for three years after the later of: Date of consummation, Date disclosures are required to be made, or Date the action is required to be taken Closing Disclosure Must maintain records of compliance with CD for five years after consummation Includes all documents related to CD Transfer of Servicing If sell, transfer or otherwise dispose of interest in a mortgage and no longer services the loan, Must provide a copy of Closing Disclosure to new servicer as part of loan file New servicer required to retain CD for remainder of 5-year period Originator must still retain for 5-year period after consummation

19 TOLERANCES AND CURES Temenos USA, Inc All rights reserved.

20 DETERMINING GOOD FAITH Good faith estimate of costs of credit and transaction terms that is based on the best information reasonably available at the time the Loan Estimate is provided To determine good faith: Look at difference between estimated charges disclosed on the initial LE and the actual charges paid by the consumer on the CD If the fee charged to the consumer exceeds the amount initially disclosed on LE beyond the applicable tolerance threshold, not in good faith Does not include technical errors, miscalculations or underestimation of charges (padded fees)

21 FEE TOLERANCES Zero Tolerance Cannot increase any amount higher than previously disclosed 10% Tolerance Can increase in the aggregate up to 10% No Tolerance May increase by any amount Must be in good faith If creditor does not provide written list of providers, good faith is determined in accordance with the 10 percent tolerance bucket if paid to a non-affiliated service provider

22 ZERO TOLERANCE Zero tolerance Fees for required services paid to the creditor, broker or affiliate Fees paid to third parties for which the consumer may not shop Transfer taxes Lender credits cannot decrease

23 ZERO TOLERANCE EXAMPLES Origination fees Affiliate title company fees Tax Service fee Underwriting fee Lender inspection fee Flood determination fee Credit report fee

24 10% TOLERANCE 10% tolerance (aggregated) Recording fees Fees paid to unaffiliated third parties for which the consumer may shop and are chosen from the creditor s Service Provider List

25 10% TOLERANCE EXAMPLES County deed stamps Non-affiliated but chosen from written list of providers Title underwriter portion of fee Title Agents Portion of Title Insurance Title Insurance Lender Title Search Title services & Lenders title policy Lender required survey

26 THE TIPPING POINT EXAMPLE Changed circumstance occurs but increase in fees does not exceed 10% of the aggregate fees originally disclosed on the LE, Comparison on CD will reflect original amounts (not revised) on LE to final amounts For example, valid CC but total of fee increase is 5% of aggregate 10% bucket originally disclosed; no revised LE or fees A 2nd valid changed circumstance occurs and the aggregate of fees from this change is still under 10%, but when aggregated with CC#1, total now exceeds 10% tolerance Revised LE and fees adjust for comparison to final amounts on CD Must meet Tipping Point to re-set the fees LE/CD must be reissued within three business days of event triggering valid changed circumstance

27 NOT SUBJECT TO A TOLERANCE Not subject to any tolerance Prepaids Amounts placed into an escrow, reserve, or similar account Property Taxes Property Insurance Premiums Fees paid to an unaffiliated third party for which the consumer may shop but did not chose from the creditor s list Fees paid to third parties for services not required by the creditor

28 NOT SUBJECT TO A TOLERANCE EXAMPLES Fee Loan Estimate Closing Disclosure Cure Property Insurance Premium $1,000 $2,000 None Property Taxes $2,495 $2,995 None Prepaid interest $145 $160 None Pest Inspection (If not required by creditor) $0 $200 None

29 TOLERANCE CURES General Rule If amounts paid by the consumer at closing exceed amounts disclosed on LE beyond applicable tolerance threshold, creditor must: Refund excess no later than 60 days after consummation, and Deliver or place in the mail a corrected CD that reflects such refund within 60 days Refunds Prior to consummation Lender Credit Post consummation Refund to borrower

30 REVISED CLOSING DISCLOSURE: PRE-CONSUMMATION A new three business day waiting period is triggered if: The disclosed APR become inaccurate The loan product changes (fixed to variable, new variable product) A pre-payment penalty is added Three business day waiting period is not required for all other changes but must be disclosed to the consumer before or at consummation The consumer has the right to inspect the revised CD during the business day of closing prior to when closing/consummation takes place

31 REVISED CLOSING DISCLOSURE: POST CONSUMMATION Revisions or corrections must be made within 30 days if: The disclosure provided at closing becomes inaccurate and results in a change to an amount paid by the consumer A non-numerical clerical error has occurred A corrected closing disclosure reflecting a tolerance cure must be provided to the consumer no later than 60 calendar days after consummation

32 EXAMPLES Example 1 A $350 appraisal fee for a single family dwelling is disclosed as being paid to an affiliate appraiser After disclosure, property is discovered to be a small farm Appraiser charges $500 for small farm appraisal Resolution Loan Estimate can be re-disclosed because of a valid changed circumstance

33 EXAMPLES Example 2 A $350 appraisal fee is disclosed as being paid to an affiliate appraiser Property is known to be small farm Lender orders single family residence appraisal in error Resolution If pre-closing, cure with lender credit If post-closing, cure by refunding over-charge to the borrower

34 EXAMPLES Example 3 An attorney fee is disclosed on LE as $300, but on CD as $350 Borrower chooses from creditor s written list of providers Resolution Calculate aggregate amount over tolerance If pre-closing, cure with lender credit If post-closing, cure by refunding over-charge to the borrower

35 AMENDMENTS TO THE FINAL RULE Temenos USA, Inc All rights reserved.

36 WRITTEN LIST OF PROVIDERS The Bureau clarified that changes may be made to Model Form H-27 (WLP) without losing safe harbor such as removing the column for an estimation of fees Must not affect substance, clarity, or the meaningful sequence of the form The written list of providers must identify each required service of which the consumer is permitted to shop; however: The creditor is not required to provide a breakdown of all related fees that are not themselves required by the creditor but may be charged as part of a package or lump sum amount by the servicer identified on the written list Notary fee, title search, or other ancillary and administrative services needed to provide the service but not required by the creditor

37 REDISCLOSURE AFTER THE RATE IS LOCKED If the rate becomes locked after the initial Loan Estimate is provided, but prior to issuance of the Closing Disclosure, then you must issue a revised Loan Estimate Required even if you are not resetting tolerances for interest rate dependent charges such as points and lender credits Includes re-locks, modifications, extensions If the rate is subsequently locked after the initial Closing Disclosure has been provided, then you must provide a revised CD if the rate lock causes it to become inaccurate This may cause you to delay closing depending on the accuracy of the APR in comparison to the initial CD

38 TOTAL OF PAYMENTS The Bureau adopted proposed amendment to apply a tolerance for the Total of Payments disclosure which parallels the Finance Charge tolerances The disclosure will generally be considered accurate for rescission and other purposes if it is greater than the amount required to be disclosed (if the Total of Payments amount is overstated) For understated amounts, the disclosure is accurate if understated by no more than $100 or no more than 1/2 percent of the face amount of the note, whichever is greater For refinancing with a new creditor, an understated amount is accurate if understated by no more than 1 percent of the face amount of the note or by no more than $100, whichever is greater

39 ESCROW AND PARTIAL PAYMENT DISCLOSURES The Final Rule clarifies that the post-consummation escrow cancellation disclosures and partial payment disclosures must be provided for all loans subject to TRID regardless of their application date Mandatory compliance October 1, 2018 Previously only applied to those transactions received on or after October 3, 2015

40 EXPIRATION DATE The Bureau clarifies that the expiration date disclosed on the initial Loan Estimate should be left blank on any revised Loan Estimates provided that the consumer has already indicated an intent to proceed The Rule further clarifies that voluntarily extending the expiration date of the initial Loan Estimate beyond the general 10 business days will allow the consumer a longer period to indicate an intent to proceed

41 SELLER CREDITS The Final Rule adopts the proposal to clarify that specific seller credits may be reflected on the Loan Estimate by either: Disclosing the cost of the service on the LE along with an offsetting seller credit in the Calculating Cash to Close Table; or By excluding the amounts paid by the seller from the Loan Estimate For example, if the seller has agreed to pay half of a required $400 appraisal fee, the creditor may either: Disclose the $400 in Section B with a $200 Seller Credit; or Disclose the required appraisal fee as $200 in Section B

42 BORROWERS AND RESCISSION Only the name and address of those consumers who are actually primarily obligated on the loan as a borrower are disclosed in the Borrower disclosure on page 1 of the disclosure This is a reversal from the proposed Rule which would have required all consumers with the right to rescind to be reflected as borrowers on the Closing Disclosure If you use the disclosure with a blank signature line, then you may include the signature for non-borrowers with rescission rights for documentation

43 PER DIEM INTEREST AND POST-CONSUMMATION CD S The Bureau clarifies in the Final Rule, Closing Disclosure s affected by per-diem interest are considered accurate if the CD is based on the best information reasonably available at the time the disclosure is prepared (Good Faith) Even if the amount of per diem interst actually paid by the consumer differs from the amount disclosed as long as the per diem interest or any disclosure affected by the per diem interest is the only change that would be made on a revised disclosure However, if a revised disclosure is provided for another reason, the per diem interest should be changed to reflect the actual amount

44 COVERAGE AND COOPERATIVE UNITS The TRID Rule will now apply to all loans secured by cooperative units, regardless of whether they are considered real property under State law Consistency across different industry markets

45 USE OF MODEL FORMS The Bureau abandoned its proposal to designate the completed model forms as samples of accurate disclosures, which would have removed the safe harbor protections for relying on them Use of the model forms in accordance with the examples under Appendix H will constitute compliance with the Rule s disclosure requirements

46 CONSTRUCTION INSPECTION FEES The Bureau clarifies that construction loan inspection fees are loan costs associated with the transaction Fees collected after consummation must be disclosed in an addendum to both the Loan Estimate and Closing Disclosure as Inspection and Handling Fees Still subject to a 0% tolerance threshold If a disclosure becomes inaccurate because of an event (Changed Circumstance) that occurs after the creditor delivers the Closing Disclosure, the inaccuracy is not a violation

47 DISCLOSURE OF CONSTRUCTION COSTS AND PAYOFFS Standard Disclosure: Costs and/or payoffs will be disclosed in the borrower s Summaries of Transactions table as an Adjustment on the Closing Disclosure Includes payoffs of existing liens secured by real property, loans secured by automobiles or other property, or unsecured debt to promote consistency Alternative Disclosure: Costs and/or payoffs will be disclosed in the Payoffs and Payments table on the Closing Disclosure

48 CLOSING THE BLACK HOLE (STILL BEING PROPOSED) Proposal would close the black hole by allowing creditors to reset tolerances using the Closing Disclosure regardless of when closing is scheduled to occur Removes the less than 4 business day limit Does not mean you can provide the CD sooner than your good faith determination will allow The Closing Disclosure should be intended to reflect a statement of the final loan terms and closing costs Must be provided within 3 business days of changed circumstance

49 RESOURCES Rule_Amendments-to-Federal-Mortgage-Disclosure- Requirements_TILA.pdf Rule_Amendments-to-Federal-Mortgage-Disclosure- Requirements_TILA.pdf

50 MILITARY LENDING ACT Temenos USA, Inc All rights reserved.

51 AGENDA 3 1. Covered consumer credit and exceptions 2. Identification of covered borrowers 3. MLA disclosure requirements 4. MAPR limitation and calculation of the MAPR 5. Other acts and practices prohibited by the MLA 6. Penalties for non-compliance 7. Helpful Resources

52 COVERAGE OF THE MLA 4 Applies to all consumer credit extended to a covered borrower or dependent of a covered borrower Does not apply to current loans Does not impose obligation to monitor borrower's covered status Does not apply to modifications unless it is a new transaction Consumer Credit: All credit granted for personal, family, or household purposes that is: Subject to a finance charge; or Payable by a written agreement in more than four installments Examples: vehicle title loans, installment loans, unsecured open-end LOCs, payday loans, refund anticipation loans, credit cards, deposit advance products

53 EXCEPTIONS TO CONSUMER CREDIT 5 Consumer credit does not mean: Residential mortgage = secured by an interest in a dwelling Credit expressly intended to finance purchase of motor vehicle or other personal property when credit is secured by vehicle or personal property being purchased Credit exempt from Reg. Z (other than those exempt under ) or otherwise not subject to disclosure requirements under Reg. Z Credit for which creditor determines consumer is not covered borrower by using a safe harbor method and complying with recordkeeping requirement Until October 3, 2017, credit card accounts

54 OVERDRAFTS 6 Typically not consumer credit Usually not payable under a written agreement in more than four installments Overdraft fee is not typically a finance charge Overdraft line of credit is consumer credit Fresh start or similar program that permits covered borrower to repay under a written agreement in more than four installments or that charges a finance charge, is covered consumer credit

55 COVERED BORROWERS 7 Covered borrower: Consumer who, at the time consumer becomes obligated on a consumer credit transaction or establishes an account for consumer credit, is a covered member or a dependent Covered member: A member of the armed forces who is serving on: Active duty under orders that do not specify a period of 30 days or fewer; or Active Guard and Reserve duty Dependent: A person described in subparagraph (A), (D), (E), or (I) of 10 U.S.C. 1072(2) Does not mean a consumer who no longer is a covered member or a dependent of a covered member

56 COVERED BORROWER EXAMPLE 8 Andy is a member of armed forces but not on active duty; Opens account for closed-end credit MLA does not apply Ordered to active duty becoming a covered borrower, and establishes personal line of credit MLA applies Ceases to serve on active duty MLA never applied to the closed-end credit account Now MLA no longer applies to the open-end line of credit His wife gets a closed-end loan MLA applies They get divorced MLA no longer applies

57 IDENTIFICATION OF COVERED BORROWERS 9 No requirement to conduct covered-borrower check Does not prescribe any method for covered-borrower check Only for the safe harbor must the creditor conduct a covered-borrower check: Check in reliance of information obtained from MLA Database; or Consumer report obtained from nationwide consumer reporting agency; Determine that consumer is not covered borrower; and Maintain a record of information obtained

58 IDENTIFICATION OF COVERED BORROWERS 10 Covered-borrower check conducted only at the time that: Consumer initiates the transaction; Consumer applies to establish the account; or Creditor develops or processes a firm offer of credit that includes the status of the consumer as a covered borrower May make determination and keep record of information obtained 30 days prior to the date of transaction or date consumer applies to establish an account For prescreened offers, may rely on covered-borrower check if consumer responds not later than 60 days after creditor provided offer If later than 60 days, creditor may not rely upon initial determination May make new determination as if consumer is initiating transaction or applying to establish account

59 IDENTIFICATION OF COVERED BORROWERS 11 For safe-harbor, must use one of the methods when extending new consumer credit product or establishing account For example, I initially opened a checking account with Anytown Credit Union; Later I apply for overdraft line of credit associated w/ the account To benefit from safe harbor for the new line of consumer credit, ACU must, use information obtained from MLA Database (or consumer report) when processing my application for or establishing the overdraft line of credit Even if ACU previously used information from the MLA Database when I established the checking account and did not find me in the database Action within existing account, such as to increase available credit, does not alter the status of prior determination for that account

60 HISTORIC LOOKBACK 12 Prohibits any person from using the database, directly or indirectly, to see if a person was a covered borrower as of a prior date Post closing reviews Assignees Does not prohibit checking to determine if covered borrower is still covered Can periodically check entire MLA loan portfolio to see if loans continue to be covered consumer credit

61 MLA DISCLOSURES 13 At the time borrower becomes obligated on the transaction or establishes an account, must provide: Statement of MAPR applicable to the extension of credit Any disclosure required by Regulation Z Clear description of payment obligation May provide oral disclosures in person or provide a toll-free telephone number Refinancing or renewal of covered loan requires new disclosures only when transaction would be considered a new transaction that requires disclosures under Regulation Z

62 STATEMENT OF THE MAPR 14 May be satisfied by description of charges creditor may impose relating consumer credit to calculate MAPR Not required to describe MAPR as numerical value or describe total dollar amount of all charges in MAPR that apply to extension of consumer credit Not required in any advertisement Model statement provided in CFR 232.6(c)(3)

63 MODEL STATEMENT 15

64 DELIVERY OF DISCLOSURES 16 Information not required to be provided more than once for transaction or the account established Assignee not required to provide the mandatory disclosures Disclosures required by Regulation Z remain subject to Regulation Z, and not MLA s one-time delivery provision Only one of two or more creditors involved in transaction must provide disclosures, multiple creditors permitted to agree among themselves which may provide disclosures

65 METHODS OF DELIVERY 17 Must provide mandatory disclosures in writing in a form covered borrower can keep and must orally provide Statement of MAPR Clear description of the payment obligation Oral disclosures: May provide information in person or provide toll-free telephone number that covered borrower can use to obtain information If toll-free number is used, must include number on either The application form; or A written disclosure creditor provides to covered borrower

66 MAPR LIMITATION 18 Cost of consumer credit expressed as annual rate Cannot exceed 36 percent In general, any charge that is a finance charge under Regulation Z and certain other charges that would be covered as interest under 10 U.S.C. 987(i)(3), must be included in the calculation of MAPR Certain bona fide fees may be excluded

67 CHARGES INCLUDED IN THE MAPR 19 Any credit insurance premium or fee, charge for single premium credit insurance, fee for a debt cancellation contract, or fee for a debt suspension agreement Any fee for a credit-related ancillary product sold in connection with credit transaction for closed-end credit or an account for open-end credit Finance charges associated with the consumer credit Most application fees Any participation fee

68 CALCULATING THE MAPR (CLOSED-END) 20 Follow rules for calculating and disclosing APR under Regulation Z based on the charges required for MAPR Requirements in section (a)(1) of Regulation Z Explanations and instructions set forth in Appendix J to Regulation Z Example: Single advance, single payment transaction loan to covered borrower for a period of 45 days Advance of $500 and single payment required consists of the principal amount plus a finance charge of $28.44, for a total payment of $ MAPR is 46.14%, exceeding the MAPR limit of 36%

69 CALCULATING THE MAPR (OPEN-END) 21 Use methods prescribed in Reg. Z for the effective APR for a billing cycle ( (c)) Cannot impose a charge for any billing cycle during where the MAPR cannot be calculated because there is no balance Except for participation fee up to $100 per year Can also charge any fee that is not required to be included in the MAPR Generally can estimate at outset of a billing cycle whether charges can produce an MAPR in excess of the 36% limit At end of a billing cycle, can waive amount necessary to comply with limit

70 OPEN-END MAPR EXAMPLE 22 Big Bank offers personal line of credit to with monthly payments to Charlie; Charlie borrows $500 Big Bank charges a periodic rate of (corresponds to annual rate of 8.25 percent), plus a fee of $25, charged when account is established and annually thereafter The MAPR is 68.26%, exceeding the limit If Charlie borrows higher amount, Big Bank could impose $25 fee If Charlie initially borrowed $1,500 the MAPR would be 28.25% You could require borrowers to take an initial draw large enough to allow you to charge the annual fee

71 REASONABLE AND BONA FIDE FEES 23 Exclusion allows creditors who offer consumer credit card accounts to exclude from the MAPR any bona fide fee (other than a periodic rate, credit insurance type fees, and credit-related ancillary fees) Only applies to credit card accounts Creditor needs to confirm that its fees are bona fide and reasonable If any fee is not bona fide or is unreasonable, creditor must include the total amount of those fees, including any bona fide fees, in MAPR Bona fide fee must be compared to fees typically imposed by other creditors for the same or a substantially similar product or service

72 REASONABLE & BONA FIDE FEES LIKE-KIND FEES 24 Does not allow creditor to compare, for example, balance transfer fee to cash advance fee or compare rewards program fee to foreign transaction fee charged by another creditor May assess the reasonableness of participation fee by taking into account potential value of any rewards points that may be awarded Does not require creditor to compare, for example, its rewards program to other rewards programs Requires creditor to assess the reasonableness of the fee charged for its rewards program to the fees charged by other creditors for their rewards programs

73 REASONABLE & BONA FIDE FEES LIKE-KIND FEES 25 No presumption that creditor s fee for a product or service must be relative to the product or service that is identical across all creditors Does not require a strict correlation For example, some creditors treat transactions involving traveler s checks, money orders, or gift cards as a cash advance transaction while other creditors do not May assess the reasonableness of cash advance fee that applies to all four types of transactions by comparing its fee to fees charged by another group of creditors who cover fewer transactions All of the transactions fit within same class because each allows cardholder to tender an item or instrument as if it were cash

74 REASONABLE & BONA FIDE FEES SAFE HARBOR 26 If creditor s fee is less than or equal to the average of 5 or more qualifying credit card issuers, the fee is reasonable Each issuer must have had $3 billion in credit card loans at any time during the three-year period preceding the date of determination May determine other issuer s fees by CFPB Credit Card Agreement Database, issuer s website May determine outstanding loans by: Public filing on SEC s Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system Call Reports for institutions insured by the FDIC on FFIEC s website Call Reports for credit unions on NCUA s website May reasonably rely upon industry-specific databases containing data collected from these and other information sources

75 REASONABLE & BONA FIDE FEES SAFE HARBOR 27 Creditor could download recent Call Report for an issuer and review Schedule RC-C Part I line 6(a) If issuer held more than $3 billion in outstanding credit card loans, creditor could include any fee charged by issuer in safe-harbor calculation Creditor could find amounts of relevant fees for issuer through a variety of sources, such as issuer s website or the CFPB database Annual fees: Bank A = $40; Bank B = $45; Bank C = $45; Bank D = $50; Bank E = $55 Anytown Bank s annual fee is reasonable as long as it charges no more than $47 [( ) / 5 = 47]

76 REASONABLE & BONA FIDE FEES HIGHER FEES 28 Reasonable standard designed to be applied flexibly May be reasonable even if fee is higher than an average amount calculated under the safe harbor For example, creditor may offer a credit card that carries relatively higher participation fee, yet does not charge foreign transaction fee May be reasonable if amount reasonably corresponds to credit limit or credit made available when fee is imposed, to services offered under credit card account, or other factors relating to credit card account

77 SHORT-TERM, SMALL AMOUNT LOANS 29 May exclude app. fee from MAPR for short-term, small amount loan Loan made pursuant another federal law that contains: Fixed numerical limit on maximum term, no more than 9 months Fixed numerical limit on application fee that may be charged Applies to Federal credit unions or insured depository institutions May exclude fee only once in any rolling 12-month period Second application fee who applies for a second short-term, small amount loan within 12-month period (and any subsequent application fee) not eligible for exclusion and must be included in MAPR for that loan

78 ADDITIONAL PROHIBITIONS 30 It is unlawful for any creditor to extend consumer credit to covered borrower where: Creditor rolls over, renews, repays, refinances, or consolidates consumer credit extended to covered borrower by same creditor with the proceeds of other consumer credit extended by that creditor to same covered borrower Does not apply to transaction when same creditor extends consumer credit to covered borrower to refinance or renew extension of credit not covered by the MLA because consumer was not covered borrower at time of original transaction Creditor does not include bank, savings association, or credit union chartered or licensed under Federal or State law Covered borrower is required to waive the right to legal recourse under any otherwise applicable provision of state or federal law, including any provision of the Servicemembers Civil Relief Act

79 ADDITIONAL PROHIBITIONS 31 It is unlawful for any creditor to extend consumer credit to covered borrower where: Creditor requires covered borrower to submit to arbitration or imposes other onerous legal notice provisions in case of a dispute Creditor demands unreasonable notice from covered borrower as a condition for legal action Covered borrower is prohibited from prepaying consumer credit or is charged a penalty fee for prepaying all or part of consumer credit

80 ADDITIONAL PROHIBITIONS 32 It is unlawful for any creditor to extend consumer credit to covered borrower where: Creditor uses title of a vehicle as security for obligation involving the consumer credit Creditor does not include bank, savings association, or credit union chartered or licensed under federal or state law Creditor requires as a condition for extension of consumer credit the covered borrower establish an allotment to repay the obligation Creditor does not include military welfare societies and the relief societies

81 ADDITIONAL PROHIBITIONS 33 It is unlawful for any creditor to extend consumer credit to covered borrower where the creditor uses check or other method to access covered borrower s deposit, savings, or other financial account Except creditor may: Require an electronic fund transfer to repay a consumer credit transaction, unless otherwise prohibited by law Require direct deposit of consumer s salary as a condition of eligibility for consumer credit, unless otherwise prohibited by law If not otherwise prohibited by applicable law, take a security interest in funds deposited after extension of credit in an account established in connection with consumer credit transaction Only prohibits a creditor from using the borrower s account information to create a remotely created check or remotely created payment order in order to collect payments on consumer credit from a covered borrower and using a post-dated check provided at or around the time credit is extended Does not prohibit deposit secured loans

82 PENALTIES FOR NON-COMPLIANCE 34 Misdemeanor: Knowingly violation is misdemeanor punishable by fine or imprisoned for not more than one year, or both Voiding the underlying contractual obligation Arbitration: No agreement to arbitrate any dispute will be enforceable against any covered borrower Civil Liability: Actual damages (not less than $500) Appropriate punitive damages Appropriate equitable or declaratory relief Costs associated with the action, including reasonable attorney s fees Preservation of other remedies: Remedies and rights under MLA are in addition to and do not preclude any remedy otherwise available under State or Federal law or regulation

83 HELPFUL RESOURCES 35 Regulatory Text: 12 CFR Part DOD's Interpretive Rule: DOD's Military Lending Act Page: CFPB Credit Card Agreement Database The SEC makes public filings available through its Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system. Information on this system is available at Call Reports for FDIC-insured institutions: Call Reports for credit unions:

84 PERFORMING A COMPLIANCE RISK ASSESSMENT DERRICK BLACK/ VP - COMPLIANCE SEPTEMBER 13, 2017 Temenos USA, Inc All rights reserved.

85 AGENDA 3 1. Pieces of the Puzzle Risk Assessment Definition Preparation Gathering Information Rating Risks Analyze and Report Data 2. Putting it all together

86 RISK ASSESSMENT: DEFINITION 4 The identification, evaluation and estimation of: the levels of risks involved in a situation; their comparison against benchmarks or standards; and determination of an acceptable level of risk

87 RISK ASSESSMENT - DEFINITION 5 The identification, evaluation, and estimation of: Identified Risk The process of prioritizing risks for subsequent further analysis or action by assessing and combining their probability of occurrence and impact. Inherent Risk The risk that an activity would pose if no controls or other mitigating factors were in place (the gross risk or risk before controls). Residual Risk The risk that remains after controls are taken into account and the risk is mitigated.

88 RISK ASSESSMENT 6 Policies Compliance Risk

89 RISK ASSESSMENT 7 A strong risk assessment is an effective tool in supporting a robust Compliance Management Program

90 WHERE DO I START? 8 Management Regulatory Guidelines Audits/Exams Monitoring Tools RISK ASSESSMENT Training Programs Policies Procedures Products Services

91 PREPARATION 9 Review regulatory guidance BSA and IT Risk Assessment Guidance CFPB Consumer Risk Assessment Template Assemble information Identify products, services to assess List all applicable regulations Match products and services to those regulations Create a risk rating scale (low, medium, high) (1-5)

92 PREPARATION RISK RATING 10 When choosing your risk rating scale, be sure to define what each risk rating means for your organization. Example: Words ~ Low; Moderate; High FFIEC BSA/AML Exam Manual, App J (sample) LOW MODERATE HIGH Stable, known customer base Customer base increasing due to branching, merger, or acquisition A large and growing customer base in a wide and diverse geographic area

93 GATHER DATA 11 Quantify Everything! Review previous audits, exams and monitoring findings Review management responses to findings What patterns emerged? Spreadsheets, charts, graphs, action reports, etc. Policies and procedures

94 INTERVIEW MANAGEMENT 12 Training Overall losses Frequency Curriculum Weaknesses perceived by management Employee Turnover Management/Staff Turnover Management and Staff Policy or Procedural Changes System or software changes/upgrades Automation vs. Employee Input Internal Controls Dual Roles Audit/Monitoring Frequency New or revised products Recent regulatory changes Complaints Audit/Monitoring Findings Corrective action Recordkeeping

95 PRODUCTS & SERVICES 13 Consumer Brick and Mortar Commercial Courier Services Niche Financial Institution Internet Banking Private Banking Investment Banking Trust Mortgage Banking

96 REGULATORY CHANGES 14 Recent Regulatory Changes Effective dates Were the changes in effect on time? Was testing performed to insure process was working appropriately? Was the process documented Exam Hot Buttons

97 RISK RATING 15 Rating the Risks Internal Threats External Threats Likelihood of occurrence Mitigating Factors Previous exposure

98 RISK RATING 16 New Products/Services Complexity of the Institution Training strengths/weaknesses Regulatory exposure

99 ANALYZE AND REPORT RESULTS 17 Consolidate Risk Information Review risk ratings Identify high risk areas Implement additional controls Strengthen training Strengthen auditing/monitoring Fine tune policies, procedures Additional Resources Report analysis to management and Board

100 PUTTING IT ALL TOGETHER 18 Temenos Institution Products & Services $200 million in assets (1) Location Last Exam: (1) Reg DD violation Recent Turnover: Retail Ops Manager Consumer Loans Mortgage Loans Internet Banking Mobile Banking ATM Wire Transfers

101 MOCK RISK ASSESSMENT 19 Regulation DD Identified Risk Products and Services - OD Advertising Exam or Audit History Q Inherent Risk Rating Quantitative Analysis High 15 ads out of 60 for 9 month timeframe Mitigating Controls Automated Platform, Changed Disclosures, Provided additional training. Residual Risk Rating Risk Direction Comment Moderate Stable New Retail Ops Manager

102 MOCK BSA RISK ASSESSMENT Customer MSB Identified Risk Can range from large multi-national corporations to small independent businesses; Diverse range of products, services and customer base; Lack of ongoing customer relationships; Minimal identification acquired; Inconsistent recordkeeping; Frequent currency transactions; Quickly change product mix; Might operate without proper registration or licensing; Money laundering placement; layering; integration Exam or Audit History Q Inherent Risk Rating High Quantitative Analysis 5 $98,765 Mitigating Controls Customer Identification Program (CIP); Profile work sheets; OFAC check; Continual Monitoring; FinCEN registration; Must obtain BSA Officer approval before opening account Residual Risk Rating Moderate Risk Direction Stable Comment

103 MOCK BSA RISK ASSESSMENT Product Types Identified Risk Inherent Risk Rating Quantitative Analysis Mitigating Controls Residual Risk Rating Risk Direction DDA True identity of customer not identified; False documentation; Accounts opened by mail; Unknown source of funds; Large number of transactions; Large amounts of transactions; Short term regularity or duration of relationship; Activity not consistent with account type; Structuring; Large cash withdrawals; Failure to report (CTR) transaction; Failure to aggregate cash transactions from different times and branches; Conduct sanctioned (OFAC) transaction; Illicit payments; Failure to file SAR for suspicious activity; Failure to check FinCEN 314(a) requests Moderate 6128 $98,765,432 Customer Identification Program (CIP); Customer Information and Risk Rating Profile work sheets; Accounts only opened live at branches or via mail; Review of various reports from core processing; OFAC checks; ChexSystems is performed; Check FinCEN 314(a) requests; BSA Staff Training; Verification letter is sent to new relationship accountholder and a telephone call is placed; Second review of all new account documentation; Account activity monitored through AML software Low Stable

104 PULL IT ALL TOGETHER 22 Compliance Risk Assessment - Temenos Bank Overall Risk Category Inherent Risk Rating (Low, Moderate, High) Overall Mitigating Controls (Weak, Moderate, Strong) Residual Risk Rating Risk Direction (Increasing, Stable, Decreasing) BSA/AML/OFAC High Moderate Moderate Stable BSA/AML/OFAC Products and Services High Strong Moderate Stable Fair Lending High Strong Low Stable Consumer Lending (Includes Flood Disaster Protection Act/Real Estate Settlement Procedures Act/Truth in Lending Act/Homeowners Protection Act/HMDA) Deposit (Includes Reg D, Reg DD, Reg CC and Reg E) Privacy / FCRA / Marketing (Includes Privacy of Consumer Financial Information, Right to Financial Privacy, Fair Credit Reporting Act, Fair Debt Collection Practices, Children's Online Privacy Protection Act, CAN-SPAM and Telephone Consumer Protection Act). Moderate Strong Low Stable Low Strong Low Stable Low Strong Low Stable

105 RESOURCES 23 CFPB Consumer Risk Assessment Template BSA Risk Assessment Guidance IT Risk Assessment Guidance

106 QUESTIONS 24

107 BANK SECRECY ACT; CTR S, SAR S AND BENEFICIAL OWNERSHIP RACHELLE DEKKER, SENIOR COMPLIANCE ADVISOR WEDNESDAY SEPTEMBER 13, 2017 Temenos USA, Inc All rights reserved.

108 AGENDA 3 1. Currency Transaction Reporting (CTRs) 2. Suspicious Activity Reporting (SARs) 3. Beneficial Ownership Rule

109 WHAT YOU WILL LEARN 4 Currency Transaction Reporting (CTRs) Complex Scenarios Common Confusion Suspicious Activity Reporting (SARs) SAR hot topics SAR Uncertainties What to look for SAR Trends & Enforcement Actions

110 WHAT YOU WILL LEARN 5 Beneficial Ownership Summary of Rule Important Definitions Procedures and Implementation Exemptions

111 CURRENCY TRANSACTION REPORTING COMPLETION 6 Completing CTR for Complex Scenarios Joint accounts- deposits and withdrawals Business accounts (LLC vs DBA) Business accounts with common ownership IOLTA & Trust accounts

112 CURRENCY TRANSACTION REPORTING CONFUSION 7 Common Confusion Multiple transactions vs Aggregate transactions Purchase of monetary instrument Cash handled by employee such as courier

113 SUSPICIOUS ACTIVITY REPORTING HOT TOPICS 8 Marijuana Related Business SARs Are financial institutions prohibited from banking MRB s? When to file a SAR Indirect Relationships Red Flags to consider Cyber-Events & Cyber-Enabled Crimes Mandatory and Voluntary SAR reporting requirements

114 SUSPICIOUS ACTIVITY REPORTING UNCERTAINTIES 9 Our customer was the victim. Who do we file on? Cumulative Amount Filing Timeframe 30 days, 90 days, 120 days Structuring when do we file and when is it normal activity?

115 IDENTIFYING SUSPICIOUS ACTIVITY 10 What to look for? Winning a lottery that you didn t enter Work from home scams using P2P transfers Shell companies Kiting Foreign Transactions conducted through accounts under a BSA Order Account Takeover- request for wire transfers

116 SUSPICIOUS ACTIVITY REPORTING TRENDS 11 FinCEN Guidance on SARs SAR Activity Review- Trends, Tips & Issues (May 2013) FinCEN Stats includes search feature for SARs filed SAR Technical Bulletins FinCEN News and Enforcement Actions

117 SUSPICIOUS ACTIVITY REPORTING NEWS 12 FinCEN News and Enforcement Actions Enforcement Action Date Matter Number Financial Institution In the Matter of Merchants Bank of California, N.A. In the Matter of Bethex Federal Credit Union In the Matter of Gibraltar Private Bank and Trust Company 02/27/ Depository Institutions 12/15/ Depository Institutions 02/25/ Depository Institutions In the Matter of Bank of Mingo 06/15/ Depository Institutions In the Matter of First National Community Bank of Dunmore, Pennsylvania In the Matter of North Dade Community Development Federal Credit Union 02/27/ Depository Institutions 11/25/ Depository Institutions

118 BENEFICIAL OWNERSHIP SUMMARY 13 Effective date July 11, 2016 Implementation date May 11, 2018 Summary of the new rule Implements change in two areas: Beneficial Ownership AML Program Rule Amendments

119 BENEFICIAL OWNERSHIP DEFINITIONS 14 Beneficial Owner Covered Financial Institution Account New Account Legal Entity Customer

120 BENEFICIAL OWNERSHIP PROCEDURES 15 Identify and verify the beneficial owners of legal entity customers at new account opening Risk-based practices Ongoing monitoring and effective CDD

121 COLLECTION OF BENEFICIAL OWNERSHIP INFORMATION 16 Collection of Information Required for individuals who own 25% or more of legal entity or have significant responsibility to control or manage Beneficial owner does not need to directly provide information What does significant responsibility to control, manage, or direct legal entity mean?

122 BENEFICIAL OWNERSHIP EXEMPTIONS 17 Not required to identify and verify the identity of the beneficial owner(s) of a legal entity customer when the customer opens any of the following four categories of accounts: POS credit products for purchases up to $50,000 Finance purchase of postage Finance insurance premiums Finance the purchase or lease of equipment

123 BENEFICIAL OWNERSHIP EXEMPTIONS 18 These exemptions will not apply under either of the following two circumstances: Transaction accounts through which a legal entity customer can make payments to, or receive payments from, third parties. If possibility of a cash refund for accounts to finance purchase of postage, insurance premium, or equipment leasing, then financial institution must verify beneficial ownership at initial remittance or at time of refund.

124 BENEFICIAL OWNERSHIP LEGAL ENTITY EXCLUSIONS 19 Financial institutions regulated by a Federal functional regulator or a State bank regulator; Phase I CTR Exempt Customers Issuers of Securities Investment Company SEC registered Investment Advisor Exchange or Clearing Agency Any entity registered with SEC or SEA

125 BENEFICIAL OWNERSHIP LEGAL ENTITY EXCLUSIONS 20 Registered Commodity Entity Public Account Firm Bank Holding Company Investment vehicle advised by Financial Institution State regulation Insurance Company Financial Market Utility Foreign Entities- certain foreign financial institutions, non US government agencies, foreign legal entity for private banking

126 BENEFICIAL OWNERSHIP CERTIFICATION 21 Certification Regarding Beneficial Owners of Legal Entity Customers Completed electronically Form in Appendix A optional

127 BENEFICIAL OWNERSHIP CERTIFICATION 22

128 Questions? 23

129 REGULATION E ELECTRONIC FUNDS TRANSFERS: ERROR RESOLUTION RACHELLE DEKKER, SENIOR COMPLIANCE ADVISOR SEPTEMBER 13, 2017 Temenos USA, Inc All rights reserved.

130 AGENDA 3 1. Brief Overview 2. Definitions 3. Error Resolution Procedures 4. Consumer Liability Limits 5. Two 60 Day Timeframes 6. Common Questions

131 BRIEF OVERVIEW 4 Regulation E Electronic Fund Transfers Subpart A General - 12 CFR 1005 Coverage - 12 CFR Liability of Consumer for Unauthorized Transfers - 12 CFR Procedures for Resolving Errors 12 CFR

132 DEFINITIONS 5 ELECTRONIC FUNDS TRANSFER Transfer of funds initiated through an electronic funds terminal, telephone, computer or magnetic tape for the purpose of ordering or instructing a financial institution to debit or credit a consumer s account.

133 DEFINITIONS 6 The term Electronic Funds Transfer (EFT) includes, but is not limited to: (i) Point-of-sale transfers; (ii) Automated teller machine transfers; (iii) Direct deposits or withdrawals of funds; (iv) Transfers initiated by telephone; and (v) Transfers resulting from debit card transactions, whether or not initiated through an electronic terminal

134 DEFINITIONS 7 An EFT also applies when a check, draft or similar paper instrument is used as an information source to initiate a one-time EFT from a consumer s account. This EFT must be authorized by the consumer.

135 DEFINITIONS 8 An EFT is NOT A check A wire transfer Automatic transfers by the account holding institution under an agreement where the institution will initiate individual transfers without a specific request Between consumer s accounts held by that institution From a consumer s account to a family member s account held by that institution Between the consumer s account and an account of the institution

136 DEFINITIONS 9 Error is defined as An unauthorized EFT transaction An EFT for an amount different from what was authorized The omission of an EFT from a periodic statement A clerical error by the financial institution The receipt of the wrong amount from an ATM A request for documentation or information

137 DEFINITIONS 10 An error is NOT A routine inquiry about the consumer s balance A request for tax information or record information A request for duplicate copies of information A dispute with a merchant that merchandise or service was not received, was defective or that return was not accepted. Credit card rules are different

138 ERROR RESOLUTION PROCEDURES 11 Regulation E trumps NACHA and Visa/MC rules unless those rules are more advantageous to the consumer May not require police report May not require written notice before beginning the resolution process.

139 ERROR RESOLUTION PROCEDURES 12 Receive Error Notice from consumer Consumer may submit verbally or in writing with the following information Consumer Name Account Number Why the consumer believes there is an error Type, date and amount of error Institution has 10 business days (20 days if new account) to resolve

140 ERROR RESOLUTION PROCEDURES 13 If institution cannot resolve within10 business days Provide provisional credit within 10 business days and extend investigation up to 45 calendar days Notify the consumer of the amount and date of provisional credit within two days of crediting Allow consumer use of the funds during the investigation If institution requires the verbal notification to be followed up in writing and consumer refuses, then no provisional credit required, but institution is allowed to extend investigation up to 45 calendar days.

141 ERROR RESOLUTION PROCEDURES 14 Exceptions to Timing Requirements 45 calendar days is extended to 90 calendar days if POS transaction Foreign transaction New Account

142 ERROR RESOLUTION PROCEDURES 15 Notification Requirements if error found Correct error within one business day of resolution Notify consumer within three business days of resolution including a statement that provisional credit is final if applicable If no error occurred Notify consumer within three days. Notify consumer of date and amount of reversed provisional credit and that items will be honored against that amount for five days.

143 CONSUMER LIABILITY LIMITS 16 Event Loss or theft of access device Includes a personal identification number (PIN) if used without a card in a telephone transaction, for example Timing of Consumer Notice to Financial Institution Within two business days after learning of loss or theft More than two business days after learning of loss or theft up to 60 calendar days after transmittal of statement showing first unauthorized transfer made with access device. Maximum liability Lesser of $50, OR total amount of unauthorized transfers. Lesser of $500, OR the sum of: (a) $50 or the total amount of unauthorized transfers occurring in the first two business days, whichever is less, AND (b) The amount of unauthorized transfers occurring after two business days and before notice to the financial institution. Provided the financial institution demonstrates that these transfers would not have occurred had notice been given within the two- business-day period. More than 60 calendar days after transmittal of statement showing first unauthorized transfer made with access device. For transfers occurring within the 60-day period, the lesser of $500, OR the sum of: (a) Lesser of $50 or the amount of unauthorized transfers in first two business days, AND (b) The amount of unauthorized transfers occurring after two business days. For transfers occurring after the 60-day period, unlimited liability (until the financial institution is notified) Provided the financial institution demonstrates that these transfers would not have occurred had notice been given within the 60- day period. Unauthorized transfer(s) not involving loss or theft of an access device Unauthorized transfer(s) not involving loss or theft of an access device Within 60 calendar days after transmittal of the periodic statement on which the unauthorized transfer first appears. More than 60 calendar days after transmittal of the periodic statement on which the unauthorized transfer first appears. No liability. Unlimited liability for unauthorized transfers occurring 60 calendar days after the periodic statement and before notice to the financial institution.

144 CONSUMER LIABILITY LIMITS 17 Loss or theft of access device or card Includes use of PIN used without a card in a telephone transaction Consumer notifies institution within two business days after learning of loss or theft Consumer Liability Lesser of $50, OR total amount of unauthorized transfers

145 CONSUMER LIABILITY LIMITS 18 Consumer leaves their debit card at the check out counter at Macy s on March 1. March 1 - $250 unauthorized transaction occurs March 3 consumer realizes card is gone and reports to institution Consumer is liable for $50, institution is liable for the remaining.

146 CONSUMER LIABILITY LIMITS 19 Mom allows son to use card ONE time for gasoline purchase. Son brings card back to Mom. Later that evening, son decides it would be fun to take his friends out to the local restaurant for dinner. He remembers Mom s PIN and remembers where she keeps her debit card. While Mom is in the study, son grabs the card without her knowledge and goes out on the town to the tune of $300. The gasoline purchase is an authorized transaction. However, where the son took the card without the Mom s permission later than evening, any of those transactions would be unauthorized. Mom is reviewing her account online the next day and notices the restaurant charges and reports those to the institution. Mom will be liable for only $50 of those $300 charges.

147 CONSUMER LIABILITY LIMITS 20 Loss or theft of access device or card Includes use of PIN used without a card in a telephone transaction More than two business days after learning of loss or theft up to 60 calendar days after transmittal of statement showing first unauthorized transfer made with access device. Lesser of $500, OR the sum of: (a) $50 or the total amount of unauthorized transfers occurring in the first two business days, whichever is less, AND (b) The amount of unauthorized transfers occurring after two business days and before notice to the financial institution. Provided the financial institution demonstrates that these transfers would not have occurred had notice been given within the two- business-day period.

148 CONSUMER LIABILITY LIMITS 21 Consumer loses card on Monday and notices it is gone, but forgets to call the financial institution. On Tuesday, there is an unauthorized charge for $75 On Thursday, an unauthorized charge for $600 hits the consumer s account. Consumer informs the institution on Friday that they lost their debit card on Monday, Consumer is liable for $50 of the $75 and $450 of the $600, for a total of $500.

149 CONSUMER LIABILITY LIMITS 22 Loss or theft of access device or card Includes use of PIN used without a card in a telephone transaction Notification occurs more than 60 calendar days after transmittal of statement showing first unauthorized transfer made with access device. For transfers occurring within the 60-day period, the lesser of $500, OR the sum of: (a) Lesser of $50 or the amount of unauthorized transfers in first two business days, AND (b) The amount of unauthorized transfers occurring after two business days. For transfers occurring after the 60-day period, unlimited liability (until the financial institution is notified) Provided the financial institution demonstrates that these transfers would not have occurred had notice been given within the 60- day period

150 CONSUMER LIABILITY LIMITS 23 Statements are mailed on the 15 th of each month. Sally Shopper s debit card was stolen on January 3 rd and she realized it was. However, she was very busy during the month. January 3, $100 debit was unauthorized January 10, $300 debit was unauthorized January 20, $100 debit was unauthorized February 17, $200 debit was unauthorized March 15, Sally decides to balance her check book and review her statements and notices the odd transactions. She then notifies her institution.

151 CONSUMER LIABILITY LIMITS 24 Sally s liability is as follows: $50 of the $100 transacted on the 3rd $400 of the transactions occurring on the 10th and 20th $50 of the $200 transaction on the 17th For a total of $500.00

152 CONSUMER LIABILITY LIMITS 25 Unauthorized transfer(s) not involving loss or theft of an access device Within 60 calendar days after transmittal of the periodic statement on which the unauthorized transfer first appears. No liability.

153 CONSUMER LIABILITY LIMITS 26 Sally Shopper s account debited for $700 (no access device used) on March 1 st. Periodic statement issued March 2 nd Sally Shopper notifies financial institution March 30 th No liability to Sally Shopper because notification was within 60 days of periodic statement transmitted on which the unauthorized EFT was documented.

154 CONSUMER LIABILITY LIMITS 27 Unauthorized transfer(s) not involving loss or theft of an access device More than 60 calendar days after transmittal of the periodic statement on which the unauthorized transfer first appears. Unlimited liability for unauthorized transfers occurring 60 calendar days after the periodic statement and before notice to the financial institution.

155 CONSUMER LIABILITY LIMITS 28 January 20 th - $ unauthorized electronic debit (no access device) January 21 st periodic statement transmitted March 30 th - $200 unauthorized electronic debit (no access device) April 1 st consumer notifies institution Consumer liability - $0 for the first $ and $200 for the March 30 th transaction. Consumer did not notify institution until 67 days after the first periodic statement was transmitted.

156 TWO 60 DAY TIMEFRAMES 29 There are two 60 day timeframes that are referenced within the Regulation. First 60 days Consumer must notify institution within 60 days of first periodic statement showing the unauthorized transaction. If notification is not provided timely, the consumer is liable for all of the transactions (beginning on day 61) the institution could have prevented if the error had been notified timely. Second 60 days Institution is not required to investigate and resolve the transaction that was not reported within 60 days of the date the error was posted on the periodic statement.

157 TWO 60 DAY TIMEFRAMES 30 Although Regulation E states the notification from the consumer must be timely or the institution does not have to investigate, there is a requirement that the liability tiers discussed earlier ($50/$500) must be followed for EFTs. Under the EFT Act, there is not a statute of limitations for providing notice to the institution, therefore, if a consumer wanted to pursue the matter through the legal system, they could do so.

158 COMMON QUESTIONS 31 Granddaughter uses Grandma s card, purchases a game from an app. When Grandma gets her statement, she notices $110 in purchases from this app store. Unfortunately, for Grandma, she is on the hook, because she did authorize granddaughter to make the purchase. 5 year old granddaughter didn t read the contract that it authorizes future purchases on the game. Can the institution eat the fee? For example, it s an elderly person and you don t want to charge them. Be cautious of fair banking when making exceptions

159 Questions? 32

160 TODAY S DEPOSIT COMPLIANCE CHALLENGES RACHELLE DEKKER, SENIOR COMPLIANCE ADVISOR SEPTEMBER 13, 2017 Temenos USA, Inc All rights reserved.

161 AGENDA 3 1. Regulation D 2. Regulation DD 3. E-statements 4. Sweepstakes, Lotteries & Raffles 5. Prepaid Rule 6. Regulation CC 7. Overdrafts

162 WHAT YOU WILL LEARN 4 Regulation D Refresher on the Requirements Best Practice for Continued Monitoring Regulation DD Advertising Reward Checking Products and Overdrafts Refer a Friend Promotions E-statements Best Practice vs. Requirements

163 WHAT YOU WILL LEARN 5 Sweepstakes, Lotteries and Raffles Important Definitions Promotions and how they can fall into a prohibited practice Prepaid Rule Effective Date Summary of New Rule Who it impacts and implementation to comply

164 WHAT YOU WILL LEARN 6 Regulation CC New Rule Remote Deposit Capture and Mobile Banking Person to Person (P2P) Transfers Overdrafts Is your Program Compliant?

165 REGULATION D EXCESSIVE TRANSACTIONS 7 Applies to Savings and Money Market accounts What does excessive transactions mean? the depositor is permitted or authorized to make no more than six transfers and withdrawals, or a combination of such transfers and withdrawals, per calendar month or statement cycle (or similar period) of at least four weeks, to another account (including a transaction account) of the depositor at the same institution or to a third party by means of a preauthorized or automatic transfer, or telephonic (including data transmission) agreement, order or instruction, or by check, draft, debit card, or similar order made by the depositor and payable to third parties.

166 REGULATION D EXCESSIVE TRANSACTIONS 8 How should you continue to monitor? Institution best practices Should monitoring be centralized? Can you automate the monitoring process?

167 REGULATION D EXCESSIVE TRANSACTIONS 9 Disclosure of excessive transaction fee What should your Truth In Savings Disclosure state? Disclose the fee and the requirement to change the type of account a depository institution must either: (a) Prevent withdrawals or transfers of funds from this account that are in excess of the limits established by paragraph (d)(2) of this section, or (b) Adopt procedures to monitor those transfers on an ex post basis and contact customers who exceed the established limits on more than occasional basis. For customers who continue to violate those limits after they have been contacted by the depository institution, the depository institution must either close the account and place the funds in another account that the depositor is eligible to maintain or take away the transfer and draft capacities of the account. An account that authorizes withdrawals or transfers in excess of the permitted number is a transaction account regardless of whether the authorized number of transactions is actually made.

168 REGULATION DD TRUTH IN SAVINGS 10 Advertising Reward Checking Products Overdrafts (b)(b) Advertising disclosures for overdraft services (1) Disclosures. Except as provided in paragraphs (b)(2) through (4) of this section, any advertisement promoting the payment of overdrafts shall disclose in a clear and conspicuous manner: (i) The fee or fees for the payment of each overdraft; (ii) The categories of transactions for which a fee for paying an overdraft may be imposed; (iii) The time period by which the consumer must repay or cover any overdraft; and (iv) The circumstances under which the institution will not pay an overdraft. Disclosure of overdraft fee and returned item fee on Fee Schedule should include that these items can be "created by check, in-person withdrawal, ATM withdrawal, or other electronic means, if applicable.

169 REGULATION DD TRUTH IN SAVINGS 11 Refer a Friend Products Disclosing a referral fee and a bonus (f) Bonus means a premium, gift, award, or other consideration worth more than $10 (whether in the form of cash, credit, merchandise, or any equivalent) given or offered to a consumer during a year in exchange for opening, maintaining, renewing, or increasing an account balance. The term does not include interest, other consideration worth $10 or less given during a year, the waiver or reduction of a fee, or the absorption of expenses.

170 E-STATEMENTS 12 Electronic statements vs Paper statements When can you charge? Consider charging a maintenance fee and waiving the fee if enrolled in e- statements. Requiring E-statements Regulation E requires periodic statements to be provided.

171 SWEEPSTAKES, LOTTERIES & RAFFLES 13 Definitions Sweepstakes- advertisements or promotional devices by which prizes (items of value) are awarded to participating consumers by chance, no purchase requirement, consideration, or entry fee necessary in order to enter. Lottery- includes any arrangement whereby three or more persons (the participants) advance money or credit to another in exchange for the possibility or expectation that one or more, but not all, of the participants (the winners) will receive by their participation more than they advanced. Raffle- a contest in which the sole consideration required for a chance of winning designated prizes is obtained by the deposit of a specific amount of money in a savings account or other savings program, where each ticket or entry has an equal chance of being drawn, such contest being subject to regulations that may from time to time be promulgated by the appropriate prudential regulator...

172 SWEEPSTAKES, LOTTERIES & RAFFLES 14 Raffles in the Branches Ensuring it isn t a lottery Bank Celebration- giveaway a CD What must be disclosed & what can the bank giveaway? Business Spotlight for Commercial Customers Consider the financial institutions reputational risk

173 PREPAID RULE 15 New Effective Date of April 1, 2018 Summary of Rule Definition of prepaid account Payroll card account Government benefit account Account marked as prepaid, redeemable upon presentation, and does not satisfy any of the exclusions Account issued on a prepaid basis and is reloadable, function of conducting transactions at merchants, ATMs, and person-to-person transfers, and is not a checking, savings or NOW account

174 PREPAID RULE 16 Exclusions Loaded only with funds from certain healthcare and employee benefit programs. Loaded only with qualified disaster relief payments. Gift certificate. Store gift card. Loyalty, award, or promotional gift card. General-use prepaid card that is both marketed and labeled as a gift card or gift certificate. Account established for distributing needs-tested benefits in a program established under state or local law or administered by a state or local agency. The P2P functionality of an account established by or through the U.S. government if the account s primary function is to conduct closed-loop transactions on U.S. military installations or vessels or similar government facilities.

175 PREPAID RULE 17 Entities Subject to the Rule Any bank, credit union, savings association or any other person that either: 1. Directly or indirectly holds an account (including a prepaid account) belonging to a consumer; or 2. Issues an access device and agrees with a consumer to provide EFT services. Under the Prepaid Rule, a transfer resulting from a prepaid card transaction is an EFT regardless of whether the transfer is initiated through an electronic terminal. 12 CFR (b)(1)(v); comment (b)(3)(i)-1. Therefore, a person meets this second prong of the definition of financial institution if the person issues a prepaid card or other access device and agrees with the consumer that the prepaid card or other access device may be used to conduct transactions authorizing the person to debit or credit the consumer s prepaid account.

176 PREPAID RULE 18 Disclosure Requirements Pre-acquisition Disclosure Short Form & Long Form Initial Disclosure Disclosure on Access Device Change in Terms

177 PREPAID RULE 19 Periodic Statements New requirements or an alternative periodic statement Agreement Requirements for Prepaid Accounts Issuer must make submissions of prepaid account agreements to the Bureau on a rolling basis. Issuer must post on its publicly available website certain prepaid account agreements that the issuer offers to the general public. Issuer must provide a consumer with access to the prepaid account agreement governing the consumer s prepaid account. Overdraft Credit Features Requires such credit features to be structured as a separate credit subaccount or account (i.e., as a separate credit feature) distinct from the prepaid account s asset feature. However, it permits credit to be accessed through a negative balance on a prepaid account s asset feature if certain conditions are met.

178 REGULATION CC FUNDS AVAILABILITY ACT 20 Summary of New Rule Effective July 2018 Major Changes Return Requirements Same-day Settlement Electronic Check Collection and Return

179 REGULATION CC FUNDS AVAILABILITY ACT 21 Remote Deposit Capture & Mobile Banking Now addressed in Regulation CC Where does the risk fall? Consider your agreements Person 2 Person (P2P) transfers What regulations apply? Consider BSA risks

180 OVERDRAFTS 22 What kind of Overdraft Program do you have? Automated- Relies on computerized decision-making, and use preestablished criteria to pay or return specific items. There is little to no case-by-case review and decision-making with respect to an individual customer or item. Ad hoc- Involves the exercise of bank employee judgment in making a specific decision about whether to pay or return an item. This is done as an accommodation and based on the employee s knowledge of a particular customer. When can you charge?

181 OVERDRAFTS 23 Opt In/Out- Regulation E Opt In Requirement Reinstated Opting In New model form must be completed Model Form A-9 in Regulation E CFPB Study on Overdrafts -practices.pdf

182 Questions? 24

183 HMDA: HAVEN OR HAVOC RACHELLE DEKKER & SHELLY NICHOLL SEPTEMBER 14, 2017 Temenos USA, Inc All rights reserved.

184 AGENDA 3 1. Effective dates 2. Overview of changes to reporting requirements o Who reports starting when 3. Key definitions 4. Categories of data o o How we organized the data 54 Data Elements o Explanation of each data field 5. Reporting requirements 6. What the changes mean to you

185 AGENDA 4 7. Data collection o Tools to get you started 8. Action Plan 9. Ethnicity, Sex & Race o o o o New Appendix B collection form What are Disaggregated Subcategories? Applicant info: Ethnicity, race and sex o Rules for collecting and reporting Transition rules 10. HMDA Workshop

186 ABOUT THE SPEAKER 5 Shelly Nicholl CRCM, CAMS Shelly Nicholl is approaching her 30th year in the banking industry, Shelly brings a broad range of skills to our clients. In addition to her general knowledge of audit and compliance she is a specialist in Regulatory Compliance, Risk Management, Bank Secrecy Act, Information Technology, Audit, Training, and Consulting. Shelly has served as an executive officer for a variety of financial institutions and has led the compliance practice at a large regional audit and consulting firm. In addition to compliance and audit, Shelly has extensive knowledge of bank and credit union operations and IT related functions gained through her many years of experience in the industry. Shelly is a graduate of the Robert Perry School of Banking, Compliance, and Audit programs. She is also a Certified Regulatory Compliance Manager (CRCM), Certified Anti-Money Laundering Specialist (CAMS), and is currently pursuing the CAMS - Auditor Certification.

187 ABOUT THE SPEAKER 6 Rachelle Dekker CRCM Rachelle Dekker is a Senior Compliance Advisor with the Temenos Compliance Advisory team. Rachelle was most recently the BSA Officer for a community bank. Her experience includes working for community banks as well as working for a regional auditing firm where she provided compliance auditing and consulting services to various financial institutions. Her background is specialized in BSA/AML, HMDA, and deposit compliance. Rachelle graduated from Grand Valley State University with her Master of Science in Accounting. She is also a Certified Regulatory Compliance Manager (CRCM).

188 WHAT YOU GET TO TAKE HOME.HMDA FLASH DRIVE 7 Cover documents HMDA DataSource Worksheets HMDA: Haven or Havoc presentation HMDA Workshop Scenarios and Answers (single slides) HMDA Guide to Collecting the Data HMDA Cross Reference Guide Commercial Consumer Open-end Consumer Closed-end HMDA Worksheets All data elements HMDA Frequently Asked Questions (FAQs) GMI only HMDA Quick Reference Guide Booklet Register example Who Reports Regulatory Actions and Criteria Key Definitions Ethnicity and Race Ethnicity and Race Examples Action Plan Action Plan Example Editable files to customize to your institution included on disk: HMDA Action Plan QCG (Word) HMDA Action Plan Example QCG (Word) HMDA Data Source Worksheets (Excel Workbook) HMDA Worksheets (Excel Workbook) CFPB Small Entity Guide

189 WHERE DID WE LAND? 8 Final rule published October 15, ½ months to prep for havoc Published July 1, 2016 CFPB s Filing Instruction Guide (FIG) for 2017 and 2018

190 WHERE DID WE LAND? 9 Amendment published on April 15, 2017 clarifies certain key terms such as temporary financing and automated underwriting system establishes transition rules for reporting certain loans purchased by financial institutions. facilitates reporting the census tract of a property, using a new CFPB online geocoding tool Comment Period ended May 25, 2017 Amendment published July 14, 2017 increases open-end lines of credit threshold from 100 to 500 for 2018 and 2019 Comment Period ended July 31, 2017

191 WHERE DID WE LAND? 10 Issued update to Final Rule on August 24, 2017 Summary of Changes: Increase of Loan Volume Threshold Addresses two categories of excluded transactions Clarifies key definitions Collection of Ethnicity and Race

192 EFFECTIVE DATES 11 Effective January 1, 2017 Low-volume depository institution exemption Effective January 1, 2018 New reporting definition Uniform loan volume thresholds New coverage definition Collect new/updated data elements Report 2017 data via CFPB electronic submission tool Disclosure Statement requirement modified (lobby notice and CRA file) Let the real fun begin???

193 EFFECTIVE DATES 12 Effective January 1, 2019 Appendix A removed from regulation due to Federal Reserve Board reference Report new/updated data elements using the CFPB s revised procedures and electronic submission tool Effective January 1, 2020 Quarterly reporting for large institutions

194 OVERVIEW Low volume threshold for depository financial institution In each of the two preceding calendar years originated at least 25 home purchase loans (consumer and commercial), including refinancings of home purchase loans, that are not: Loans originated or purchased by the financial institution acting in a fiduciary capacity (such as trustee); Loans on unimproved land (unless purchase will be to construct a dwelling or move a dwelling onto the property within 2 Years); Temporary financing (such as bridge or construction loans); The purchase of an interest in a pool of loans (such as mortgage-participation certificates, mortgage-backed securities, or real estate mortgage investment conduits); The purchase solely of the right to service loans; or Loans acquired as part of a merger or acquisition, or as part of the acquisition of all of the assets and liabilities of a branch office

195 OVERVIEW Reporting threshold for all financial institutions Originate 25 or more covered closed-end mortgage loans in each of the past two calendar years; - OR - Originate 100 or more covered open-end lines of credit in each of the past two calendar years Temporary Increase: Open-end threshold will increase from 100 to 500 for loans in the prior two years (2018 and 2019) will return to the 100 threshold in 2020.

196 OVERVIEW Transactions subject to reporting Include all dwelling-secured loans Include HELOCs and reverse mortgage Commercial loans home purchase, home improvement or refinance purpose New York CEMA transactions Transactions not subject to reporting Temporary Financing Construction only loan or line of credit extended only for constructing dwelling for sale Loan or line of credit designed to be replaced by separate permanent financing extending by any financial institution to the same borrower Home improvement loans not secured by a dwelling New data as well as changes to existing data fields Modified versus New

197 OVERVIEW Submission of HMDA-LAR info Web-based data submission Disclosure Statement upon request no longer required Provide notice that disclosure statement and modified LAR are available on the CFPB s website Model language for both CRA Public File and lobby notice included in Final Rule Home Mortgage Disclosure Act Notice The HMDA data about our residential mortgage lending are available online for review. The data show geographic distribution of loans and applications; ethnicity, race, sex, age and income of applicants and borrowers; and information about loan approvals and denials. These data are available online at the Consumer Financial Protection Bureau's Web site (

198 OVERVIEW Require certain large institutions to file reports quarterly Report at least 60,000 loans annually But all institutions must have data current within 30 days of each calendar quarter close Loan Volume Threshold for open-end lines of credit will decrease from 500 in prior two years to 100

199 CATEGORIES OF DATA 18 New 35 new elements to be collected Modified 12 revised from the current requirement No Change 7 remain the same

200 KEY DEFINITIONS Dwelling: a residential structure, whether or not attached to real property includes but is not limited to: detached home, an individual condominium or cooperative unit, a manufactured home or other factory-built home or a multifamily residential structure or community Clarify when dwelling no longer used as residence Homes converted for commercial purposes, such as a daycare or professional office No RVs or houseboats, even if used as a residence Service or medical component Assisted living vs. nursing home Determine primary use Mobile homes will only be referred to as manufactured homes (consistent with HUD) 19

201 KEY DEFINITIONS 20 Multifamily dwelling A dwelling, regardless of construction method, that contains five or more individual dwelling units Additional information will also be required such as number of individual income-restricted units pursuant to Federal, State, or local affordable housing programs The following is not considered a Multifamily dwelling: Covered loan secured by five or more separate dwellings, which are not multifamily dwellings, in more than one location Covered loan secured by five or more separate dwellings that are located within a multifamily dwelling, but which is not secured by the entire multifamily dwelling (e.g., an entire apartment building or housing complex)

202 KEY DEFINITIONS 21 Home improvement loan A closed-end mortgage loan or an open-end line of credit that is for the purpose, in whole or in part, of repairing, rehabilitating, remodeling, or improving a dwelling or the real property on which the dwelling is located Must be secured by a dwelling Unsecured home improvement loans not reportable Mixed-Use Home Improvement Loan or line of credit to improve commercial space in a multifamily dwelling is not a reportable home improvement loan Loan or line of credit to improve commercial space in a dwelling other than a multifamily dwelling is a reportable home improvement loan Assumption A transaction in which an institution enters into a written agreement accepting a new borrower in place of an existing borrower as the obligor on an existing debt obligation, even if new borrower merely assumes the existing debt obligation and no new obligation is created Includes successor-in-interest transactions, in which individual succeeds prior owner as the property owner and then assumes the existing debt secured by the property

203 APPLICATION 22 Quick Reference Guide

204 54 DATA ELEMENTS 23

205 HOW WE ORGANIZED THE DATA TO BE COLLECTED 24 Parallels the Temenos HMDA Worksheet Leverages Reportable Data Element Grouping General Information Applicant Information Property Information Loan Information Our materials are designed for practical data collection Can be leveraged regardless of reporting format CFPB has published a (final) reporting format Regardless of any reporting format (uploading), institutions should leverage tools that are best suited for data collection Reportable data typically extrapolated from systems vs. entering data in the order to be reported

206 CFPB: (DIS)ORDER 25

207 GENERAL INFORMATION: APPLICATION DATE 26 Date application was received OR date on application form Need not use same approach throughout Be consistent by routinely using one approach within particular division or for category of loans If reporting date shown on form and retaining multiple versions of form, report date shown on first form received that constitutes an application For application not submitted directly to institution, may report: Date application was received by party that initially received application, Date application was received by institution, or Date shown on application form For reinstated counteroffer (or reconsidered application that was denied, withdrawn, or closed for incompleteness) the reportable application date depends on how the request is treated: If treated as new transaction with new ULI, report date of request If not treated as new transaction and using previous transaction s ULI, report original application date

208 GENERAL INFORMATION: PREAPPROVAL 27 Preapproval (Home Purchase) Preapproval requested Preapproval not requested Must be preapproval request for home purchase loan under preapproval program No more 3-N/A

209 GENERAL INFORMATION: APPLICATION CHANNEL NEW! 28 Whether or not application was submitted directly to institution If reporting actions taken by agent, agent is not considered institution If applicant contacted and completed application with broker or correspondent that forwarded application to institution for approval, application was NOT submitted directly to institution Whether or not obligation arising from loan or application was or would have been initially payable to institution Obligation is initially payable to institution if obligation is initially payable either on face of note or contract to institution that is reporting loan or application

210 GENERAL INFORMATION: UNIQUE IDENTIFIERS NEW! 29

211 GENERAL INFORMATION: UNIQUE IDENTIFIERS NEW! 30 Legal Entity Identifier 20-digit alphanumeric institution identifier Issued by: A utility endorsed by LEI Regulatory Oversight Committee; or A utility endorsed or otherwise governed by Global LEI Foundation (GLEIF) (or any successor of the GLEIF) after GLEIF assumes operational governance of global LEI system. Obtained from Global LEI Foundation website: Universal Loan Identifier Unique number used to identify loan Must consist of up to 23 letters, numerals or combination of both Must not include any information that could be used to directly identify applicant or borrower Follows LEI and ends with check digit MLO s numeric NMLSR ID# NA if MLO is not required to obtain and has not been assigned NMLSR ID Report MLO s NMLSR ID#, regardless of whether he/she is required to obtain NMLSR ID for transaction being reported, such as commercial loan If more than one MLO associated with transaction, report NMLSR ID# of individual MLO with primary responsibility for transaction as of date of action taken

212 CALCULATING THE UNIQUE IDENTIFIER NEW! 31 Step 1: Append ULI to LEI and using the chart in Table 1, replace each alphabetic character with the correct numbers to obtain all numeric values in the string.

213 APPLICANT INFORMATION: APPLICANT/CO-APPLICANT AGE NEW! 32 Obtained from date of birth provided by applicant/co-applicant on application form Optional reporting for purchased loans No rounding

214 APPLICANT INFORMATION: CREDIT SCORE NEW! 33

215 APPLICANT INFORMATION: CREDIT SCORE NEW! 34 If relying on multiple scores (e.g., by relying on scoring grid that considers each score separately without combining all into composite score): Report one of the credit scores relied on in making the credit decision. In choosing which credit score to report, need not use same approach throughout, but should be generally consistent (e.g., by routinely using one approach within a particular division or for a category of loans). More than one applicant and relying on a single credit score: Report that credit score for either the applicant or the first co-applicant. If the transaction involves more than one applicant and relying on separate credit scores for each applicant: Report the credit score relied on for the applicant and the credit score relied on for the first co-applicant

216 APPLICANT INFORMATION: AUTOMATED UNDERWRITING SYSTEM/RESULTS NEW! 35 AUS System 1. DU 2. LP 3. TOTAL Scorecard 4. GUS 5. Other 6. NA AUS Results 1. Approve/Eligible 2. Approve/Ineligible 3. Refer/Eligible 4. Refer/Ineligible 5. Refer w/caution 6. Out of Scope 7. Error 8. Accept 9. Caution 10. Ineligible 11. Incomplete 12. Invalid 13. Refer 14. Eligible 15. Unable to Determine 16. Other 17. NA

217 APPLICANT INFORMATION: AUTOMATED UNDERWRITING SYSTEM/RESULTS NEW! Report name of Automated Underwriting System (AUS) used to evaluate application and result generated by that AUS Electronic tool developed by a securitizer, Federal government insurer, or Federal government guarantor of closed-end mortgage loans or openend lines of credit A person may be a securitizer, even if it is not actively securitizing, insuring or guaranteeing closed-end mortgage loans or open end lines of credit at the time a financial institution uses the AUS Report only if an AUS was used to evaluate application Must report regardless of whether intention is to sell loan or retain loan in portfolio For example, if an AUS developed by a private securitizer was used to evaluate an application but the loan was not sold, and, instead, was held in portfolio, the name of the AUS used to evaluate the application and the result generated by that system must be reported 36

218 APPLICANT INFORMATION: AUTOMATED UNDERWRITING SYSTEM/RESULTS NEW! If more than one AUS is used to evaluate an application or if one AUS is used to evaluate an application but it generated multiple results, determine which AUS or AUSs and which result or results to report. To do so, use following steps in exact order they are presented below: 1. Determine whether an AUS used to evaluate application matches loan type reported for application or loan 2. If AUS matches loan type (such as TOTAL Scorecard for an FHA loan), determine whether only one result was obtained from that AUS. If only one result was obtained from AUS that matches loan type, report AUS that matches loan type and result obtained from that AUS 3. If AUS was not used that matches loan type or if more than one result was obtained from AUS that matches loan type, determine whether AUS used to evaluate application matches purchaser, insurer, or guarantor (if any) for loan 4. If AUS was used that matches purchaser, insurer, or guarantor (such as Desktop Underwriter for loan that Fannie Mae purchased), determine whether only one result was obtained from that AUS. If only one result was obtained from AUS that matches purchaser, insurer, or guarantor, report AUS that matches and the result obtained from that AUS 5. If an AUS was not used that matches purchaser, insurer, or guarantor or multiple results were obtained from an AUS that matches purchaser, insurer, or guarantor or loan type, report result obtained closest in time to credit decision and AUS that generated that result, unless multiple results were obtained closest in time to credit decision 6. If multiple results are obtained simultaneously closest in time to credit decision, report each of the multiple AUSs that generated each of those results, up to a total of five AUSs For example, institution obtains multiple results closest in time to the credit decision if it obtains two results at noon on the day immediately before it makes the credit decision and does not obtain any results at a later time 37 Never report more than five AUSs If more than five AUSs were used, choose five AUSs to report

219 APPLICANT INFORMATION: INCOME AND RATIOS 38 Gross annual income relied on in processing application or relied on in making credit decision Rule clarifies determining gross annual income relied on when credit decision is not made Ratio of the applicant's or borrower's total monthly DTI ratio relied on in making credit decision NEW! CLTV ratio relied on in making credit decision NEW! Note: The CLTV is the combined value of all property securing the loan not just the real estate.

220 APPLICANT INFORMATION: ACTION TAKEN AND REASONS FOR DENIAL 39

221 APPLICANT INFORMATION: ACTION TAKEN AND ACTION TAKEN DATE 40 Loan originated Loan closing or account opening Later date of: Initial funds disbursement; Date institution acquired loan from party that initially received application; OR Date loan converts to permanent financing if construction-permanent Application approved but not accepted Any reasonable date, such as: Approval date, Deadline for accepting offer, or Date file was closed Application denied Date application is denied or Date notice sent to applicant Application withdrawn by applicant Date express withdrawal was received or Date shown on notification form (if written withdrawal) File closed for incompleteness (Preapproval request closed for incompleteness not HMDA reportable) Date file was closed or Date notice sent to applicant

222 APPLICANT INFORMATION: ACTION TAKEN AND ACTION TAKEN DATE 41 Purchased loan Date of purchase Preapproval request denied Date preapproval request was denied or Date notice sent to applicant Preapproval request approved but not accepted Any reasonable date, such as: Approval date, Deadline for accepting offer, or Date file was closed Must report origination as occurring in year in which origination goes to closing or account is opened

223 APPLICANT INFORMATION: DEMOGRAPHICAL INFORMATION 42 Hold that thought

224 PROPERTY INFORMATION 43

225 PROPERTY INFORMATION: ADDRESS AND VALUE 44 Street, city, state and zip code for property used as collateral NEW! Applications not resulting in origination: use property address proposed For originated loans: use property address identified in legal obligation State, county, and census tract only if property is located in MSA or MD in which institution has home or branch office or if required to report data on small business, small farm, and community development lending under CRA Value of property securing loan NEW! If obtaining multiple values, report value relied on in making credit decision (Note: this includes the value of all property securing the loan, not just the real estate) Report NA if: File was closed for incompleteness Application was withdrawn before a credit decision was made, even if property value had been obtained Credit decision is made without relying on the property value

226 PROPERTY INFORMATION: LIEN STATUS 45 Report lien status on property securing the loan or property to which loan or application relates Purchased loans Lien status determined by reference to best information readily available to the institution at the time of purchase Applications and originations Lien status determined by reference to best information readily available at the time final action is taken, such as: Information obtained from a title search The applicant s statement on the application form The applicant s credit report

227 PROPERTY INFORMATION: OCCUPANCY TYPE 46 If buying or building new dwelling that will become principal residence within year (or upon completion of construction), the new dwelling is considered the principal residence Purchased loans: May report occupancy type as principal residence unless loan documents or application indicate property not occupied as principal residence Second residence if is or will be occupied by applicant or borrower for only portion of the year and is not applicant s or borrower s principal residence, such as a vacation home Investment property if applicant or borrower does not occupy property at all. For example, if a person purchases property, does not occupy the property, and receives income by renting the property, the property is investment property

228 PROPERTY INFORMATION: TOTAL UNITS NEW! 47 Report number of individual dwelling units related to property securing loan Application: report the number of individual dwelling units related to property proposed to secure loan Application or loan secured by a manufactured home community: include total number of manufactured home sites that secure loan and available for occupancy, regardless of whether sites are occupied or have manufactured homes attached For loan secured by single manufactured home that is or will be located in manufactured home community, report one individual unit For a loan secured by condominium or cooperative complex, report total number of individual dwelling units securing loan or proposed to secure loan in the case of an application May include recreational vehicle pads, manager apartments, rental apartments, site-built homes, or other rentable space that are ancillary to operation of secured property if such units are considered in underwriting guidelines or investor guidelines, or if number of such units are tracked for internal purposes May rely on the best information readily available at time action is taken, such as: Information provided by applicant that is reasonably believed Information contained in property valuation or inspection Information obtained from public records

229 PROPERTY INFORMATION: MULTIFAMILY AFFORDABLE UNITS NEW! If property securing loan or proposed to secure application includes multifamily dwelling, provide number of individual dwelling units that are income-restricted pursuant to Federal, State, or local affordable housing programs Affordable housing income-restricted units individual dwelling units that have restrictions based on occupants income level pursuant to restrictive covenants encumbering the property. Covenants may be evidenced by use agreement, regulatory agreement, land use restrictions, or a similar agreement. Rent control or rent stabilization laws, the acceptance of Housing Choice Vouchers, and other similar forms of portable housing assistance that are tied to occupant and not individual dwelling unit are not affordable housing income-restricted dwelling units for purposes of reporting May rely on the best information readily available to it at time final action is taken, such as: Information provided by applicant that is reasonably believed Information contained in property valuation or inspection Information obtained from public records 48

230 PROPERTY INFORMATION: CONSTRUCTION METHOD NEW! 49 Site built Includes modular homes and factory built homes that do not meet the definition of manufacture home (HUD certificate) Also includes multi-family dwellings, unless the multi-family dwelling is a manufactured home community Manufactured home If manufactured home community, report construction method as manufactured home Must have the HUD certification label Prior to 6/15/1976- not a dwelling (not reportable)

231 PROPERTY INFORMATION: MANUFACTURED HOME (SECURED PROPERTY TYPE) NEW! Manufactured home and land Manufactured home and not land Not applicable Not required to report this attribute if the construction method is Site built or if you are reporting a Manufactured home community that is a multi-family dwelling 50

232 PROPERTY INFORMATION: MANUFACTURED HOME ( LAND PROPERTY INTEREST) NEW! 51 Report information about applicant s or borrower s property interest in land on which manufactured home is or would have been located Direct ownership: Applicant or borrower has more than a possessory real property ownership interest in land, such as fee simple ownership Indirect ownership Applicant or borrower is or will be member of resident-owned community structured as housing cooperative in which occupants own entity that holds the land underlying the manufactured home community. Applicant or borrower may still have lease and pay rent for the lot on which his or her manufactured home is or will be located, but property interest type should be reported as indirect ownership if applicant is or will be a member of cooperative that owns the manufactured home community s underlying land Paid leasehold Applicant resides or will reside in resident-owned community structured as a housing cooperative in which occupants own an entity that holds the land underlying the manufactured home community. Applicant or borrower may still have a lease and pay rent for the lot on which his or her manufactured home is or will be located, but property interest type should be reported as paid leasehold if applicant is not or will not be a member of cooperative that owns the manufactured home community s underlying land For example, borrower locates manufactured home on lot on which he or she does not have an ownership interest; has a written lease for the lot; and lease specifies rent payments Unpaid leasehold Borrower locates manufactured home on land owned by family member, does not have written lease, and does not have an agreement regarding rent payments Report N/A if 1) is not a manufactured home or 2) if manufactured home community that is a multi-family dwelling.

233 LOAN INFORMATION 52

234 LOAN INFORMATION: LOAN AMOUNT AND LOAN TYPE 53 Loan Amount Loan Type Closed-end loan, other than purchased loan, an assumption, or a reverse mortgage: Report amount to be repaid as disclosed on legal obligation Purchased closed-end loan or assumption of closed-end loan: Report unpaid principal balance at time of purchase or assumption Open-end line of credit, other than a reverse mortgage open-end line of credit: Report the amount of credit available to the borrower under terms of plan For reverse mortgage: Report the initial principal limit, as determined pursuant to Section 255 of the National Housing Act and implementing regulations and Mortgagee Letters issued by HUD Report as a whole number; no truncating (ex. if the loan amount is $110,500, enter or Whether the loan is or application was for: Conventional, Insured by FHA, Guaranteed by VA, or Guaranteed by the RHS or the FSA Whether or not loan is reverse mortgage NEW! Whether or not loan is open-end line of credit NEW! Whether or not loan is business or commercial purpose NEW! May rely on Regulation Z 12 CFR for guidance

235 LOAN INFORMATION: LOAN PURPOSE 54 Loan Purpose Home purchase Construction-permanent Assumptions Refinancing Home Improvement No more unsecured loans Cash Out Refinancing NEW! Refinancing classified as a cash out refinancing Other NEW!

236 LOAN INFORMATION: LOAN PURPOSE 55 CFPB HMDA Small Entity Guide Section 5.7

237 LOAN INFORMATION: GENERAL TERMS AND INTEREST RATE NEW! 56 Report the term of the loan as the scheduled number of months after which the legal obligation will mature or terminate or would have matured or terminated If the loan includes a schedule with repayment periods other than months, report the loan term in months using an equivalent number of whole months without regard for any remainder For fully amortizing loans, enter the term of the loan in months, ending with the final payment due date. Loans that do not fully amortize during the maturity term, such as loans with a balloon payment, are reported using the maturity term rather than the amortization term For a purchased loan, report the number of months after which the legal obligation matures as measured from the loan s origination For an open-end line of credit with a definite term, report the number of months from account opening until the account termination date, including both the draw and repayment period (if any) For a loan or application that does not have a definite term, such as a reverse mortgage, Not Applicable

238 LOAN INFORMATION: GENERAL TERMS AND INTEREST RATE NEW! 57 Interest Rate May use a decimal separator Report the interest rate applicable to a loan or to an application that is approved but not accepted Report the introductory rate period as the number of months from loan closing or account opening until the first date the interest rate may change For an application, report the number of months from loan closing or account opening until the first date the interest rate could have changed under the proposed terms There is no requirement to report introductory interest rate periods based on preferred rates unless the terms of the legal obligation provide for an expiration date for the preferred rate Preferred rates include loan terms that provide that the initial underlying rate is fixed but that it may increase or decrease upon the occurrence of some future event, such as: An employee leaving the employ of the institution The borrower closing an existing deposit account with the institution The borrower revoking an election to make automated payments Report the term of any prepayment penalty period in months

239 LOAN INFORMATION: SPECIAL LOAN PRODUCT FEATURES NEW! 58 Balloon Payment: One that is more than two times amount of regular periodic payment Interest Only payments: One or more periodic payments may be applied solely to accrued interest and not to loan principal Negative Amortization: Payment of periodic payments that will result in increase in principal balance Must report whether or not loan contains any other contractual terms which would allow for any payments other than fully amortizing payments

240 LOAN INFORMATION: COSTS AND CREDITS 59

241 LOAN INFORMATION: COSTS AND CREDITS NEW! 60 For loans subject to Regulation Z s Closing Disclosure (CD) requirements: Report total of all itemized origination charges that are designated borrower paid at or before closing as disclosed in Block A of the Closing Costs Details page of the CD If amount changes because revised CD is issued during same reporting period in which loan closing occurred, report revised amount annually and/or quarterly, as may be applicable Report total discount points paid to creditor to reduce interest rate as disclosed on Block A, Line.01 of the Closing Cost Details page of the CD If amount changes because revised CD is provided during same reporting period in which loan closing occurred, report revised amount annually and/or quarterly, as may be applicable Report amount of lender credits disclosed in the second row in Block J on the Closing Cost Details page of the CD If amount changes because revised CD is provided during same reporting period in which loan closing occurred, report revised amount annually and/or quarterly, as may be applicable Report total loan costs if a CD was provided for the loan Report N/A for any fields that are Not Applicable

242 LOAN INFORMATION: COSTS AND CREDITS NEW! 61 For loans subject to the ability-to-repay provisions of Regulation Z, report the amount of Total Loan Costs as disclosed in Block D of the Closing Cost Details page of the Closing Disclosure If the amount changes because a revised CD is provided during the same reporting period in which the loan closing occurred, report the revised amount annually and/or quarterly, as may be applicable If loan is NOT subject to Regulation Z s CD requirements and is not a purchased loan, report total points and fees If it is determined that the transaction s total points and fees exceeded the applicable limit and the overage is cured during same reporting period in which closing occurred, report revised amount annually and/or quarterly, as may be applicable For example, an institution is required to submit HMDA data quarterly. It closes a loan on January 2, 2020, and cures an overage on January 9, The institution reports the revised amount of total points and fees in both its quarterly LAR submitted for first quarter data by May 30, 2020, and its annual LAR submitted in 2021 for 2020 data If loan is not subject to Regulation Z and there are no costs and/or credits, report Not Applicable

243 LOAN INFORMATION: RATE SPREAD AND HOEPA 62 Report the difference between the loan s annual percentage rate (APR) and a comparable transaction s average prime offer rate (APOR) as of the date the loan s interest rate was set If an application does not result in an originated loan for a reason other than that the application was approved but not accepted by the applicant, report Not Applicable If an application (including a preapproval request) was approved but the applicant did not accept, report the difference between the APR of the loan that would have resulted had the applicant accepted it and a comparable transaction s APOR as of the date the interest rate was set Report whether or not a consumer credit transaction subject to Regulation Z and secured by a principal dwelling is a high-cost mortgage For an application or loan that is not subject to HOEPA, report Not Applicable

244 LOAN INFORMATION: TYPE OF PURCHASER 63

245 LOAN INFORMATION: TYPE OF PURCHASER 64 Report type of purchaser if: Loan being reported was both originated and sold within same calendar year Loan being reported was both purchased and sold within same calendar year Private securitizer: entity (other than those listed in 1-4) which is known or reasonably believed to securitize the loan Knowledge or reasonable belief based on: Purchase agreement or other related documents Previous transactions with purchaser Purchaser s role as securitizer (such as investment bank) If, in selling the loan, it is unknown (or reasonably believed) whether purchaser will securitize loan, and it is known that purchaser frequently holds or disposes of loans by means other than securitization, report loan as purchased by one of the other types of purchasers, as appropriate If purchaser meets criteria to be private securitizer and also falls within one of the other reportable categories in 6, 71, 72, 8, or 9, report purchaser is a private securitizer Affiliate institution: company that controls, is controlled by, or is under common control with the institution Mortgage company: nondepository institution that purchases loans secured by dwellings and, typically, originates loans secured by dwellings Other: purchaser that is not any of the options provided. Report purchaser type of Other if purchaser was bank holding company or thrift holding company that is not a private securitizer and is not an affiliate of institution

246 LOAN INFORMATION: TYPE OF PURCHASER 65 If loan was originated or purchased, but was not sold during calendar quarter for which data is being recorded, report Not Applicable If the loan is sold in a subsequent quarter of same calendar year, record type of purchaser for quarter in which loan was sold If loan is sold in succeeding year, do not record or report sale

247 2017: REPORTING REQUIREMENTS 66 Depository institution $44 million in assets (adjusted annually) Home or branch in MSA Federally insured or regulated Originated at least (25) home purchase loans in prior two calendar years (2015/2016) NEW! Including refinancings of home purchase loans Includes consumer and commercial

248 2018: REPORTING REQUIREMENTS 67 All Financial Institutions Originated at least (25) closed-end mortgage loans in each of the two preceding calendar years - OR - Originated at least 500 covered open-end lines of credit in each of the two preceding calendar years Non-Depository Home or branch office in MSA Depository Institution $44 million in assets (adjusted annually) Home or branch in MSA Originated at least (1) home purchase or refinance secured by a first lien on a 1-4 dwelling Federally insured or regulated

249 WHAT THESE CHANGES MEAN TO YOU 68 Costs Changes to your software systems Changes to policy and procedures Training Time Data collection Data verification/scrub

250 DATA COLLECTION 69 Create a HMDA DataSource Worksheet (Handout) What are your actual source documents for each data element that must be captured for HMDA reporting? For example: Residential mortgage loan, you use the 1003; GMI information is located on page 4 of 5 Next, add a column to indicate what source documents have the correct (and consistent) information Complete this for each type of application Residential Mortgage Loans: 1003, GMI, Page 4 of 5 Commercial loans: separate GMI form

251 HMDA DATASOURCE WORKSHEET 70

252 DATA COLLECTION 71 Create a HMDA Worksheet (Handout) List each data field required to be collected Record the information to be inputted in the exact form it is to be inputted (e.g. Purpose of Loan 1; Action Taken 3; Reasons for Denial 3) Attach any copies from FFIEC Calculator or FFIEC Geocoding (or other vendor) Benefits Inputting Accountability Time (Less time digging in files)

253 DATA COLLECTION: HMDA WORKSHEET 72

254 DATA COLLECTION 73 Key factors to address in procedures Who collects the data? When is it collected? Where is it stored? How will it be captured electronically?

255 DATA COLLECTION 74 Benefits Minimize errors Inadvertent Fair lending concerns Consistency Examiners Training

256 DATA COLLECTION 75 Handouts have been provided in editable Excel format for your convenience

257 ACTION PLAN 76 Identify all lines of business that will be impacted Determine whether you have sufficient staff Establish a HMDA Implementation Committee Develop a centralized plan/timeline insure your institution is ready to comply by January 1, 2018 Include members from each line of business, including upper management, and IT Allow time for each step in the process Meet regularly to discuss progress Plan now for the increased data capture requirements and remember that data integrity is essential Look at your operating systems to see what elements they are missing Contact your vendors to see what steps they are taking to incorporate these elements Ask specifics, such as deadline dates Will there be an additional cost to your institution?

258 ACTION PLAN 77 Start training early Today is a GREAT start! Identify who needs to be trained Don t forget the Board of Directors Develop training materials specific for each position (i.e., collection, input, etc.) Test staff to identify any areas of confusion and/or weaknesses. Do not wait until data collection is required Update policy and procedures Nail down any procedures that affect how you will collect and report certain elements Update your overall Compliance Risk Assessment Re-evaluate risk rating as changes are extensive and errors could cause not only HMDA violations but potential fair-lending violations

259 ACTION PLAN 78 Once data collection begins, conduct self-testing Verify accuracy of data collected BEFORE reporting Audit data collected and data input at least quarterly to test processes for any weaknesses Remember all institutions must maintain internal LAR with complete and accurate HMDA data within 30 days of each calendar quarter close Conduct assessment of lending practices Know what the data shows Fair Lending UDAAP How will you address any problems indicated?

260 ACTION PLAN 79 We have provided an Action Plan Quick Compliance Guide as well as an Action Plan Checklist example.

261 ETHNICITY, RACE AND SEX 80 New requirement to report how institution collected applicant s or borrower s ethnicity, race and sex Whether or not it collected on basis of visual observation or surname Must permit applicants to self-identify their ethnicity and race using disaggregated ethnic and racial subcategories Institutions not permitted to use disaggregated subcategories when identifying applicant s ethnicity and race based on visual observation or surname New Appendix B Form and Instructions

262 APPENDIX B: COLLECTION FORM 81

263 WHAT ARE DISAGGREGATED CATEGORIES? 82 Ethnicity Hispanic or Latino Mexican Puerto Rican Cuban Other Hispanic or Latino

264 WHAT ARE DISAGGREGATED SUBCATEGORIES? 83 Race American Indian or Alaska Native Enrolled or principal tribe Asian Asian Indian Chinese Filipino Japanese Korean Vietnamese Other Asian

265 WHAT ARE DISAGGREGATED SUBCATEGORIES? 84 Black or African American and White are NOT Disaggregated Subcategories Native Hawaiian or Other Pacific Islander Native Hawaiian Guamanian or Chamorro Samoan Other Pacific Islander

266 APPLICANT INFORMATION: ETHNICITY 85

267 APPLICANT INFORMATION: ETHNICITY 86 Must offer option of selecting more than one ethnicity and must permit applicant to self-identify using both aggregate categories (Hispanic or Not Hispanic) and disaggregated subcategories (Mexican, Puerto Rican, Cuban, Other Hispanic or Latino) Applicant isn t required to select an aggregate category as a requirement to select a subcategory Must report every aggregate category and subcategory selected. If more than five selected, institution reports only up to five. If Hispanic or Latino selected, all four subcategories may be selected: Mexican Puerto Rican Cuban Other Hispanic or Latino If Other Hispanic or Latino selected, ethnicity not listed in standard subcategories may be provided Report both Other Hispanic or Latino and additional information provided by applicant Applicant is permitted to complete the free form Other field without specifically selecting Other Cannot use the subcategories when identifying ethnicity based on visual observation or surname Must only use Hispanic or Latino or Not Hispanic or Latino

268 APPLICANT INFORMATION: RACE 87

269 APPLICANT INFORMATION: RACE 88 Must offer option of selecting more than one race and must permit applicant to self-identify using both aggregate categories ((American Indian or Alaska Native, Asian, Black or African American, Native Hawaiian or Other Pacific Islander or White) ) and disaggregated subcategories ((Asian Indian, Chinese, Filipino, Japanese, Korean, Vietnamese, Other Asian, Native Hawaiian, Guamanian or Chamorro, Samoan, or Other Pacific Islander) Applicant isn t required to select an aggregate category as a requirement to select a subcategory Must report every aggregate category and subcategory selected, up to total of five If Other Asian or Other Pacific Islander is selected, applicant must be permitted to provide race subcategory not provided on collection form If Other Asian or Other Pacific Islander selected, race not listed in standard subcategories may be provided Report both Other Asian or Other Pacific Islander and additional information provided by applicant Institution may report American Indian or Alaska Native if the applicant provides only a particular American Indian or Alaska Native enrolled or principal tribe in the free-form field Applicant is permitted to complete the free form Other field without specifically selecting Other Cannot use the subcategories when identifying race based on visual observation or surname Must use only the five aggregate categories

270 APPLICANT INFORMATION: SEX 89

271 APPLICANT INFORMATION: SEX 90 Applicant can now choose both genders Differences from Regulation B in collection practices

272 APPLICANT INFORMATION: ETHNICITY, RACE AND SEX 91 Must ask for ethnicity, race and gender information regardless of how application is taken Cannot require applicant to provide If application taken in person and ethnicity, race and gender not provided by applicant, must indicate such and then collect on the basis of visual observation or surname Must inform applicant that they are doing so Report non-natural persons as NA Electronic application with video component must be treated as in person Without video, treated as accepted by mail

273 APPLICANT INFORMATION: ETHNICITY, RACE AND SEX 92 May request ethnicity, race and gender when meeting with applicant in person if applicant begins application by mail, internet, or telephone, but does not provide the requested information and does not select I do not wish to provide this information If applicant does not provide requested information during in-person meeting, information must be collected on basis of visual observation or surname If meeting occurs after application process is complete (e.g., at loan closing or account opening), there is no requirement to obtain applicant s ethnicity, race and gender and institution may report as Not Applicable If a loan or application includes a guarantor, ethnicity, race and gender are not reported for the guarantor Optional reporting for purchased loans If choosing not to collect, report Not Applicable

274 CONSIDER 93 Fair Lending Risk Ethnicity, race and sex

275 COLLECTING GMI WITH NEW URLA/ Beginning January 1, 2017, may collect ethnicity, race and sex under the new 2018 rules For reporting: Application Taken During 2017/Loan Originated 2017 Report only aggregate categories and codes, even if applicants have selfidentified using the expanded "disaggregated" categories Application Taken During 2017/Loan Originated 2018 May report using new disaggregated categories OR May abide by the transition rule and continue to report only aggregate categories and codes, even if applicants have self-identified using the expanded "disaggregated" categories

276 Questions? 95

277 Thank you! temenos.com

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