Consumer Compliance Hot Topics Agenda Regulatory Update: Timeline and Title XIV Summary Frequently Asked Questions Supervisory Expectations Future Rules Areas of Emerging Risk Risk Focused Supervision Outreach and Resources 2
Regulatory Update Timeline Title XIV Rulemakings Ability to Repay Loan Originator Comp. Mortgage Servicing Home Ownership and Equity Protection Act (HOEPA) Escrow Accounts Appraisals/Valuations Truth in Lending Act Real Estate Settlement Procedures Act Integration January 2014 August 2015 Credit Risk Retention Data Collection (Small Business and HMDA) Payday Loans and Deposit Advance Products Unknown 3 Regulatory Update Title XIV Summary Rule Summary Bank Action Small Bank Carve Out Ability to Repay/ Qualified Mortgage (QM) Requires good faith evaluation of repayment ability Encourages basic, noncomplex loans Review mortgage lending strategy Formalize documentation Small creditor QM Balloon QM Loan Originator (LO) Comp Restricts LO bonuses Establishes LO standards, qualifications and training Identify LO Review bonuses, annual training, and related policies None Mortgage Servicing Creates life of loan protections Determine status Review servicing practices Small servicers HOEPA Broadens coverage Expands protections Review marginal loans Provide pre closing counseling None HPML Escrow Extends required escrows Affords regulatory relief Review pricing Develop exit strategy Small, rural banks Appraisals/ Valuations Creates right to receive valuations May require third party appraisal Provide valuations Find appraisers QMs and loans <$25M exempt 4
Regulatory Update Frequently Asked Questions Ability to Repay and Qualified Mortgages: Are qualified mortgages required? How does ability to repay apply to unconventional loans? 5 Regulatory Update Frequently Asked Questions (Cont d) Loan Originator Compensation: How has the loan originator definition changed? How do bonus restrictions apply to loan originators? 6
Due Diligence: Regulatory Update Supervisory Expectations Consider additional regulatory requirements Consider fair lending and Community Reinvestment Act repercussions Assess, Adjust, Assimilate: Assess business strategies Adjust loan offerings, structuring and pricing Assimilate by revising policies and training staff Ongoing Monitoring: Review regulatory treatment of transactions Review regulatory treatment of institution 7 Regulatory Update Future Rules Integrated Mortgage Disclosures Credit Risk Retention Expanded HMDA Data Deposits and Operations Regulatory Streamlining, Redefining Rural, and Business Data Collection 8
Areas of Emerging Risk New or Specialized Products: Overdraft protection Deposit advances Credit protection and add on features Bank Presence in Social Media: CA letter 13 22 Relationships with Payday Lenders Regarding Payment Processing 9 Areas of Emerging Risk (Cont d) Fair Lending/CRA: Ability to repay and qualified mortgage rule: CA letters 13 15 and 13 23/SR letter 13 20 Redlining Pricing risk for mortgage and consumer credit 10
Risk Focused Supervision Implemented January 1, 2014: New Risk Focused Consumer Compliance Supervision Program for Community Banks: CA letter 13 19 Revised Examination Frequency Policy: CA letter 13 20 Note: Community banks are defined as banks with total assets of $10 billion or less. 11 Risk Focused Supervision Program Framework Identify inherent compliance risk Evaluate institution s compliance risk controls Assess remaining compliance risk Coordinate risk focused examination Ongoing monitoring will take place at the midpoint of each examination cycle. 12
Risk Focused Supervision New Compliance Exam Frequency Schedule Asset Size Examination Frequency Over $1 billion 24 months $350 million to $1 billion 36 months Less than $350 million 48 to 60 months Applies to institutions with compliance and CRA ratings of Satisfactory or better. 13 Outreach and Resources Community Banking Connections Newsletter Consumer Compliance Outlook Publication http://www.philadelphiafed.org/bankresources/publications/consumer compliance outlook/ Outlook Live Audio Conference Series http://www.philadelphiafed.org/bankresources/publications/consumer compliance outlook/outlook live/ Fed Connections 14
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