LENDING: KEY EXAMINER TRENDS 2015 Temenos USA, Inc. All rights reserved. Leah M. Hamilton Chief Compliance Officer, TriComply Services
WHAT YOU WILL LEARN TRID Compliance Reprieve Common issues Regulation Z (TILA) Regulation X (RESPA) Fair Lending Vendor Management Other notable mentions On the horizon Preventative measures 2
IS THERE REALLY A REPRIEVE ON COMPLIANCE? CFPB good-faith enforcement grace period Oversight will be sensitive to the progress made by those entities that have been squarely focused on making good-faith efforts to come into compliance with the rule on time FDIC: FIL-49-2015 Examiners will expect supervised entities to make good faith efforts to comply with the TRID Rule's requirements in a timely manner. Specifically, examiners will consider the institution's implementation plan, including actions taken to update policies, procedures, and processes, its training of appropriate staff, and its handling of early technical problems or other implementation challenges. Civil liability HR 3912: Homebuyers Assistance Act Enforcement safe harbor The integrated disclosure requirements for mortgage loan transactions under section 4(a) of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2603(a)), section 105(b) of the Truth in Lending Act (15 U.S.C. 1604(b)), and regulations issued under such sections may not be enforced against any person until February 1, 2016, and no suit may be filed against any person for a violation of such requirements occurring before such date, so long as such person has made a good faith effort to comply with such requirements. Committee review and sent to House Placed on the Union Calendar, Calendar No. 210 October 1, 2015 3
COMMON ISSUES REGULATION Z (TILA) Mortgage servicing Incorrectly crediting of payments Failure to apply payments in accordance with note Bi-weekly payments held for monthly application Failure to credit as of date received Calculating APR Note Advertisements 4
COMMON ISSUES REGULATION Z (TILA) Disclosure timing Within 3 business days 7 business day waiting period Disclosures Accuracy Advertisements vs. note vs. disclosures HELOCs ARMS 5
COMMON ISSUES REGULATION X (RESPA) Disclosure timing No cost loan Page 3 of the HUD: $0 in GFE column vs. new Loan Estimate Calculating GFE/LE fees Overestimating to create safety net Denying loans when fees are inaccurate or unacceptable Not a valid option Regulation B requires specific reasons for denial 6
COMMON ISSUES REGULATION X (RESPA) RESPA Section 8 (12 CFR 1024.14) Unearned fees C. Payments Must Be for Goods, Facilities or Services http://www.fdic.gov/news/news/financial/1999/fil9921b.pdf In the determination of whether payments from lenders to mortgage brokers are permissible under Section 8 of RESPA, the threshold question is whether there were goods or facilities actually furnished or services actually performed for the total compensation paid to the mortgage broker. In making the determination of whether compensable services are performed, HUD s letter to the Independent Bankers Association of America, dated February 14, 1995 (IBAA letter) may be useful. In that letter, HUD identified the following services normally performed in the origination of a loan: 7
RESPA SECTION 8 VIOLATIONS Violations of Section 8's anti-kickback, referral fees and unearned fees provisions of RESPA Subject to criminal and civil penalties Criminal case May be fined up to $10,000 and imprisoned up to one year Private law suit May be liable to the person charged for the settlement service an amount equal to three times (3x) the amount of the charge paid for the service Administrative Proceeding File No. 2015-CFPB- 0004 New Day Financial, LLC 8
COMMON ISSUES FAIR LENDING Disparate impact Texas Dept. of Housing and Community Affairs v. Inclusive Community Project, Inc. Disparate impact analysis under Fair Housing Act Redlining It s baaaackk! Did it ever leave? CFPB and DOJ take action 9/24/2015 Alleges that Hudson City Savings Bank redlined by locating its branches and selecting mortgage brokers nearly all outside of majority-black-and-hispanic neighborhoods, among other actions In other words, it intentionally discouraged potential borrowers from equal access to credit in majority-black-and-hispanic neighborhoods in New Jersey, New York, Connecticut, and Pennsylvania Re-check your maps! 9
VENDOR MANAGEMENT Third party vendor management Risk management Monitoring Debt collection 10
OTHER NOTABLE MENTIONS HMDA Error mitigation Flood Ongoing violations subject to $2,000 Document, document, document UDAP and UDAAP Consumer and commercial Sniff test FCRA Failure to follow FCRA accuracy and integrity requirements SCRA Incorrect calculations of SCRA protected payments Failure to identify servicemembers prior to foreclosure or repossession 11
UPCOMING HOT BUTTONS Complaint management program Complaint management required as part of compliance management system Cybersecurity What? That s IT s issue! FFIEC free cybersecurity risk tool 12
PREVENTATIVE MEASURES Well documented policies and procedures Clearly written and communicated Review policies and procedures Monitoring, auditing Ensure sufficient transactional testing Test the process, not just the documentation Actually monitor calls, especially debt collection If using a third party auditor, be sure to manage expectations as to what is reviewed, volume of transaction testing, risk rating Respond to and correct identified issues Potential Section 8 violations should always be brought to the Board s attention immediately Train, train, train Incorporate UD(A)AP into training On-going training Leverage staff meetings Develop internal Q&As # 13
Questions?