My financial institution is looking at a participation to purchase. We haven’t done this in a long time, especially after the beneficial ownership rule has been effective. The borrowing entity is an LTD partnership. As only the participant, what do we need to collect for beneficial ownership?
Participation loans are technically exempt from the Beneficial Owner rule. The bank should obtain, however, some type of certification or assurance that the originating bank collected the beneficial owner information.
2. Are loan participations purchased from third parties and loans purchased from a car
dealer or mortgage broker within the exclusion from the definition of “account” for loans
acquired through an acquisition, merger, purchase of assets, or assumption of liabilities?
Yes, this exclusion is intended to cover loan participations purchased from third parties and loans
purchased from a car dealer or mortgage broker. If, however, the bank is extending credit to the
borrower using a car dealer or mortgage broker as its agent, then it must ensure that the dealer or
broker is performing the bank’s CIP.
PAGE 2: https://www.fincen.gov/sites/default/files/guidance/finalciprule.pdf
If it is in our loan policy not to use the credit score to base our credit decision on, but we do pull the real estate credit report for the disclosures. We don’t need to report the credit score on the HMDA LAR since we do not rely on the score to make a decision, correct?
Yes, that's correct - if the credit score wasn't relied on in making the credit decision, you're not required to report it for HMDA purposes, even if the credit report was pulled.
TRANSACTIONS FOR WHICH NO CREDIT SCORE WAS RELIED ON.
If a financial institution makes a credit decision without relying on a credit score for the applicant or borrower, the financial institution complies with § 1003.4(a)(15) by reporting that the requirement is not applicable.
Comment 5 to 1003.4(a)(15): https://www.consumerfinance.gov/eregulations/1003-Subpart-Interp/2017-18284_20180101#1003-4-a-15-Interp-5
We have a property that we are financing the purchase of. The flood determination came back and the house is not in a flood zone, but the deck that is attached to the house is in the flood zone. Is the property subject to the flood insurance requirements even though only the deck is in the flood zone?
Yes – the property is subject to the flood insurance regulations. This is because even if one piece of the building that the bank is taking as security is in the flood zone, then the entire structure should be covered by flood insurance. Now, if the deck was detached from the house, then flood insurance would not be required. However, here, the deck is attached and in a flood zone. Thus, the entire house needs to be covered by the requisite amount of flood insurance.
12 CFR § 339.3(a):
“(a) In general. An FDIC-supervised institution shall not make, increase, extend, or renew any designated loan unless the building or mobile home and any personal property securing the loan is covered by flood insurance for the term of the loan.”
For TRID purposes, when we receive a Preliminary Title CD from a Title Company and it has seller-paid fees on it, do we have to disclose the seller-paid fees to the borrower on our CD or can we leave these seller-paid fees off of the CD we give the borrower?
Even though you are able to give separate CDs to the borrower and seller, seller-paid loan costs are required, per the guidance, to be disclosed on the CD that you give the borrower.
CFPB, TILA/RESPA Small Entity Compliance Guide, p. 80:
“Seller-paid Loan Costs and Other Costs are required to be disclosed on the consumer’s Closing Disclosure, regardless of whether a separate Closing Disclosure is provided to the seller. Seller-paid real estate commissions are one example of seller-paid costs that may not be omitted from and must be included on the consumer’s Closing Disclosure. (§ 1026.38(g)(4); Comment 38(g)(4)-4).”
We have a new teller machine that we are about to make available for use. It is a virtual teller machine (VTM) where customers will be able to access a teller via video chat. The debit card would only be used for identification purposes, if at all. Sometimes, they can just verify their identity through the video chat, though. Do the Reg. E error procedure rules apply?
Not necessarily – no. For the rules to apply, there would need to be an electronic fund transfer (EFT). In order for there to be an EFT, in the situation of a VTM, there would need to be an electronic terminal, telephone, computer, or magnetic tape. Although, this is not a totally settled point in the law, it is our interpretation that a VTM would not fall under the definition of “electronic terminal” nor “computer” for purposes of Reg. E. Further, the official commentary to Reg. E expressly excludes teller operated machines where an access device is used for ID purposes only as an “EFT.” So, there would be no EFT in this situation of a VTM. Thus, because the error resolution procedures of Reg. E (§ 1005.11) apply to EFTs, the rules encapsulated in § 1005.11 do not apply.
12 CFR § 1005.11(a)(1):
“(a) Definition of error.
(1) TYPES OF TRANSFERS OR INQUIRIES COVERED.
(i) An unauthorized electronic fund transfer;
(ii) An incorrect electronic fund transfer to or from the consumer's account;
(iii) The omission of an electronic fund transfer from a periodic statement;
(iv) A computational or bookkeeping error made by the financial institution relating to an electronic fund transfer;
(v) The consumer's receipt of an incorrect amount of money from an electronic terminal;
(vi) An electronic fund transfer not identified in accordance with § 1005.9 or § 1005.10(a); or
(vii) The consumer's request for documentation required by § 1005.9 or § 1005.10(a) or for additional information or clarification concerning an electronic fund transfer, including a request the consumer makes to determine whether an error exists under paragraphs (a)(1)(i) through (vi) of this section.”
12 CFR § 1005.3(b)(1):
The term “electronic fund transfer” means any transfer of funds that is initiated through an electronic terminal, telephone, computer, or magnetic tape for the purpose of ordering, instructing, or authorizing a financial institution to debit or credit a consumer's account. The term includes, but is not limited to: …”
12 CFR § 1005.2(h)-3:
“A terminal or other computer equipment operated by an employee of a financial institution is not an electronic terminal for purposes of the regulation. However, transfers initiated at such terminals by means of a consumer's access device (using the consumer's PIN, for example) are EFTs and are subject to other requirements of the regulation. If an access device is used only for identification purposes or for determining the account balance, the transfers are not EFTs for purposes of the regulation.”
Is a volunteer fire department fully exempt from obtaining beneficial ownership or would it require just the Control prong?
It depends on whether the fire department is a government entity or a non-profit. Governmental units are entities set up by federal, state, or local law.
If the fire department is a government entity, then it would be exempt under 31 CFR 1010.230(e)(2).
"(2) Legal entity customer does not include:
(i) A financial institution regulated by a Federal functional regulator or a bank regulated by a State bank regulator;
(ii) A person described in §1020.315(b)(2) through (5) of this chapter;"
And 1020.315(b)(2) states:
"b) Exempt person. For purposes of this section, an exempt person is:
(1) A bank, to the extent of such bank's domestic operations;
(2) A department or agency of the United States, of any State, or of any political subdivision of any State;
(3) Any entity established under the laws of the United States, of any State, or of any political subdivision of any State, or under an interstate compact between two or more States, that exercises governmental authority on behalf of the United States or any such State or political subdivision;"
If instead, the fire department is a non-profit, then it would be subject to only the control prong under 31 CFR 1010.230(e)(3).
"(3) The following legal entity customers are subject only to the control prong of the beneficial ownership requirement:
(i) A pooled investment vehicle that is operated or advised by a financial institution not excluded under paragraph (e)(2) of this section; and
(ii) Any legal entity that is established as a nonprofit corporation or similar entity and has filed its organizational documents with the appropriate State authority as necessary."
Is a loan for a “flipper” property subject to HMDA? This would be a short-term loan to purchase an existing property, renovate it, and then completely pay off the loan with the proceeds of the sale.
Although the loan may be short-term, if it is for the purpose of renovating an existing home (as opposed to constructing a new home), and if it is not intended to be replaced with later financing, then it would be reportable for HMDA purposes.
Do we collect the Government Monitoring Information for a temporary construction loan where the loan purpose was to purchase a lot and construct home?
As long as both the lot purchase money and the construction money will be permanently financed with a later loan, the entire loan is considered “temporary financing,” and therefore Government Monitoring Information should not be collected.
Is the bank required to provide an appraisal notice when it takes real estate as an abundance of caution?
If a loan is secured by a dwelling, the appraisal notice is required. If the dwelling is an abundance of caution, an appraisal itself, however, would not be required. Abundance of caution specifically exempts the lender from hanging to get an appraisal, as long as it is a true abundance of caution. The bank should not invoke this exemption if its credit analysis reveals that the transaction would not be adequately secured by sources of repayment other than the real estate, even if the contributory value of the real estate collateral is low relative to the entire collateral pool and other repayment sources.
See Appendix A in the Interagency Appraisal and Evaluation Guidelines here: https://www.fdic.gov/regulations/laws/rules/5000-4800.html
I have a question in regards to the matricula consular identification. This is a form of ID given by the Mexican government. Is this form of ID acceptable for CIP purposes in opening a new account?
The CIP rule neither endorses nor prohibits bank acceptance of information from Matricula IDs. Instead, a bank must decide for itself, based upon appropriate risk factors, whether the information presented by a customer is reliable. The CIP rules simply permit use of "any other government-issued document evidencing nationality or residence and bearing a photograph or similar safeguard." https://www.ffiec.gov/bsa_aml_infobase/pages_manual/olm_011.htm
However, some banks refuse to accept this form of ID, because they believe it's too hard to verify the legitimacy of these cards. If your bank decides to accept this form of ID, you may still want a secondary source of ID if you have reason to doubt the authenticity of the card.