I have a quick question related to Regulation D and reserve requirements. If we offer commercial escrow services to hold funds for two or more parties, are these funds held in escrow generally subject to Reg. D?
Yes, escrow funds are specifically included in the definition of "deposits" for purposes of Regulation D: §204.2 Definitions.
For purposes of this part, the following definitions apply unless otherwise specified:
(a)(1) Deposit means:
(ii) Money received or held by a depository institution, or the credit given for money or its equivalent received or held by the depository institution in the usual course of business for a special or specific purpose, regardless of the legal relationships established thereby, including escrow funds, funds held as security for securities loaned by the depository institution, funds deposited as advance payment on subscriptions to United States government securities, and funds held to meet its acceptances;
12 CFR § 204.2(a)(1)(ii) https://www.ecfr.gov/cgi-bin/text-idx?SID=8ddd88a51a067ba79f787e95219009c7&mc=true&node=se12.2.204_12&rgn=div8
For examination purposes, should we be logging all changes to our website or just the ones related to compliance?
Since the bank's website is generally considered an advertisement and sometimes contains disclosures required by federal regulations, the bank would want to be sure to retain records of the webpages for any applicable retention periods. How long the pages should be kept would generally depend on the regulation that the content of the page falls under. For example, if the page contained an advertisement for deposit accounts, then the bank would want to retain a copy of that webpage for 2 years under Regulation DD.
The bank may also find our Record Retention Schedule helpful here:
We have two commercial lines of credit that originated in 2016 but were increased by $200,000 each in 2019. We did not have new disclosures signed, and we simply executed a loan modification for the loan amount increase to both files. Should these increases be reported on the small business LAR for this year or is this just for originations?
Yes, the bank should report in this case because increases are treated as new originations for CRA purposes, as set out in the Guide here:
A3. Institutions must collect and report data on lines of credit in the same way that they provide data on loan originations. Lines of credit are considered originated at the time the line is approved or increased; and an increase is considered a new origination. Generally, the full amount of the credit line is the amount that is considered originated.
Page 12 at https://www.ffiec.gov/cra/pdf/2013_CRA_Guide.pdf
I have spent the afternoon looking for a simple “definition” of what a distressed and underserved community is. I have found bits and pieces, and I have found the updated lists for 2018, but we are undergoing some policy updates, and would like to align our definition with what the FRB and FFIEC define them as, but I am at a loss to find something. Can you help, or point me in the right direction?
Distressed or underserved communities are designated by the FRB, FDIC, and OCC, based on rates of poverty, unemployment, population loss, population size, density, and dispersion. The bank would need to use the lists for determining if a loan is being made in a distressed or underserved community.
The distressed lists: https://www.ffiec.gov/cra/distressed.htm
And the CRA:
(iii) Distressed or underserved nonmetropolitan middle-income geographies designated by the Board of Governors of the Federal Reserve System, FDIC, and Office of the Comptroller of the Currency, based on--
(A) Rates of poverty, unemployment, and population loss; or
(B) Population size, density, and dispersion. Activities revitalize and stabilize geographies designated based on population size, density, and dispersion if they help to meet essential community needs, including needs of low- and moderate-income individuals.
By what day do we have to file the continuing activity SAR? Is it Day 90 or Day 120?
The guidance provides that "Financial institutions with SAR requirements may file SARs for continuing activity after a 90 day review with the filing deadline being 120 days after the date of the previously related SAR filing. Financial institutions may also file SARs on continuing activity earlier than the 120 day deadline if the institution believes the activity warrants earlier review by law enforcement." https://www.fincen.gov/sites/default/files/shared/sar_tti_21.pdf (p. 53).
So the review period itself is 90 days, but the filing deadline is 120 days from the last one filed, to include the additional 30 days allowed for filing. It does also say that the bank has the option of filing earlier than the 120 days if it believes that law enforcement should review earlier.
Financial institutions with SAR requirements may file SARs for continuing activity after a 90-day review with the filing deadline being 120 days after the date of the previously related SAR filing. So, for filings where a subject has been identified, the timeline is as follows:
Identification of suspicious activity and subject: Day 0.
Deadline for initial SAR filing: Day 30.
End of 90 day review: Day 120.
Deadline for continuing activity SAR with subject information: Day 150 (120 days from the date of the initial filing on Day 30).
If the activity continues, this time frame will result in three SARs filed over a 12-month period.
We have a potential borrower who has several buildings we will be taking as collateral. The corner of one building is in a flood zone. We have requested flood insurance covering the entire building. Our borrower stated that his previous lender allowed them to obtain flood insurance on the one unit of the building that has the corner in the flood zone. We disagree with this. Should we receive flood insurance on the entire building?
That is correct. Under the “one brick rule,” if the bank is taking the entire building as collateral and if even one corner or brick of the building is in the flood zone, the entire building must be covered. There’s not an exception for only securing the percentage of the building that is in the flood zone, unfortunately.
This was discussed in our latest flood webinar:
(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. The amount of insurance must be at least equal to the lesser of the outstanding principal balance of the designated loan or the maximum limit of coverage available for the particular type of property under the Act. Flood insurance coverage under the Act is limited to the building or mobile home and any personal property that secures a loan and not the land itself.
With regard to the FDIC's Part 350 Annual Disclosure Statement rescission, would it only apply to one of our charters or would it apply to the holding company and everything under it as a whole? We are two chartered banks under one holding company.
The rescission applies to all FDIC supervised bank at the federal level, so in your case, it appears that it would apply to both banks independently, regardless of whether they're both under a holding company:
...This Financial Institution Letter applies to all FDIC-supervised institutions, including community institutions....
FDIC: FIL-14-2019: Removal of the FDIC'S Part 350 Annual Disclosure Statement Requirement
Removal of the FDIC's Part 350 Annual Disclosure Statement Requirement Printable Format: FIL-14-2019 - PDF (). Summary: On March 8, 2019, the FDIC Board approved a final rule rescinding and removing Part 350 of the FDIC's regulations, which is entitled Disclosure of Financial and Other Information by FDIC Insured State Nonmember Banks. The FDIC is taking this action to simplify its regulations ...
When is the deadline to provide a PMI notice of cancellation/termination?
Assuming this is subject to the Homeowners Protection Act, the bank has 30 days after the PMI relating to a residential mortgage transaction is canceled or terminated to send out a notice to the borrower, as set out here:
"Notification upon Cancellation or Termination of PMI Relating to Residential Mortgage Transactions General Requirements Not later than thirty days after PMI relating to a residential mortgage transaction is canceled or terminated, the servicer must notify the borrower in writing that
We escrow for taxes and insurance. This is not an HPML loan nor is flood insurance required in this situation. The taxes, with respect to this loan, are subject to a continual homestead credit that exceeds the tax charge. So, year after year, the amount via escrow that is owed is $0.00. The bank would like to collect a small amount as a cushion in case the taxes increase over the established credit. We don’t necessarily anticipate the taxes to increase, though. Can we do this?
12 CFR 1024.17(c)(ii): https://www.consumerfinance.gov/policy-compliance/rulemaking/regulations/1024/17/#c-1-ii - (1) A lender or servicer (hereafter servicer) shall not require a borrower to deposit into any escrow account, created in connection with a federally related mortgage loan, more than the following amounts:
(ii) Charges during the life of the escrow account. Throughout the life of an escrow account, the servicer may charge the borrower a monthly sum equal to one-twelfth (1/12) of the total annual escrow payments which the servicer reasonably anticipates paying from the account. In addition, the servicer may add an amount to maintain a cushion no greater than one-sixth (1/6) of the estimated total annual payments from the account.
We are selling one of our branches next month. The branch only has one HMDA loan to date. Do we need to report that loan on the HMDA LAR? The bank that is purchasing the branch is not a HMDA-reporting bank.
Assuming that purchasing this branch will not cause the acquiring back to become a HMDA-reporting bank, then yes, in this instance you'd report any HMDA reportable loans that originated prior to the sale in April. Any reporting after the sale by the acquiring bank is optional for the remainder of the year.
CFPB HMDA Guide, p. 121 https://files.consumerfinance.gov/f/documents/bcfp_hmda_small-entity-compliance-guide-final_2018-10.pdf
When an institution that is not subject to Regulation C acquires a Branch Office of an institution that is subject to Regulation C but that acquisition does not result in the acquiring institution becoming subject to Regulation C, data collection is required for transactions of the acquired Branch Office that take place prior to the acquisition. Data collection by the acquired Branch Office is optional for transactions taking place in the remainder of the calendar year of the acquisition.
Compliance Alliance offers a comprehensive suite of compliance management solutions.
To learn how to put them to work for your bank, call (888) 353-3933 or email firstname.lastname@example.org.