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.
On a business loan where we have personal guarantees, do we have to check MLA on the guarantees, since they are acting as individuals?
No, because a business loan is not a covered transaction under the MLA.
The MLA applies to "consumer credit" offered to covered borrowers, as those terms are defined in the MLA.
Regarding the applicability of the MLA to guarantors, the Act is not clear as to whether it does apply or does not apply to guarantors. Conservatively, the bank would treat guarantors as if they fall under the scope of the MLA because they are to some extent "obligated on the consumer credit transaction..."
12 CFR § 232.3(g)(1) ("Covered borrower means a consumer who, at the time the consumer becomes obligated on a consumer credit transaction or establishes an account for consumer credit, is a covered member (as defined in paragraph (g)(2) of this section) or a dependent (as defined in paragraph (g)(3) of this section) of a covered member."
12 CFR § 232.3(f)(1) ("Consumer credit means credit offered or extended to a covered borrower primarily for personal, family, or household purposes, and that is: ...")
Does the bank have to comply with the appraisal independence requirements even if an appraisal is not required?
While not an explicit requirement if the appraisal itself is not required, we advise that the bank should ensure independence in the appraisal ordering process even if the appraisal was not required by the appraisal regulations. Note that the bank should also follow the same independence requirements for evaluations as well. The independence requirements can be found in the Interagency Appraisal and Evaluation Guidelines here: https://www.fdic.gov/regulations/laws/rules/5000-4800.html
We request a tri-merge credit report for each applicant. Our credit decision is relies on the single lowest middle score applicant(s). Can you give guidance on how credit scores would be reported for two or more applicants? Do we report the one score relied on for all applicants, or report the score relied for one applicant and then the other as not applicable?
The bank would report the credit score that it relied upon in making the decision. From what you described, it sounds like it would be the lowest middle score in this instance. The score would be reported for the applicant or co-applicant and not applicable for the one whose credit score was not used (since it wasn't relied upon in making the credit decision).
To illustrate, assume a transaction involves one applicant and one co-applicant and that the financial institution obtains or creates two credit scores for the applicant and two credit scores for the co-applicant. Assume further that the financial institution relies on a single credit score that is the lowest, highest, most recent, or average of all of the credit scores obtained or created to make the credit decision for the transaction. The financial institution complies with § 1003.4(a)(15) by reporting that credit score and information about the scoring model used for the applicant and reporting that the requirement is not applicable for the first co-applicant or, at the financial institution's discretion, by reporting the data for the first co-applicant and reporting that the requirement is not applicable for the applicant.
Comment 3, 1003.4(a)(15), https://www.consumerfinance.gov/policy-compliance/rulemaking/regulations/1003/Interp-4/#4-a-15-Interp-3
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