I need clarification on community development services for CRA credit. If an executive officer volunteers for a community service, can that be counted for credit under the service test?
That all depends. If they are acting on behalf of the bank and they are out there representing the bank, then you could use that as a service credit. However, if they are volunteering on their own behalf (i.e. not getting paid by the bank to be out there), then the bank would not receive credit. That is just a service the EO is doing out of the kindness of their heart.
Do we report pre-qualifications for HMDA in 2018?
No, pre-qualifications that are outside the definition of a preapproval are not reportable under HMDA 2018. It is important to note, though, that the bank's definition is not decisive as to classifying the inquiry as a pre-qualification or preapproval. Rather, the CFPB provides definitions that must be used in making the determination.
Generally, a prequalification is defined as "a request (other than a preapproval request) by a prospective loan applicant for a preliminary determination of whether the prospective loan applicant would likely qualify for credit under the Financial Institution’s standards, or for a determination of the amount of credit for which the prospective applicant would likely qualify. The 2015 HMDA Rule does not require a Financial Institution to report prequalification requests, even though these requests may constitute 'applications' under Regulation B."
A preapproval, though, is an application and reportable if it is for a home purchase loan, not secured by a multifamily dwelling, not for an open-end LOC or reverse mortgage, and reviewed under a bank preapproval program. A preapproval program in one in which a bank conducts a comprehensive analysis of the applicant's creditworthiness, resources, etc., and then issues a written commitment with certain limitations. Further, if the bank reviews applications in this manner, but only on an ad hoc basis, it is not considered to have a preapproval program, but must be generally consistent with procedures for these reviews. Finally, preapproval program reviews are only reportable if they resulted in a denial, an offer that was not accepted, or a closure due to application incompleteness. If the review results in a covered loan, then it is reported as a covered loan, not an application.
While at a recent compliance training, the instructor stated that a standard flood hazard determination (SFHD) is required when making, increasing, renewing, and extending a loan. That being said, I know SFHD are good for 7 years. Am I interpreting the regulation that even though the SFHD has a 7 year term if you are making, increasing, renewing, or extending a loan you should still run a new flood determination?
You may rely on a previous determination, for up to 7 years, using the SFHDF when you are increasing, extending, renewing, or purchasing a loan secured by a building or a mobile home. However, the "making" of a loan is not listed as a permissible event that permits you to rely on a previous determination. So if the bank is increasing, renewing, and extending credit, then it is possible that you may rely on a previous determination using the SFHDF as long as the original determination was made not more than seven years before the date of the transaction, the basis for the determination was set forth on the SFHDF, and there were no map revisions or updates affecting the security property since the original determination was made. However, you must obtain a new determination using a new SFHDF, when "making" a loan. See Question and Answer number 68 from the 2009 Interagency Questions and Answers Regarding Flood Insurance https://www.federalregister.gov/d/E9-17129/p-443.
Is HVCRE collateral driven or purpose drive? For example, if the bank does an equity out loan to purchase land, and the land being purchased will not be the bank’s collateral, would this loan still qualify as HVCRE, since the purpose of the loan is to purchase the land?
First, to qualify for an HVCRE, it would be purpose driven to determine whether or not ADC applied. HVCRE technically covers the "acquisition, development OR construction" (ADC) of commercial real estate, so it's possible that purchasing land might still fall under the HVCRE risk weighting. However, if the loan is solely for the purpose of developing agricultural land, then it would also be exempt, per the regulation.
The complete definition of HVCRE can be found here: https://www.fdic.gov/regulations/laws/rules/2000-4350.html.
However, the exemptions are what would bring collateral in to the equation. HVCRE exceptions include:
1. ADC (acquisition, development, or construction) loans for 1-4 family residential properties, including loans secured by land for developing or constructing 1-4 family residential properties, and loans to finance the acquisition of lots zoned for 1-4 family residential properties;
2. ADC loans for real property that qualifies as community development investments; and
3. ADC loans for land used for agricultural purposes.
CA does offer a High Volatility Commercial Real Estate (HVCRE) Summary of the most frequently asked questions in effect of having HVCRE in bank portfolios.
Is an environmental questionnaire required to be completed on residential real estate taken as collateral for commercial loan purposes?
There's not a federal regulatory requirement for residential properties- that relates to commercial property. Typically environmental questionnaires or surveys are only needed for commercial real estate. There may be a rare case in which the title company is requesting an environmental questionnaire to be completed, but I would consider that out of the ordinary.
Use of an environmental questionnaire isn't required under the federal consumer compliance regulations. That being said, you may want to consider obtaining such information to ensure that you're properly managing any environmental concerns from a safety and soundness standpoint. Since environmental liability is governed by state law you'll want to consult with local counsel should you decide to use such a questionnaire.
As stated in the FDIC's environmental Guidelines, "loans collaterized by 1- to 4-family residences normally have less exposure to environmental liability than loans to finance industrial properties."
A copy of the FDIC policy for Environmental Standards can be found on the FDIC's website, here:
CA also does offer our Environmental Risk Procedures here which may prove helpful: https://www.compliancealliance.com/find-a-tool/tool/environmental-risk-procedures
Does it violate Regulation B (ECOA) to predetermine that all fixed rate loans made to individuals over the age of 60 will be sold on a secondary market?
Yes. While Regulation B does not specifically mention selling loans on the secondary market, the official interpretation to the regulation defines its scope to include all dealings between applicants and creditors, including the administration of accounts.
Age is included in the list of prohibited bases, and selling a loan on the secondary market is an administrative matter.
Which loans will the new HMDA 2018 data point requirements apply?
The HMDA amendments for 2018 require reporting of most of the new and revised data points for loans closing in 2018, including those loans applied for in 2017. The exception, however, is for data on race, ethnicity, and sex. The CFPB clarified in guidance that banks will not need to provide the newly revised data points for these three categories for applications from 2017 that close in 2018 - compliance with the regulations on data points from 2017 will still suffice. However, any applications applied for on or after January 1, 2018, will require use of the amended guidelines on gathering this data.
Is the Bank required to give an adverse action notice if it takes adverse action against a consumer seeking to open a deposit account solely based on past history with the Bank? The bank did not run the consumer through Chex systems nor did it pull any other type of consumer report.
No. The ECOA only applies to credit applications. FCRA covers any person who takes adverse action against a consumer, but the decision to take adverse action is based on information contained in a credit report. Since, the bank did not take adverse action against the consumer based on information contained in a credit report, it is not required to send an adverse action notice.
If we are not a HMDA reporting bank, do we still need to collect Government Monitoring Information (GMI) on mortgage loans?
Yes, but only for a home purchase or refinance of a home purchase loan secured by a dwelling, that is or will be used by the borrow as a principal dwelling.
Under Regulation E a bank is required to research a customer’s dispute of an electronic transfer if, among other things, it was received within 60 days after a periodic statement that contained the error was sent. What obligation does the bank have if a dispute is received after those 60 days?
There is not a requirement to comply with the investigation portion or any other portion of 1005.11 after 60 days from the periodic statement since the Regulation state’s that the bank must comply if it’s no later than 60 days.
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