Priority – Chapter 22

Report
36th Annual Texas Tech University Banking School
Legal Issues for Bankers
Ann Graham, J.D., M.B.A.
Professor of Law, Texas Tech University School of Law
Banking Law Blog: http://lawprofessors.typepad.com/banking/
Texas Tech University School of Law
Financial Systems in Crisis
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Bailouts
Broad Safety Net
Regulating the Unregulated
Executive Compensation
Lending Issues
Consumer Protection
Large/Small - State/National
Regulatory Reform
Bank Failures – Too Big to Fail
Consumer Protection
and
Bank Compliance
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Consumer Financial Protection Agency?
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Safety & Soundness depends on Consumer Protection
Policies & Procedures – Update All Affected
New Legislation:
Truth in Lending Act (TILA) – Reg Z
Housing and Economic Recovery Act (HERA)
Secure and Fair Enforcement for Mortgage Licensing
Act of 2008 (SAFE Act)
 Mortgage Disclosure Improvement Act (MDIA)
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Consumer Protection
– More New Laws & Regs
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Emergency Economic Stabilization Act of 2008 (EESA)
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Amended MDIA
Preventing Mortgage Foreclosures & Enhancing
Mortgage Credit Act – “Helping Families Save Their
Homes Act of 2009”
Credit Card Accountability Responsibility & Disclosure
Act of 2009 (Credit CARD Act)
Regulations:
RESPA - HUD’s Reg X
 HMDA – FRB Reg C
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* FACTA Reg V
For Lenders – Reg Z Changes
1.
Reg Z Changes finalized July 2008 (orig. eff. 10/1/09)
2.
MDIA & More Reg Z Changes (eff. 7/30/09)
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New “Higher Priced Mortgage Loans” (HPMLs)
New Average Prime Offer Rate “APOR” (FFIEC site)
Lenders must assess, verify & document ability to repay
for Higher Priced Mortgage Loans & HOEPA loans
New way to calculate Debt-to-Income (eff. 10/09)
Prepayment penalty restrictions
New Early TIL requirements:
http://www.fdic.gov/news/news/financial/2009/fil09026.html
More Reg Z
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Prepayment penalty restrictions on HPMLs
Limits on collecting fees until early disclosures
New early disclosure requirements
Redisclosure if APR becomes inaccurate
No coercion or undue influence of appraisers
Restricted S-T balloons on principal dwelling loans
Required to escrow tax & ins for 1st mtg. HPMLs
No pyramiding late fees on principal dwelling loan
New advertising requirements
New Reg Z Waiting Periods
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Application: giving info in anticipation of credit decision
Early TIL Disclosures within 3 days
Wait 7 business days from early disclosures for
earliest possible closing
If disclosures mailed, presume 3 days for receipt
Immediate redisclosure if APR inaccurate
New tolerances
Wait 3 bus. days from receipt of revised disclosure
WAIVER: Must be bona fide personal emergency,
customer request, no forms
RESPA – HUD’s Reg X
(final 11/08, some changes eff. 1/16/09, some 1/1/10)
 Servicing Disclosure Statement – New Form
3 business days after Loan Application
 New Definition of Application
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New Good Faith Estimate Form
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Can’t charge appraisal fee as condition for GFE
GFE MUST be good for 10 business days unless
changed circumstance
New tolerance limits, cure with refund at settlement or
within 30 days
New HUD1/1A Forms & Instructions – 1/1/10
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HMDA – Reg C & HMDA LAR
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Changes eff. 10/1/09
For Higher Priced Mortgage Loans,
Report spread between APR and Survey-Based
estimate of prime mortgage loans
 If spread >1.5% for lst lien loan or >3.5% for 2nd
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Credit CARD Act & Reg Z
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Effective Aug. 20, 2009
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For ALL open-end consumer credit accounts,
including Credit Cards & HELOCs
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Mail/deliver Statements 21 days before payment due
For Credit Cards
45 days notice of increased APR or other sig. changes
 Include right to cancel the account
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All interest rate increases after 1/1/09 must be
reviewed beginning Aug. 2010 for reduction
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More changes 2/22/2010 http://www.fdic.gov/news/news/financial/2009/fil09044.html
SAFE Act
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Secure and Fair Enforcement for Mortgage
Licensing Act of 2008
Requires Mortgage Loan Originators (MLOs) to
register with Nationwide Mortgage Licensing
System and Registry (NMLSR)
Fingerprints & background
Also for Agency Regulated institutions & subs
Proposed Rule:
http://www.fdic.gov/news/news/financial/2009/fil09028.html
Appraisal Issues
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Reg Z: Cannot Directly OR Indirectly Influence Appraiser
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Need Policies & Procedures –
Use Appraisal Mgt. Company?
Borrower cannot pay for appraisal
Home Valuation Code of Conduct – HVCC
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Industry Standard
 Selling into Secondary Market
 Who can talk to the appraiser
 Annual Audit
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Allowance for
Loan & Lease Losses
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Guidance: Aug. 3, 2009
ALLL for Residential Mortgages secured by
junior liens
Analyze each quarter
Examiners will be looking at loss mitigation
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http://www.fdic.gov/news/news/financial/2009/fil09043.html
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Loan Modification Guidance for Servicers:
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http://www.fdic.gov/news/news/financial/2009/fil09045.html
Service Members
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Mortgage Protection for Servicemembers
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Amends Servicemembers Civil Relief Act
Effective July 30, 2008
6% interest rate cap for pre-service debt during
military service and if mortgage up to 1 year
after military service
Stay of court proceedings for 9 months after
service – temporary until 12/31/2010
Fair Credit Reporting Act – FCRA (1970)
Fair & Accurate Credit Transactions Act FACTA
(2003)
 Affiliate Marketing Restrictions
 Accuracy & Integrity Guidelines
 Direct Dispute Resolution
 ANPR: http://edocket.access.gpo.gov/2009/pdf/E9-15322.pdf
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Comment period ends 8/31/09
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ID Theft RED FLAG FAQs:
http://www.fdic.gov/news/news/financial/2009/fil09030.html
More Examiner Focus
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Flood Insurance – New Q&A – 7/21/09
http://www.fdic.gov/news/news/press/2009/pr09127.html
Effective 9/21/09
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Bank Secrecy Act (BSA)/Anti-Money Laundering (AML)
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FDIC Nationwide Seminars on Deposit Insurance:
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FinCEN
CTRs and SARs
http://www.fdic.gov/news/news/financial/2009/fil09046.html#body
Sweep Account Disclosures (eff. 7/1/09) FAQ:
http://www.fdic.gov/news/news/financial/2009/fil09039.html
CRA Changes
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Higher Education Opportunity Act
Requires considering low-cost education loans
to low-income borrowers
Meeting community credit needs
Agencies’ proposed regs:
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http://www.fdic.gov/news/news/financial/2009/fil09035.html
Capital
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“Making Homes Affordable” Program
Mortgage Loan Modifications
May Assign 50% risk weight, if not 90 days or
more past due or on non-accrual
Interim Final Rule:
http://www.fdic.gov/news/news/financial/2009/fil09036.html
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Balancing Act
Federal Preemption
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Watters v. Wachovia (2007)
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OCC has exclusive “visitorial power” over nat’l banks
AND their operating subsidiaries
Cuomo v. Clearing House (2009)
States can enforce consumer protection statutes
against national banks
 By Lawsuit, not by “visitorial powers”
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Administration’s Regulatory Reform Legislation
Texas News
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Texas Banking Commissioner Charles Cooper
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Regulatory Guidance 3009: Loan Participation Risks
What happens if the Lead Bank fails & offsets deposit?
Monitor Risk!
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FAQs: http://www.banking.state.tx.us/exec/faq.htm
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HOME EQUITY – Texas Constitution Art. 16, Sec. 50
Legal Info for Bankers
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Agency Websites:
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Trade Associations:
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www.fdic.gov Financial Institution Letters (FILs)
www.federalreserve.gov
www.occ.treas.gov
* www.ots.treas.gov
www.treas.gov
* www.ffiec.gov
www.banking.state.tx.us
ABA: www.aba.com * TBA: www.texasbankers.com
ICBA: www.icba.com * IBAT: www.ibat.org
CSBS: www.csbs.org
Texas Statutes:
www.capitol.state.tx.us
Legal Info for Bankers
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FTC
ID Theft:
http://www.ftc.gov/bcp/edu/microsites/idtheft/
 Credit Reports: http://www.ftc.gov/freereports
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FinCEN: BSA Issues: http://www.fincen.gov/

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