The following questions and answers (Q&A) are drawn from questions asked by bankers calling the Community Bankers for Compliance Program (CBC) Compliance Hot Line. Please note that Young & Associates, Inc. is not engaged in the practice of law. The answers given here apply to individual situations that may differ from one institution to another. The advice of legal counsel should be sought on specific situations. PMI. Q: Our mortgage area is considering adding this paying for private mortgage insurance (PMI) upfront as an option for our borrowers. I am not familiar with this subject and want to make sure we are following the proper procedures. When a borrower pays for PMI upfront in a single payment, do they still need to receive annual notices or notice when the termination of the MI is met? Does the PMI company still issue a refund if the loan is paid off early or when LTV is less than 80%? A: All the PMI notice requirements still apply. In addition, by law, the PMI company cannot keep unearned premiums so they would have to refund if the customer paid off early, just like with monthly-payment PMI. TILA. Q: We closed a rescindable loan on December 21, 2022, so rescission ended at midnight on Saturday, December 24. However, with the weekend and holiday, the customer did not actually have their funds until Tuesday, December 27 (with the holiday observance on Monday). I just wanted to make sure that since rescission uses the precise definition of a “business day”, it does not matter that our office was closed on December 24, and that we can still count that as one of the three business days of the rescission period. A: For this loan, the bank is permitted to disburse after midnight on December 24 – as long as it is reasonably certain that no person entitled to rescind has canceled. In practical terms, the bank likely would not disburse until Tuesday, December 27 if the bank was closed Saturday and Monday, December 26 for the observed Christmas Day 2022. For rescission “business day” purposes, Monday, December 26 would still count as a “business day” (if there is a rescission period that extends over that day) since Christmas is one of the federal holidays that is defined by its specific date – December 25 – not by when the Federal Reserve and government observe Christmas. TISA. Q: Our bank would like to offer a limited-time certificate of deposit special. When it comes to advertising on the bank’s website would it be acceptable to include the “triggered terms” in a link or do they need to be on the same screen with the annual percentage yield (APY)? For example, the “triggered terms” could be accessible by clicking on a link labeled “Disclosure.” A: Linking to the additional required terms is allowed, but the link must take the consumer directly to the additional information (not some chain of multiple links to get there). Also, just labeling the link as “Disclosures” might not be clear enough to at least some average consumers. It might be better to have something like, “For additional information, click here” – with the link embedded in the last word. TILA. Q: The percentage of downpayment applies only to “credit sale transactions” – one in which the creditor is the seller – correct? For example, that would include loans the bank extends to finance the sale of repossessed property (home, car, etc.)? If the bank is not advertising financing this type of transaction but a simple transaction for the purchase of a home from some third party, we are permitted to say 80% LTV or 20% downpayment in our advertising with no additional triggered terms, correct? A: Correct. In Regulation Z, “downpayment” is defined so that it applies only to “credit sale transactions.” Therefore, mention – explicitly or implicitly – of a downpayment is not a “triggering term” for general loan advertising, QUESTIONS FROM COMMUNITY BANKERS FOR COMPLIANCE PROGRAM (CBC) MEMBERS BY BILL SHOWALTER, CRCM, SENIOR CONSULTANT, YOUNG & ASSOCIATES, INC. Associate Member 18 In Touch
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