16 The Community Banker mibonline.org COMPLIANCE Q&A By Bill Showalter, Senior Consultant, Young & Associates, Inc. WINTER 2022 Young & Associates provides banks and thrifts with support for their compliance programs, independent reviews, and in-bank training, as well as a full menu of management consulting, loan review, IT consulting, and policy systems. BSA. Q: For resident and nonresident alien accounts, are we required to have a current, unexpired passport or alien identification card on file when opening a new account for such an existing customer? A: This comes down to the bank’s customer identification policy (CIP) and how the bank handles expired identification. The BSA regulation carves out existing customers, provided that the bank has a reasonable belief that it knows the true identity of the person. The interagency BSA/AML Examination Manual provides more information on this issue, particularly in a section on risks associated with nonresident aliens and foreign individuals. ECOA. Q: Regulation B states that for unsecured credit, a creditor may not inquire about an applicant’s marital status unless they reside in a community property state. However, most consumer loan applications have a section that asks for marital status with boxes for Married/Separated/Unmarried. What is a bank to do with this data when an applicant fills in the appropriate box to their circumstance in an online application or via mail when they are applying for unsecured credit? A: The bank should have procedures in place to address scenarios where applicants improperly provide marital status on applications they complete and submit to the bank. Regulation B has this provision because the first two “prohibited bases” in the original ECOA and Regulation B were sex and marital status – because of discrimination against women. This prohibition is in there because marital status is irrelevant for individual, unsecured credit. For any other type of credit, the marital status might be relevant for some aspect of creditworthiness and/or access to collateral. The Official Staff Commentary states that it is permissible for the applicant to provide prohibited information so long as the lender does not use it when prohibited. One way to make it clear in a case such as this is to notate that the information was “completed by applicant” (or similar). TILA. Q: We sometimes make loans with private mortgage insurance (PMI). This should be reflected on the Loan Estimate (LE) and Closing Disclosure (CD), right? A: Yes. In the “Projected Payments” section on the first page, there is a line item for “Mortgage Insurance.” However, it will not be included with taxes and property insurance in the “Estimated Taxes, Insurance & Assessment” section on page one. On the second page of both the LE and CD, PMI will appear section F, “Prepaids,” in the “Mortgage Insurance Premium” space for any PMI to be paid before the first scheduled payment. Also, on the second page, PMI will be shown in section G, “Initial Escrow Payment at Closing,” in the “Mortgage Insurance” space for any PMI that the consumer will be expected to place into a reserve or escrow account at consummation to be applied to recurring periodic charges. (Be sure that these amounts do not double-count any PMI premiums.) FCRA. Q: I am currently performing an FCRA Audit, and our Commercial Department states we have verbiage on our personal financial statement (PFS) form about pulling credit. However, I notice that some of the PFS’s we acquire from other banks do not have this verbiage. I am trying to find guidance on whether we indeed need that for consumer loans made in the Commercial
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