By Bill Showalter, Senior Consultant, Young & Associates, Inc. Fall 2022 RESPA. Q: We have a consumer real estate loan that we escrow for the property taxes and insurance. We did their annual escrow account analysis in August 2022. Now, we are paying their taxes and see their tax bill has increased by $1,300 from the last bill. We did not have this new tax information until the bill came. Is it allowable or advisable to do a new escrow account analysis so the system will refigure the escrow payment using the higher tax bill? A: Yes, it is allowed but not required. If the bank decides to do another analysis, it will have to issue a short-year escrow account statement to cover any time since the last escrow account statement (after the August analysis). This will also reset the escrow computation year, so annual escrow account analyses will occur in October instead of August. An alternative course of action is inaction, meaning do nothing at this time, allow a deficiency to occur, and make any necessary adjustments for the next annual escrow account analysis next August. Either course of action is permitted. The choice of response is up to the bank. Flood Insurance. Q: We are acquiring a bank, and in some instances, we cannot find proof of continuous flood coverage in their flood files. For example, the bank would sometimes discard the previous year’s flood declarations page without saving an electronic copy after receiving the current year’s copy. To be clear, we do not believe the bank actually had coverage gaps. Our concern is that during an exam, would our FDIC examiner potentially cite us for the lack of evidence? Would it be more important to ensure flood coverage records are complete post-acquisition? We have considered reaching out to the various insurance agents to try to get past coverage records, but we are unsure if we can dedicate the resources unless it is absolutely necessary. A: The bank must ensure flood insurance records are complete, especially going forward. We cannot speak to what examiners might or might not cite. You should contact your exam team to see if they believe you need to reach out to the various insurance agents for prior records. EFTA. Q: We have an existing deposit customer who has had an account with us for over a year. Now, the customer is requesting to have overdraft protection added to their account. If the customer comes in and signs a form to have the overdraft protection added to their account, do we also need to give them a new Regulation E disclosure? A: A full Reg E initial disclosure is not required unless there have been any changes that have not already been disclosed to the customer. However, the bank needs to comply with the opt-in requirements noted in the regulation: Provide a separate written notice that describes the bank’s overdraft service, give the customer a reasonable time or opportunity to opt-in to the overdraft service for ATM and one-time debit card transactions, obtain the customer’s affirmative consent (opt-in) to the bank’s payment of ATM and one-time debit card transactions, and provide the customer with written confirmation of their opt-in (including a statement of their right to revoke that consent). Insider Credit. Q: If a new member of the bank’s board of directors has an existing deposit relationship and/or existing loans with the bank, is there anything we need to look at? As they are not an executive officer, they would not be subject to the $100,000 limit on “other purpose” loans, correct? A: Existing loans not made in contemplation of the person becoming an “insider” need not conform to the requirements of Regulation O until such extensions of credit are renewed, revised, or extended. At that time, the extensions of credit would be treated as a new extension of credit and, therefore, subject to all requirements of Regulation O. However, such transition loans must be counted toward the individual and aggregate lending limits of Regulation O as soon as the borrower becomes an insider. This same treatment would apply to extensions of credit to a director or principal shareholder who later becomes an executive officer. Such extensions of credit need not conform to the provisions of Regulation O that apply only to executive officers until such extensions of credit are renewed, revised, or extended. However, the amount of any such extensions of credit count toward the quantitative limits for loans to executive officers as soon as the director or principal shareholder becomes an executive officer. Keep in mind that many lines of credit by a bank to an insider must be approved by the bank’s board of directors every 14 months. Each such approval constitutes a new “extension of credit.” Accordingly, transition lines of credit COMPLIANCE Q&A 10 The Community Banker mibonline.org
RkJQdWJsaXNoZXIy ODQxMjUw