Pub. 9 2021 Issue 2

15 The Community Banker structuring or regarding elder financial abuse or some other general description. Providing a copy of the actual SAR to board members is not required and is probably not a good idea, given the strict confidentiality requirements surrounding SARs – doing so opens up security issues, etc. Truth in Lending. Q: We had a customer who rescinded his mortgage loan. Will the loan now be considered as withdrawn, and no fees can be collected from him? A: Regarding whether the loan will be considered “withdrawn” (presumably for HMDA reporting purposes) – No. An action code of “withdrawn” requires that the applicant expressly withdraw the application before the lender makes a credit decision. In the case of a rescinded loan, the lender has already approved and closed the loan. The Official Staff Commentary on Regulation C provides that the action taken for such a transaction should be recorded as “approved not accepted.” Recharging fees – No, no fees may be charged to the customer for a loan they have rescinded. In fact, the lender must refund to the borrower all loan-related fees it has collected (even for third-party charges), as provided in the Official Staff Commentary on Regulation Z. Remember also, the lender must promptly release its security interest – and it must absorb the costs of both the original filing and the release of that mortgage/deed of trust. One thing to note: Regulation B requires the lender to provide the borrower with a copy of any appraisal related to a home loan. Regulation B also allows the lender to pass the cost of that appraisal on to the borrower and is silent on the issue of a rescinded loan. However, Regulation Z clearly states that the borrower cannot be required to pay any amount – which appears to override the Regulation B provision. So, be sure the borrower gets their copy of the appraisal (free to them). RESPA. Q: If our annual escrow analysis shows a shortage greater than one month’s escrow payment, our notice states, “The shortage will be collected over a period of 12 months. If you prefer, you can pay the shortage before DD/MM/YYYY.” There is also an escrow shortage payment notice attached that the customer can send in with the shortage payment. Would this be a violation of Regulation X? A: You need to remove the statement advising the borrower that, if they choose, they may pay the entire shortage amount by some set date. The bank may accept such lump-sum payments from borrowers but is prohibited from stating anything to “provide the option” to the borrower; it must be their idea. The latest update of the Escrow Accounts: Deficiencies, Shortages, and Surpluses section of the CFPB’s Mortgage Servicing FAQs includes a question and answer exactly on point with this question. ECOA. Q: We have a loan applicant who qualifies for the requested loan but is involved in a romance scheme. They want money for their “fiancée.” Can the bank deny the loan and provide a reason that the bank believes the loan proceeds are being used for a fraudulent romance scheme? A: There is nothing in consumer regulations that requires lenders to extend just any old credit. If they have reason to believe that there is some fraud involved, they are free to deny the application and may cite the reason as something like “suspect transaction involved” (or words to a similar effect). But the bank will want to be reasonably sure of this conclusion. Bill Showalter, Senior Consultant, Young & Associates, Inc. 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. Closing SBA loans keeps doors open. Call 800.340.7304 to start www.holtandmon.com Your customers have never needed capital more than they do right now. Plus you need to offset narrowing margins by increasing noninterest fee income. SBA/USDA lending is the perfect answer. And ICBA recommends just one provider to make the process hassle-free: Holtmeyer & Monson. Give customers exactly what they need, at no net cost to your bank. Small businesses count on your expertise. You can count on ours.