Pub. 16 2021-22 Issue 1

NEBRASKA BANKERS ASSOCIATION 19 (CRA) examinations within the timeframes established by the FDIC policies. The most common violations during the 2020 examinations involved: the Truth in Lending Act (TILA), Truth in Savings Act (TISA), Flood Disaster Protection Act (FDPA), Electronic Funds Transfer Act (EFTA), and the Real Estate Settlement Procedures Act (RESPA). The FDIC uses a risk-focused methodology in conducting its compliance examinations, and the most frequently cited violations typically involve regulations that represent the greatest potential harm to consumers. The FDIC initiated eight formal enforcement actions and 16 informal enforcement actions to address consumer compliance examination findings. The total voluntary payments to consumers totaled approximately $7.4 million to more than 67,000 consumers. RESPA Section 8(a) prohibits giving or accepting a thing of value for the referral of settlement service business involving a federally related mortgage loan. The FDIC continued to find RESPA Section 8(a) violations involving illegal kickbacks disguised as above-market payments for lead generation, marketing services, and office space or desk rentals. Paying for leads is acceptable, but paying for a referral is prohibited. To distinguish between the two, examiners look to whether the person providing the lead/referral was merely giving information about a potential borrower to a settlement service provider or if was a person was “affirmatively influencing” a consumer to select a certain provider. “Affirmative influence” means recommending, directing or steering a consumer to a certain provider. Often, true leads are lists of customer contacts that are not conditioned on the number of closed transactions resulting from the leads or any other considerations, including the endorsement of a settlement service. To mitigate the risks associated with RESPA violations, banks could provide training to executives, senior management, and staff responsible for, and involved in, mortgage lending operations. Banks can also perform due diligence when considering new third-party relationships for whom the bank, or any individuals employed at or under contract to the bank, that generate leads or identify prospective mortgage borrowers. Lastly, the bank could develop a monitoring process for identifying, assessing, documenting, and reporting executive and senior management risks. The TILA RESPA Integrated Disclosure Rule (TRID) rule also led to many violations. The Loan Estimate helps consumers understand the key features, estimated costs, and risks of the mortgage loan for which they are applying. The Closing Disclosure helps consumers understand all of the actual costs of the transaction and provide them with the opportunity to review costs and resolve any problems before closing. Under the TRID rule, the Loan Estimate is based on the “best information reasonably available” at the time the disclosures are provided to the consumer, and the bank must exercise due diligence in obtaining this information. The Closing Disclosure is based on an accurate disclosure standard. The FDIC found multiple instances involving Veteran Administration Loans where banks failed to comply with the “best information reasonably available” and due diligence standards under TRID by issuing Loan Estimates based on unavailable interest rates and loan terms. Additionally, examiners found potentially deceptive practices when banks represented certain terms for loans that were not generally available. Mitigating risks for TRID violations also includes providing training to executives, senior management, and Compliance Alliance — continued on page 20