Regulatory Compliance Update April 2018

Regulatory Compliance Update

By: Hickman Beckner, Senior Vice President

I have reviewed the Compliance News for March 2018.  Congress is back in session.  The Congressional push to change the structure and funding of the CFPB continues.

IRS – Information Return Penalties – The IRS has revised the penalties they adopted last month.  There are no system changes required.

Corrected return filed within 30 days:

Per Return: $50

Maximum Total penalty: $545,500

Corrected return filed after 30 days:

Per Return: $100

Maximum Total penalty: $1,637,500

Small Business Maximum: $545,500

Corrected Return filed after August 1st

Per Return: $270

Maximum Total penalty: $3,275,000

Small Business Maximum: $1,091,500

CFPB – Statements to Borrowers in Bankruptcy.  The CFPB has issued the final changes to Regulation Z that defines the timing for statements for borrowers in bankruptcy. There are no system changes required.

The new rule provides for a “Single Statement Exemption”.  A servicer will be exempt from the transition requirement for the next billing cycle after a trigger event.

The new rule replaces the “14 day rule” and clarifies the timing of statements for borrowers in bankruptcy.

Significant Dates:

April 16, 2018 – Registration deadline for registered information systems for payday lenders, vehicle title lenders and other high cost consumer loans.

April 19, 2018 – Effective date for CFPB final changes in mortgage servicing requirements dealing with Successor In Interest and periodic statements for borrowers in bankruptcy.   This will impact both Retail and Commercial.

April 19, 2018 – Effective date for CFPB rules for Successors in Interest safe harbor for Fair Debit Collection Practices Act for actions taken to comply with the CFPB Mortgage Servicing Rules.

April 19, 2018 – Effective date for CFPB final amendments to Reg Z dealing with the timing for transition to modified statements for borrowers in bankruptcy.

May 11, 2018 – Effective date for FinCEN’s Customer Due Diligence Requirements.

Emerging Legislation:

Community Institutions Mortgage Relief Act – Creates a safe harbor from requirements to provide escrow services for creditors with less than $10 billion in assets and keeps the loan on its books for at least three years.  The Act would also exempt mortgage servicers with 20,000 or fewer mortgage loans.

Financial Institution Customer Protection Act – Would prohibit the recurrence of “Operation Chokepoint” which targeted banks serving payday lenders. The Act would also prohibit a bank from terminating a customer’s account based solely on reputational risk.  The Act also amends FIRREA to apply civil penalties to specified violations against unaffiliated third persons and modifies the provisions related to administrative subpoenas.

Home Mortgage Disclosure Adjustment Act – Would exempt banks from record keeping requirements is the bank originated fewer than 1,000 loans in each of the past two years.

Taking Account of Institutional Risk Act – Would require regulatory agencies to take risk profiles into account when taking regulatory actions.

Portfolio Lending Mortgage Access – Would exempt banks from the ability to pay requirements if the bank consistently held the loan in its own portfolio and the prepayment penalties of the loan complied with regulatory guidelines.  The bank would also not be subject to a lawsuit for a violation if the bank informed the borrower the loan would be held in the bank’s portfolio.

Preserving Access To Manufactured Housing Act – Would exempt retailers of manufactured housing from being considered a mortgage originator subject to the requirements under the Truth In Lending Act or the Secure and Fair Mortgage Licensing Act.  The Act would also increase the APR and transaction values at which mortgages for manufactured housing would be considered “high-cost mortgages”.

Economic Growth, Regulatory Relief and Consumer Protection Act – Would exempt banks with less than $10 billion in assets from the ability to pay rule for mortgages so long as the mortgage is held in the bank’s portfolio and complies with prepayment penalty rules.  Would exempt appraisal requirements for properties in rural areas for loans less than $400,000.  The exemption would not apply to high cost loans.  The Act would also increase the loan volume threshold to 500 loans and lines of credit in each of the two previous calendar years for exemption from HMDA data recording and reporting requirements.  The Act would also extend the period for a credit freeze due to a fraud alert to one year and to require credit bureaus allow one free freeze alert every year.  Credit bureaus would also be required to provide free freeze alerts requested on behalf of a minor.  (This requirement is due to an increase in fraud using a minor’s social security number.)

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