Compliance Update – July 2020

The Consumer Financial Protection Bureau issued a proposed rule to implement relief from mandatory escrow requirements for higher-priced mortgage loans.

Under the proposal, institutions with $10 billion or less in assets that originate 1,000 or fewer mortgage loans secured by a first lien on a principal dwelling will not be required to establish escrow accounts for loans originated and retained in portfolio.

The proposal to amend Regulation Z begins the last CFPB rulemaking required by the S. 2155 regulatory relief law.

The Financial Crimes Enforcement Network issued guidance on BSA/AML regulatory requirements for hemp-related business customers. This guidance explains how financial institutions can conduct due diligence for hemp-related businesses.

It also identifies the type of information and documentation financial institutions can collect from hemp-related businesses to comply with BSA regulatory requirements.

1. The CFPB issued an interim final rule of June 23, 2020 regarding loss mitigation options for homeowners recovering from pandemic related financial hardships.

The new rule will make it easier for consumer to transition out of financial hardship caused by the COVID-19 pandemic and easier for mortgage services to assist those consumers.

Reference: Billing Code: 4810-AM-P, 12 CFR Part 1024 [Docket No. CFPB-2020-0022]

2. The Bureau issued a statement on temporary and targeted supervisory and enforcement flexibility during the COVID-19 pandemic for credit card issuers regarding electronic provision of certain Regulation Z disclosures required to be in writing.

Reference: CFPB Supervisory & Enforcement Statement issued on June 3, 2020

Question:

An advertisement for home loans has brought the bank criticism, the criticism states that the bank violated FHA and Reg B with the advertisement because it uses only one race depicting home loan applicants. Is this an issue?

Answer:

Yes. When advertising, consideration should always be given to whether or not everyone is represented – per Reg B’s equal credit prohibited bases. By showing only one race, the bank runs the risk of discouraging potential minority applicants. Any advertisement for housing related products must keep Fair lending in mind.

When determining the elements of the advertisement, be sure to review Reg B, FHA, and Regulation Z requirements. Also ensure that equal housing/lending symbol is included, as applicable.

Reference: Regulation Z 12 CFR 1026.16 (open end); 12 CFR 1026.24 (closed end).

Question:

A Bank recently started taking applications via Skype. Does the Bank need to collect monitoring information or is the type of application similar to a telephone application?

Answer:

Regulation B’s official staff interpretation states that for an application received through electronic media where the creditor can see the applicant, the creditor must note the monitoring information on the basis of visual observation or surname, if the applicant chooses not to provide the information.

The bank should ensure that it has procedures and training in place to address receiving applications via Skype or similar electronic means that align with the requirements of Regulation B.

Reference: Regulation B official staff interpretation 12 CFR 1002.13(b)(4)