220 likes | 412 Views
36 th Annual Texas Tech University Banking School. Legal Issues for Bankers. Ann Graham, J.D., M.B.A. Professor of Law, Texas Tech University School of Law Banking Law Blog: http://lawprofessors.typepad.com/banking/. Texas Tech University School of Law. Financial Systems in Crisis.
E N D
36th Annual Texas Tech University Banking School Legal Issues for Bankers Ann Graham, J.D., M.B.A. Professor of Law, Texas Tech University School of Law Banking Law Blog: http://lawprofessors.typepad.com/banking/ Texas Tech University School of Law
Financial Systems in Crisis Bailouts Broad Safety Net Regulating the Unregulated Executive Compensation Lending Issues Consumer Protection Large/Small - State/National Regulatory Reform Bank Failures – Too Big to Fail
Consumer Protectionand Bank Compliance • Consumer Financial Protection Agency? • Safety & Soundness depends on Consumer Protection • Policies & Procedures – Update All Affected • New Legislation: • Truth in Lending Act (TILA) – Reg Z • Housing and Economic Recovery Act (HERA) • Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act) • Mortgage Disclosure Improvement Act (MDIA)
Consumer Protection – More New Laws & Regs • Emergency Economic Stabilization Act of 2008 (EESA) • Amended MDIA • Preventing Mortgage Foreclosures & Enhancing Mortgage Credit Act – “Helping Families Save Their Homes Act of 2009” • Credit Card Accountability Responsibility & Disclosure Act of 2009 (Credit CARD Act) • Regulations: • RESPA - HUD’s Reg X * FACTA Reg V • HMDA – FRB Reg C
For Lenders – Reg Z Changes • Reg Z Changesfinalized July 2008 (orig. eff. 10/1/09) • MDIA & More Reg Z Changes (eff. 7/30/09) • New “Higher Priced Mortgage Loans” (HPMLs) • New Average Prime Offer Rate “APOR” (FFIEC site) • Lenders must assess, verify & document ability to repay for Higher Priced Mortgage Loans & HOEPA loans • New way to calculate Debt-to-Income (eff. 10/09) • Prepayment penalty restrictions • New Early TIL requirements: http://www.fdic.gov/news/news/financial/2009/fil09026.html
More Reg Z Prepayment penalty restrictions on HPMLs Limits on collecting fees until early disclosures New early disclosure requirements Redisclosure if APR becomes inaccurate No coercion or undue influence of appraisers Restricted S-T balloons on principal dwelling loans Required to escrow tax & ins for 1st mtg. HPMLs No pyramiding late fees on principal dwelling loan New advertising requirements
New Reg Z Waiting Periods Application: giving info in anticipation of credit decision Early TIL Disclosures within 3 days Wait 7 business days from early disclosures for earliest possible closing If disclosures mailed, presume 3 days for receipt Immediate redisclosure if APR inaccurate New tolerances Wait 3 bus. days from receipt of revised disclosure WAIVER: Must be bona fide personal emergency, customer request, no forms
RESPA – HUD’s Reg X(final 11/08, some changes eff. 1/16/09, some 1/1/10) • Servicing Disclosure Statement – New Form • 3 business days after Loan Application • New Definition of Application • New Good Faith Estimate Form • Can’t charge appraisal fee as condition for GFE • GFE MUST be good for 10 business days unless changed circumstance • New tolerance limits, cure with refund at settlement or within 30 days • New HUD1/1A Forms & Instructions – 1/1/10
HMDA – Reg C & HMDA LAR • Changes eff. 10/1/09 • For Higher Priced Mortgage Loans, • Report spread between APR and Survey-Based estimate of prime mortgage loans • If spread >1.5% for lst lien loan or >3.5% for 2nd
Credit CARD Act & Reg Z • Effective Aug. 20, 2009 • For ALL open-end consumer credit accounts, including Credit Cards & HELOCs • Mail/deliver Statements 21 days before payment due • For Credit Cards • 45 days notice of increased APR or other sig. changes • Include right to cancel the account • All interest rate increases after 1/1/09 must be reviewed beginning Aug. 2010 for reduction • More changes 2/22/2010 - http://www.fdic.gov/news/news/financial/2009/fil09044.html
SAFE Act Secure and Fair Enforcement for Mortgage Licensing Act of 2008 Requires Mortgage Loan Originators (MLOs) to register with Nationwide Mortgage Licensing System and Registry (NMLSR) Fingerprints & background Also for Agency Regulated institutions & subs Proposed Rule: http://www.fdic.gov/news/news/financial/2009/fil09028.html
Appraisal Issues • Reg Z: Cannot Directly OR Indirectly Influence Appraiser • Need Policies & Procedures – • Use Appraisal Mgt. Company? • Borrower cannot pay for appraisal • Home Valuation Code of Conduct – HVCC • Industry Standard • Selling into Secondary Market • Who can talk to the appraiser • Annual Audit
Allowance for Loan & Lease Losses Guidance: Aug. 3, 2009 ALLL for Residential Mortgages secured by junior liens Analyze each quarter Examiners will be looking at loss mitigation http://www.fdic.gov/news/news/financial/2009/fil09043.html Loan Modification Guidance for Servicers: http://www.fdic.gov/news/news/financial/2009/fil09045.html
Service Members • Mortgage Protection for Servicemembers • Amends Servicemembers Civil Relief Act • Effective July 30, 2008 • 6% interest rate cap for pre-service debt during military service and if mortgage up to 1 year after military service • Stay of court proceedings for 9 months after service – temporary until 12/31/2010
Fair Credit Reporting Act – FCRA (1970)Fair & Accurate Credit Transactions Act FACTA (2003) Affiliate Marketing Restrictions Accuracy & Integrity Guidelines Direct Dispute Resolution ANPR: http://edocket.access.gpo.gov/2009/pdf/E9-15322.pdf Comment period ends 8/31/09 ID Theft RED FLAG FAQs: http://www.fdic.gov/news/news/financial/2009/fil09030.html
More Examiner Focus • Flood Insurance – New Q&A – 7/21/09 http://www.fdic.gov/news/news/press/2009/pr09127.html Effective 9/21/09 • Bank Secrecy Act (BSA)/Anti-Money Laundering (AML) • FinCEN • CTRs and SARs • FDIC Nationwide Seminars on Deposit Insurance: • http://www.fdic.gov/news/news/financial/2009/fil09046.html#body • Sweep Account Disclosures (eff. 7/1/09) FAQ:http://www.fdic.gov/news/news/financial/2009/fil09039.html
CRA Changes • Higher Education Opportunity Act • Requires considering low-cost education loans to low-income borrowers • Meeting community credit needs • Agencies’ proposed regs: • http://www.fdic.gov/news/news/financial/2009/fil09035.html
Capital “Making Homes Affordable” Program Mortgage Loan Modifications May Assign 50% risk weight, if not 90 days or more past due or on non-accrual Interim Final Rule: http://www.fdic.gov/news/news/financial/2009/fil09036.html Balancing Act
Federal Preemption • Watters v. Wachovia (2007) • OCC has exclusive “visitorial power” over nat’l banks AND their operating subsidiaries • Cuomo v. Clearing House (2009) • States can enforce consumer protection statutes against national banks • By Lawsuit, not by “visitorial powers” • Administration’s Regulatory Reform Legislation
Texas News Texas Banking Commissioner Charles Cooper Regulatory Guidance 3009: Loan Participation Risks What happens if the Lead Bank fails & offsets deposit? Monitor Risk! FAQs: http://www.banking.state.tx.us/exec/faq.htm HOME EQUITY – Texas Constitution Art. 16, Sec. 50
Legal Info for Bankers • Agency Websites: • www.fdic.gov Financial Institution Letters (FILs) • www.federalreserve.gov • www.occ.treas.gov * www.ots.treas.gov • www.treas.gov * www.ffiec.gov • www.banking.state.tx.us • Trade Associations: • ABA: www.aba.com * TBA: www.texasbankers.com • ICBA: www.icba.com * IBAT: www.ibat.org • CSBS: www.csbs.org • Texas Statutes: www.capitol.state.tx.us
Legal Info for Bankers • FTC • ID Theft: http://www.ftc.gov/bcp/edu/microsites/idtheft/ • Credit Reports: http://www.ftc.gov/freereports • FinCEN: BSA Issues: http://www.fincen.gov/