Heather lineUtah credit union association

October 26, 2013

Regulatory Compliance Update

2014 Will Be . . . .

A Wild Ride

AGENDA

Changes in 20132014 Mortgage RulesUpcoming ChangesBSA UpdateFair Lending Update

2013 Changes

Minor disclosure changes

IRS reporting for NRAsATM fee noticesNew BSA formsMandatory escrow

accounts for HPMLsRemittance transfer

disclosuresCredit card access rule

Disclosure Changes

Effective January 1, 2013List the CFPB as the contact regulator on

certain disclosures, including: Adverse action notices Risk based pricing notices Credit card applications Open-end account opening disclosures

IRS Reporting for NRAs

Effective January 1, 2013Requires the reporting of deposit interest to

the IRS for nonresident aliensRules:

Financial institutions (including credit unions) must file IRS Form 1042-S for interest (of $10 or more) paid to a nonresident alien.

The rule specifically covers nonresident aliens who are residents of a country with which the U.S. has an information-sharing agreement

New BSA Forms

Effective April 1, 2013Electronic filing of BSA forms required in

June 2012Revised forms for CTRs and SARs required

on effective date

ATM Fee Disclosures

Effective March 26, 2013

Big win for credit unions and banks

Eliminates external fee notices on ATMs

Screen notices still required

Reduces frivolous lawsuits

Mandatory Escrow Accounts

Effective June 1, 2013Applies to Higher-Priced Mortgage LoansRequires mandatory escrow accounts for the

first five years

Remittance Transfer Disclosures

Effective October 28, 2013Applies to foreign remittance transfersRequires a remittance transfer provider to provide

a consumer sender: A written disclosure provided prior to the initiating a

transaction that includes the actual exchange rate, fees and taxes, and the amount of currency to be received by the recipient

A written receipt that includes the prepayment disclosure, information about error resolution, provider and regulator contact information, and the availability of the funds upon receipt

Small providers are exempt

Credit Card Access Rule

Effective November 4, 2013

Eases “independent ability to repay” underwriting rules from the credit card act for consumers over 21

Household income can be used to qualify for a credit card

2014 Mortgage Rules

Ability to Repay/Qualified Mortgage

Loan ServicingHOEPALoan Originator

CompensationECOA ValuationsHPML Appraisals

Ability to Repay/Qualified Mortgage

ATR/QM The Basics

Creditors must make a reasonable, good-faith determination that a consumer has a reasonable ability to repay a mortgage loan.

Presumption of compliance if creditor originates a QM.

Ability to Repay Factors

Current or reasonably expected income or assets that the consumer will rely on to repay the loan

Current employment statusMonthly mortgage paymentMonthly payment on any simultaneous loans secured

by the same property Monthly payments for property taxes and insurance

that you require the consumer to buy, and certain other costs related to the property such as homeowners association fees or ground rent

Debts, alimony, and child support obligations Monthly debt-to-income ratio Credit history

Qualified Mortgage Features

Loan feature limitations

Loan term limitsPoints and fee limitsDebt to income limits

ATR/QM Considerations

Exceptions for small creditors and small creditors in rural and underserved areas.

Management must decide how many non-QMs the credit union will originate.

All mortgage loans must be underwritten using information that is verified by third party sources.

Mortgage Servicing Rules

All ServicersAll Servicers Large Servicers OnlyLarge Servicers Only

Error resolution and information requests

Forced placed hazard insurance

ARM disclosuresPrompt creditingPayoff statements

Policies and procedures

Early interventionContinuity of

contactLoss mitigation

proceduresPeriodic statements

Servicing Rules

HOEPA

HOEPA Rule Summary

Applies to High Cost Mortgage LoansWhen you originate a high-cost mortgage, the

creditor must: Give additional disclosures Avoid certain loan terms Ensure the consumer receives additional protections,

including homeownership counseling.The updated rule:

Lowered the points and fees trigger Expanded coverage Added protections including homeownership

counseling

Loan Originator Compensation

Loan Officer Compensation Summary

Prohibits a loan originator’s compensation from being based on the terms of a transaction.

Permits contributions to and benefits under designated tax-advantaged plans and certain bonuses and other compensation under non-deferred profits-based compensation plans based on mortgage-related business profits.

Prohibits loan originators in a transaction from being compensated by both a consumer and another person, such as a creditor.

Other Rules Related to Loan Officer Compensation

Include NMLS ID on certain loan documentsMandatory arbitration clauses in mortgage

contracts are prohibitedProhibition on financing credit insurance

premiums (some monthly premiums are ok)

ECOA Valuations

ECOA Valuations

Within three days of application, notify the applicant of the right to receive a copy of appraisals/valuations

“Promptly” share copies of appraisals and other written valuations with the applicant.

Provide valuations upon completion or at least three days prior to closing (closed-end) or at account opening (open-end)

Applicant can waive right to received valuations prior to closing (still must must be delivered at closing)

Higher-Priced Mortgage Loan Appraisals

Higher-Priced Mortgage Loan Appraisals

Disclose to consumers within three business days after receiving the consumers’ applications that they are entitled to a free copy of any appraisal

Obtain a written appraisal performed by certified or licensed appraiser

Have the appraiser visit the interior of the property and provide a written report

Deliver copies of appraisals to applicants no later than three business days before consummation

Two appraisals required in “flipping” transactions

Upcoming Changes

New TIL/RESPA disclosures

Privacy NoticesMore Tinkering

BSA Update

No new changes in regulation

Most common SARs: Structuring/Money

Laundering Mortgage Loan Fraud Check fraud Unusual activity

New trends: Elder abuse Insider abuse

Fair Lending Update

Increased focus from the NCUA

Separate fair lending exams scheduled

Targeting credit unions that submit HMDA data

Fair lending training for all employees

Examination of HMDA data to understand fair lending trends