Bankers Alliance Compliance Corner
Editor's Note: The following was submitted by Bankers Alliance. LBA, through its subsidiary Louisiana Bankers Service Corporation, has partnered with Bankers Alliance to give banks access to three compliance-related programs. Click here for more information.
Q. When we make a new loan that is to be secured by a property that already secures another loan, can we rely on an existing flood cert that is less than 7 years old, or do we need a new certification? Is the certification loan specific? This is not a renewal or an extension of an existing loan.
A. The flood certification is property-specific, not specific to a loan. You could reuse the flood determination as long as it is less than 7 years, the flood determination was recorded on the standard flood hazard determination form, there have been no map revisions or updates since the date of the determination, and you are the same lender that requested the prior determination. 42 USC 4104b: Standard hazard determination forms (house.gov)
Q. We have a loan secured by a dwelling where the borrower used the funds to purchase a house and he is making improvements on it. The payments are interest only for 12 months. After the 12 months, he is getting a permanent takeout loan to replace it. Would this be a HMDA reportable loan or does the fact that it is short-term financing take precedence over the purchase and home improvements?
A. If the loans are separate and the first is intended to be replaced by separate financing later, the first loan would be considered temporary financing and is exempt from HMDA reporting for that reason. If the facts were the same but the house were going to be resold to pay off the 12-month loan, then it would not be exempt, but that does not appear to be the case in this situation. “…1. Temporary financing. Section 1003.3(c)(3) provides that closed-end mortgage loans or open-end lines of credit obtained for temporary financing are excluded transactions. A loan or line of credit is considered temporary financing and excluded under § 1003.3(c)(3) if the loan or line of credit is designed to be replaced by separate permanent financing extended by any financial institution to the same borrower at a later time. … v. Lender A originates a loan with a nine-month term to enable an investor to purchase a home, renovate it, and re-sell it before the term expires. Under § 1003.3(c)(3), the loan is not designed to be replaced by separate permanent financing extended to the same borrower, and therefore the temporary financing exclusion does not apply. Such a transaction is not temporary financing under § 1003.3(c)(3) merely because its term is short. …” Comment 3(c)(3)-1.
Compliance Alliance offers a comprehensive suite of compliance management solutions. To learn how to put them to work for your bank, call (888) 353-3933 or email email@example.com and ask for our Membership Team.
Did you know that it’s important for banks to research and document the clearing red flags on credit reports?
- Banks should obtain and retain verified documentation showing the clearing of the red flag.
- Red flags can be an indicator of potential identity theft or fraud.
- The use of a red flag clearing checklist may be helpful.
Did you know that special rules apply when marketing credit cards to college students?
- Card issuers are prohibited from offering students a tangible item to induce them to apply for a credit card on or near a college campus, or at a college-sponsored event.
- A tangible item can include t-shirts, gifts cards, magazine subscriptions, etc.
- Card issuers must report annually to the CFPB any agreements with colleges, foundations, or alumni organizations.
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