Hot Topics, Exam Findings and Best Practices
Sherry Antonellis
Field Supervisor
New England South Territory

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Servicemembers Civil Relief Act (“SCRA”)
Protecting Tenants at Foreclosure Act
Aftermath of Mortgage Rules
Overdraft Protection
EFT Error Disputes
Flood Insurance Reform
Social Media
CHFA and HMDA Reporting
Most Common Violations
Some Common CMS Issues

FDIC Regulatory Update
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Protections for servicemembers on active duty (and their spouses) in relation to interest and fees charged on certain types of credit
Certain protections in the foreclosure process as well
Applies to credit cards, student loans, mortgages and consumer loans acquired prior to service date

FDIC Regulatory Update
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Effective the date that the servicemember begins active duty status.
Must be made retroactive to that date if request is made within 180 days of active duty beginning.
Cannot require specific documents; must accept any official document that includes date of active duty.
Lenders and servicers cannot in any way discourage servicemembers from requesting to asserting their SCRA protections.

FDIC Regulatory Update
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Expectation from DOD and DOJ that lenders and servicers be proactive in the use of the DOD web site to determine if active duty status has ended or been extended. https://www.dmdc.osd.mil/appj/scra/welcome.xh
tml
Contacting servicemembers on active duty via letter at last known address alone is not considered adequate.

FDIC Regulatory Update
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Have detailed, written procedures and training that provide employees with specific guidance and expectations.
Track all SCRA requests. Detail outcome and maintain documentation for each request received whether granted or not. Create an audit trail.
Include use of DOD web site in all aspects of
process. This will help to ensure that expectation of proactivity is being met.
Provide for regular audits for SCRA compliance and compliance with your own procedures across all loan types and departments.

FDIC Regulatory Update
Hot Topics
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Originally passed in May 2009.
Was to expire in December 2012; extended to
December 31, 2014.
Applies to any residential property in foreclosure.
Bank assumes responsibility for ensuring the rights of any tenants occupying the property.
Tenants must receive written notice of eviction at least
90 days prior to effective eviction date.
Tenants must be allowed to maintain residence until the end of any lease unless the property is sold to someone who will occupy as primary residence
(assuming no breach of lease by tenant).

FDIC Regulatory Update
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If no lease, tenants must still receive 90-day notice.
Currently no pending legislation to extend.
No prohibition to pay tenants to vacate (“Cash for
Keys”).
Connecticut General Statutes section 47a-20f applicable.
Tenants must receive the greater of:
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Double the total of security deposit plus unpaid interest;
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Two months’ rent; or
$2,000.

FDIC Regulatory Update
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Have detailed, written procedures and training that provide employees with specific guidance and expectations If no lease, tenants must still receive 90day notice.
Ensure that Compliance Officer is notified of any foreclosure involving tenants.
Maintain applicable disclosures on hand to avoid confusion.
Ensure consideration of State laws and
regulations in the process.

FDIC Regulatory Update
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Amendments to Regulation Z enacted to preclude making of unaffordable mortgage loans to consumers.
“Ability to Pay” requirements have made it more difficult to originate low- or no-documentation loans.
We are starting to see community banks making these loans again.
Banks are relying on Verifications of Income from employers as the sole form of income verification or are making Stated Income loans.
These loans are then being maintained in the banks’ own portfolios.

FDIC Regulatory Update
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The requirements of applicable guidance on nontraditional mortgage products (FIL-2006-031) still need to be followed in these cases.
Appropriate risk mitigation practices must still be followed (e.g., reasonability of income related to profession).
These products can also expose the bank to additional
Fair Lending risks such as steering.

FDIC Regulatory Update
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Ensure that formal written procedures include details regarding risk mitigation practices outlined in
FIL-2006-031.
Provide for appropriate monitoring and audit of these procedures and the loans themselves to ensure that procedures are followed and “red flags” were recognized and addressed.
Include these products in any Fair Lending reviews and provide training on applicable risks to employees.

FDIC Regulatory Update
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We continue to see issues in this area whether in formal or ad hoc programs.
Disclosures do not match actual practices of the bank.
Use of disclosures provided with programs purchased from third-party vendors that do not accurately portray the bank’s program.
New fees are instituted without proper disclosure ahead of time or at account opening.
“Continuous overdraft fees” are assessed daily and these customers are not included in monitoring for abuse or excessive negative balances.

FDIC Regulatory Update
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These issues can be violations of Truth-in-Savings
(Regulation DD) or Section 5 of the Federal Trade
Commission Act (UDAP).
In some cases, restitution can be required based on the type of violation or the level of consumer harm.

FDIC Regulatory Update
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Ensure that disclosures accurately reflect the
parameters of your ODP program.
If changes are made to your ODP program from a systems standpoint, ensure that they are
accurately reflected in the applicable disclosures.
If fees are added to the ODP program, ensure that
appropriate notice is given to depositors as required by applicable law and regulation.
Ensure that high balance/abuse reviews include those primarily caused by the assessment of daily fees and that bank policy is followed in these cases.

FDIC Regulatory Update
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We continue to see issues with banks regarding the processing of EFT error disputes.
Customers are being required to complete additional steps in order to have their error claims investigated.
These include:
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Requiring police reports, notarized statements, or other formal documents before acceptance of the dispute;
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Requiring the completion of bank-developed forms before an investigation will be commenced;
Charging a fee for investigating a dispute.
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These are violations of Regulation E but in some cases may also be violations of Section 5 (UDAP) and may require customer restitution.

FDIC Regulatory Update
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Have detailed, written procedures and training that provide employees with specific guidance and expectations.
Track all error disputes regardless of how they are received (e.g., in-person, telephonically, via e-mail).
Detail outcome and maintain documentation for each dispute received whether granted or not. Create an audit trail.
Provide for regular audits and monitoring for EFT compliance and compliance with your own procedures. across all loan types and departments.

FDIC Regulatory Update
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Homeowner Flood Insurance Affordability Act of 2014
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Limits annual flood insurance premium rate increases, imposes an annual surcharge, and refunds excess premiums paid under Biggert-Waters.
Restores “grandfathered” status to certain properties.
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Permits assumption of an NFIP policy upon sale of a home.
Introduces optional high-deductible policies.
Requires escrow of FI premiums on a “tripwire” approach.
Excludes detached structures on residential property from FI requirements.

FDIC Regulatory Update
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Ensure that affected employees are trained on the new requirements as well as the actual
procedures used by the bank.
Provide for regular monitoring of all loans requiring flood insurance. Track all policies on a monthly basis.
Develop detailed, written procedures that reflect the new requirements.
Provide for regular audits of loan files.

FDIC Regulatory Update
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Final FFIEC Guidance issued December 11, 2013
Provides a guide highlighting the applicability of existing requirements and supervisory expectations.
No new regulatory requirements were created.
Social media defined as:
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A form of interactive online communication in which users can generate and share content through text, images, audio or video;
Excludes e-mails and texts not sent through social media platforms;
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Includes Facebook, Twitter, Yelp, LinkedIn.

FDIC Regulatory Update
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Existing laws and regulations apply to activities conducted through social media as they would when conducted through other channels.
Address disclosures, marketing, privacy:
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Truth in Lending;
Truth in Savings;
Fair Lending;
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Section 5 of Federal Trade Commission Act and Sections 1031 an 1036 of Dodd-Frank (UDAAP);
Electronic Funds Transfer;
GLB Privacy;
Advertisement of Membership; and
CRA.

FDIC Regulatory Update
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Management of third parties through due diligence, monitoring, and contract.
Regular monitoring of bank-owned or -sponsored
sites, pages, blogs, e-mails, texts, etc. for compliance with applicable laws, regulation and guidance.
Training of employees to ensure that any bankrelated social media for which they are responsible is compliant.

FDIC Regulatory Update
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Are loans made through the CHFA reportable on a bank’s HMDA LAR?
Some banks have been cited for not reporting, others for doing so.
No clear guidelines to follow. \
CRA credit?

FDIC Regulatory Update
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Contractually, who is making the loan decision? If the bank makes the credit decision, it must report the loan.
Consult legal counsel with regard to existing contracts and ask their assistance in drafting new ones.
Review different loan products/programs
separately as requirements may be different for reporting.
Please feel free to contact FDIC with any questions and for assistance.

FDIC Regulatory Update
Hot Topics
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RESPA
TILA
Flood Insurance
TISA
ECOA
HMDA
FCRA
EFT

FDIC Regulatory Update
Hot Topics
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Training not reflecting actual bank procedures.
Procedures too general.
Lack of independence in monitoring.
Scope, breadth, and frequency of audit.
Lack of authority for Compliance Officer.
Lack of planning for employee absence/turnover.
Lack of follow-up ion audit/exam findings.
Lack of compliance involvement in new/revised products or services.
Lack of third-party oversight.
Lack of appropriate realistic risk assessment.

FDIC Regulatory Update
Hot Topics

FDIC Regulatory Update
Hot Topics