The Bureau of Consumer Financial Protection has released the Filing Instructions Guide, or FIG, for Home Mortgage Disclosure Act (HMDA) data collected in 2019 and reported in 2020. There are no significant changes to the submission process for data collected in 2019 and reported in 2020 and, therefore, no significant changes to the FIG. However, updates were made and financial institutions will need to be aware of the changes to the FIG for data collected in 2019.

A few of the changes include, but are not limited to, added and updated AUS values; updated instructions for reporting DTI to accept a negative number; reporting the credit score; reporting AUS results; numerous edit revisions including verifying institutions are eligible to take exemption for applicable data points; and, less consequential, an adjustment to the Bureau’s name (i.e. Consumer Financial Protection Bureau is now Bureau of Consumer Financial Protection or the Bureau).

To access the 2019 FIG, including a full list of changes, click here.

A full list of HMDA resources is available here.

On October 23, the Bureau of Consumer Financial Protection (the Bureau) released its Complaint Snapshot: 50 State Report. According to the Bureau, the report “…provides a high-level overview of trends in consumer complaints and supplements the Consumer Response Annual Report with more recent information on complaints about consumer financial products and services by state.”

From July 2011, when the Bureau began receiving complaints, through June 30, 2018, the Bureau had received approximately 1,578,700 complaints. The Complaint Snapshot: 50 State Report breaks down information at the national and state level. Information analyzed from January 2017 through June 2018 includes the number of complaints, average number of complaints per month, percentage change, and timely response for the US and each state, respectively. The report also analyzes product complaint trends for the top complaint-prone products, submitted from January 1, 2015 through June 30, 2018, for the US and each state, respectively, allowing financial institutions to recognize potential issues in their areas.

Based on complaints received from January 2017 through June 2018, the report notes the following:

• Collectively, US consumers submitted 494,540 complaints to the Bureau, with an average of 27,474 per month;
• The top five complaints for consumers nationwide (based on percentage changed) were money transfer/service and virtual currency, vehicle loans or leases, personal loans, payday loans, and title loans;
• The top five complaints for consumers nationwide (based on volume) were debt collection, credit or consumer reporting, mortgage, credit card, and checking or savings;
• Timely company response rates during this time were 98% nationwide;
• California consumers submitted more complaints that consumers in any other state with 63,096, while Florida, Texas, New York, and Georgia took the next four spots; and
• Wyoming had the fewest complaints with 386 submitted.

The Bureau’s Complaint Snapshot: 50 State Report is available here.

The current version of the Special Flood Hazard Determination Form (SFHDF), FEMA Form 086-0-32 published on June 1, 2016, is set to expire on October 31, 2018. The SFHDF is required for all federally backed loans and is used by lenders to determine the flood risk for their building loans. FEMA (Federal Emergency Management Agency) oversees the National Flood Insurance Program (NFIP) and is responsible for updates to the SFHDF.

As we near the expiration date of the form, FEMA has yet to indicate when an updated form will be released. However, those of us in the banking industry who have been around a few years know, FEMA’s lack of punctuality in renewing the form is not new. For example, the previous version of the SFHDF (published 4/2012) was set to expire on May 30, 2015; the new and current form was not published until June 1, 2016. And before that the SFHDF (published 12/2008) was set to expire on December 31, 2011, but a newly approved form was not published by FEMA until April 2012.

But perhaps we shouldn’t be too hard on FEMA – it is an agency that generously spends its resources in the trenches helping those in need after disasters. And historically, FEMA has recognized expiring forms and indicated lenders should continuing using the current form until a new form is published. With this in mind, lenders should continue using the current form until a new form is released by FEMA and be mindful that a new SFHDF will likely be released in the not too distant future.

We will monitor FEMA’s progress and be sure to let you know of any updates or information related to the form. The SFHDF is available on FEMA’s website.

It’s that time of year again…the National Multistate Licensing System and Registry’s (NMLS) 2019 renewal period begins November 1 and continues through December 31. All Mortgage Loan Originators (MLOs), as defined in Regulation G, 12 CFR 1007, who are registered with the Registry are required to complete the annual registration renewal.

One exception to the renewal requirement is for MLOs who completed their registration with the Registry less than 6 months prior to the end of the annual renewal period which is December 31, 2018. For example, if an MLO was registered on or before June 30, 2018, they must renew their registration during the 2019 renewal period; however, if the MLO was registered on or after July 1, 2018, renewal is not required during the 2019 renewal period.

Information regarding the NMLS registration renewal process is available here.

On Wednesday, October 17, the Consumer Financial Protection Bureau (CFPB, or the Bureau) released its second of two rulemaking agendas for 2018. The Fall 2018 installment of the semi-annual agenda includes items in the prerule, proposed rule, and final rule stages. In addition, the CFPB released a list of long term actions anticipated beyond the next 12 months.

Three items are listed in the pre-rule stage. Those include rulemakings to exempt certain creditors with assets of $10 billion or less from the Higher Priced Mortgage Loans escrow requirements with action expected in June 2019, action to develop standards for assessing consumers’ ability to repay “Property Assess Clean Energy” (PACE) financing expected in June 2019, and modification of public HMDA data for the purpose of protecting consumer privacy interests final with guidance expected in the next few months and further rulemaking in future years.

Six items are on the agenda in the proposed rule stage and three items are in the final rule stage. Among the six proposed rule items are anticipated debt proposals regarding collection practices and disclosures under the Fair Debt Collection Practices Act with a proposed rule expected by March 2019 and Payday, Vehicle Title, and Certain High-Cost Installment Loans with a proposed rule expected January 2019. The final rule items include a rule related to the disclosure of records and information, which was effective October 12, and a rule related to Fair Credit Reporting Act disclosures, which was effective on September 18 with an additional comment period through November 19, 2018. Lastly, a final rule related to technical specifications for submissions of prepaid account agreements is expected in February 2019, a couple of months prior to the Prepaid Account rule’s April 1, 2019 effective date.

Perhaps one of the most notable items is found in the long-term actions. The CFPB has reclassified the Regulation B business lending data collection and reporting for applications by women-owned, minority-owned, and small businesses from prerule status in the Spring 2018 Rulemaking Agenda to a long-term action item in the Fall 2018 Rulemaking Agenda. Along with Regulation B business lending data, another item added to the long-term agenda is further clarification on what constitutes abusive act and practices.

In its statement the CFPB recognizes that the significant tasks currently underway at the Bureau, such as implementation of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA) provisions and conducting an effectiveness assessment of significant rulemakings, among other initiatives, could affect future rulemaking. The Bureau expects by no later than the Spring 2019 Agenda to issue a more comprehensive statement of priorities to reflect its ongoing market monitoring and results of these current initiatives.

The 2018 Fall Rulemaking Agenda and 2018 Fall Long Term Agenda are available here:

2018 Fall Rulemaking Agenda

2018 Fall Long Term Agenda

Information on the 2018 Spring Rulemaking Agenda is available here.

On October 3, 2018, the Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA), the Office of the Comptroller of the Currency (OCC), and the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) (the Agencies), issued a statement giving certain financial institutions the ability to collaborate on Bank Secrecy Act (BSA)/Anti- Money Laundering (AML) requirements. The Agencies believe increased collaboration would be suitable for banks with a community focus, less complex operations, and lower-risk profiles for money laundering or terrorist financing, in order to increase the efficiency and efficacy of their BSA/AML efforts while reducing costs.

Types of collaboration among banks could include, but isn’t limited to, pooling human, technology and other resources to fulfill the requirement of a banks BSA/AML compliance program such as:

• Internal monitoring (reviewing, updating, and drafting BSA/AML policies and procedures; reviewing and developing risk-based customer identification and account monitoring processes; and tailoring monitoring systems and reports for the risks posed)
• Independent Testing
• Training

However, the Agencies’ statement does caution against collaboration on one element of the BSA/AML compliance program, the BSA Officer. The Agencies note it may not be appropriate to share a BSA Officer due to the confidential nature of suspicious activity reports, managing coordination and facilitation of each bank’s daily BSA/AML compliance functions, and potential challenges the BSA Officer may have communicating with each bank’s board of directors and senior management.

If a bank does consider collaborating with other banks there are key risks to consider and necessary controls that should be built into the arrangement to mitigate those risks. Such controls include, but aren’t limited to: considering legal restriction; instituting oversight mechanisms by board and senior management; contractual agreements; and confidentiality agreements. The Agencies state that banks should approach these arrangements with due diligence and consideration of risk and benefits. As always, it is important to remember that the ultimate obligation and risk lies with each financial institution.

Banks should consult their primary regulator before entering into an agreement to share BSA resources.

The Interagency statement is available here.

On September 28, 2018, the Federal Reserve Board, Federal Deposit Insurance Corporation, National Credit Union Administration, and Office of the Comptroller of the Currency (Federal Banking Agencies or FBAs), in conjunction with FinCEN, announced an order exempting premium finance loans, made by banks to commercial customers, from the Customer Identification Program (CIP) requirements implementing section 326 of the USA Patriot Act (31 U.S.C. § 5318(l)). This is in line with FinCEN’s earlier exemption of these same products from the Beneficial Ownership rules.

According to the CIP rules, banks must implement a customer identification program that enables the bank to form a reasonable belief of the true identity of its customers, including specific identifying information the bank will obtain prior to account opening. For lenders who participate in premium finance lending, complying with the CIP requirement for premium finance loans proves to be difficult.

Premium finance loans are short term extensions of credit that provide financing to businesses to facilitate their purchases of property and casualty insurance policies. Generally, insurance agents or brokers work to help arrange such financing of single premium insurance. Borrowers typically make a down payment toward the insurance premium directly to the agent or broker and the lender will then advance a loan to the borrower, with the proceeds being paid directly to the insurance company or broker, to cover the remainder of the premium.

According to the exemptive Order, banks noted these loans are “typically submitted, approved and funded within the same business day and are conducted through insurance agents or brokers with no interaction between the bank and the borrower.” As a result, it is difficult for banks to fully comply with the CIP information collection requirements.

Considering the information from banks and evaluating the premium finance loan products and processes, FinCEN has determined these types of loans present a low risk of money laundering and terrorist financing. Since funds are remitted directly to insurance companies or brokers rather than the borrower, customers have restricted use of funds which means the policies are not effective means for transferring illicit funds. The FBAs also found the exemption consistent with safe and sound banking practices as such loans are a form of secured lending; if a borrower defaults the insurance company is legally obligated to return any unearned premiums to the lender.

Although premium finance loans are exempt from the CIP requirements, banks must continue to comply with all other BSA requirements, as applicable, when engaging in premium finance lending.

The Order is available here.

On September 24, 2018, the Office of National Drug Control Policy designated ten new areas across Kentucky, New Jersey, North Carolina, Ohio, Pennsylvania, South Carolina, and West Virginia as High Intensity Drug Trafficking Areas (HIDTAs). The High Intensity Drug Trafficking Areas (HIDTAs) program, which was established with the enactment of the Anti-Drug Abuse Act of 1988, provides assistance to Federal, state, local, and tribal law enforcement agencies operating in areas determined to be critical drug-trafficking regions. The purpose of the program is to reduce drug trafficking and production in the United States.

The newly designated areas are:

• Allegheny, Beaver, and Washington Counties in Pennsylvania as part of the Ohio HIDTA
• Atlantic County in New Jersey as part of the Liberty Mid-Atlantic HIDTA
• Butler County in Ohio as part of the Ohio HIDTA
• Charleston County in South Carolina and the Eastern Band of Cherokee Indian Reservation in North Carolina as part of the Atlanta/Carolinas HIDTA
• Mineral County in West Virginia as part of the Washington/Baltimore HIDTA
• Montgomery and Powell Counties in Kentucky as part of the Appalachia HIDTA

Financial institutions must consider the risk of doing business in certain geographic areas that pose higher risks, such as HIDTAs, when determining their risk profile, developing internal controls, and assessing the adequacy of their overall Bank Secrecy Act/Anti-Money Laundering program. The announcement from the Office of National Drug Control Policy is available here.

On Friday, September 7, 2018, the Financial Crimes Enforcement Network (FinCEN) issued a ruling which grants certain exceptions for financial institutions from the Beneficial Ownership Rule. Specifically the ruling provides financial institutions relief from the obligations under the Beneficial Ownership Requirements of identifying Legal Entity Customers in the case of:
•A rollover of a certificate of deposit (CD)
•A renewal, modification, or extension of a loan (e.g., setting a later payoff date) that does not require underwriting review and approval;
•A renewal, modification, or extension of a commercial line of credit or credit card account (e.g., a later payoff date is set) that does not require underwriting review and approval; and
•A renew al of a safe deposit box rental.

FinCEN deems each of these account relationships to presents low risks for money laundering and terrorist financing because they make such activity impractical.

Prior to this action, on May 16, 2018, FinCEN issued a 90-day temporary exceptive relief, retroactive to May 11, 2018, which was then extended an additional 30 days on August 8, 2018. Similar to the September 7 ruling, the May 11 temporary rule provided exceptive relief from the Beneficial Ownership Rule for products and services that automatically rolled over or renewed (i.e., CD or loan accounts) and were established before the Beneficial Ownership Rule’s Applicability Date of May 11, 2018. This exceptive relief replaces and supersedes the May 16, 2018, temporary rule, as well as the August 8, 2018, 30-day extension.

FinCEN’s ruling is available here.

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On September 13, 2017 the Office and of the Comptroller of the Currency, Federal Reserve Board, and Federal Deposit Insurance Corporation (Agencies), proposed a rule to amend their respective Community Reinvestment Act (CRA) regulations. The amendments would conform their CRA regulations to changes recently made by the Consumer Financial Protection Bureau to Regulation C, which implements HMDA. The Agencies anticipate issuing the final rule to coincide with the January 1, 2018 effective date of the recent Regulation C changes

The rule proposes to amend the following:
• “Home Mortgage Loan” Definition: In 1995, the Agencies amended CRA regulations to add the definition of “home mortgage loan”, to describe a category of loans that examiners evaluate when assessing a financial institution’s performance under the retail lending test. In order to produce a less-burdensome CRA assessment process, the Agencies relied on the scope of loans reported under Regulation C to define “home mortgage loan.” To conform to the new revisions in Regulation C, the Agencies propose to revise the current definition of “home mortgage loan” in their CRA regulations to mean a closed-end mortgage loan or an open-end line of credit.
• “Consumer loan” Definition: Because the proposed change to the definition of “home mortgage loan” would refer to open-end lines of credit as well as closed-end mortgage loans, the Agencies propose to remove the term “home equity loan” from the list of consumer loan categories provided under the definition of “consumer loan”.
• Public File: Under the changes to Regulation C, effective January 1, 2018, financial institutions will no longer be required to provide the HMDA disclosure statement directly to the public and will only be required to provide a notice that clearly conveys to the public that they can obtain a copy of the financial institution’s disclosure statement on the Bureau’s website. The proposed rule would amend the CRA regulations to require HMDA reporting institutions to only maintain the notice required under Regulation C in their CRA public file, rather than a copy of the HMDA disclosure statement.

The proposed rule would also make technical amendments to remove unnecessary cross references as a result of the amended definitions and remove obsolete references to the Neighborhood Stabilization Program.

The proposed rule is available here.

Other recent HMDA/Regulation C blog articles are available here.

Other recent CRA blog articles are available here.