SUNNY SAN DIEGO IN THE REARVIEW

I have been told many times throughout my adult life that the West Coast has a relaxed and stress-free atmosphere; this week I was able to judge for myself and couldn’t agree more.  While it is difficult to believe attending the ABA Regulatory Compliance Conference could be relaxing, it truly was just that for me.  From the beautiful cool weather and serene ocean to the harbor views and delicious restaurants, San Diego rolled out the red carpet for us bankers!  The Manchester Grand Hyatt was a beautiful hotel and even the “seminar chicken” was rather tasty.  If I had one suggestion to make it would be more daily caffeine and sweets; I mean we are at a “compliance” conference and some of us were dealing with some serious jetlag!

Overall, I was impressed with the messages presented by ABA staff, industry gurus, and bankers from across the nation.  Rob Nichols, President/CEO of the ABA laid the groundwork in an early general session discussing the strategic priorities of the ABA.  While a portion of the message was a request to support “Bank Pac” (the ABA’s federally registered political action committee that allows a voice to be heard in Washington D.C.), there was one very important strategic priority for the ABA that set the theme for the convention: millennials.  President Nichols stated that millennials (birth years: early 80’s to 2000) have now passed the baby boomers as the largest population and staggeringly, “7 out of 10 millennials would rather go to the dentist than to a bank!”  What does this mean for those of us who are not in this age group – change!  It’s time to take our current, minimal electronic banking options to a whole new level and for us conservative, traditional compliance folks that’s a tough one to handle.  Millennials live in a world of extreme digital expectations; they don’t want to just transfer funds electronically they want to have loan applications on mobile platforms, complete P2P transfers on the mobile device, and never have to handle a paper check, ever!

This strategic priority of the ABA, laid the foundation for another very “techy” general session at the conference on “FinTech”.  FinTech was the buzzword at this year’s conference, referring to financial technology and the call for the banking industry to get on board.  One panelist, a strong advocate of FinTech, stated very clearly what the majority of us in the room were thinking, “regulations only come in size XXL and regulation smashes the processes that FinTech is trying to establish.”  In other words, lift some of the regulatory burden, untie our hands, and let us delivery what our customers need!  [Link to OCC white paper on FinTech.]

While there were many breakout session options to choose from, I gravitated toward the lending sessions.  While my primary focus was TRID, I also attended some great sessions on the Military Lending Act, Flood, and HMDA.  A few highlights of my sessions are below:

Top TRID Issues – A great session that included a panelist who was an original author of TRID (it was difficult not to charge the podium!) shared some insight into expectations of the proposed update to the regulation.  He stated that the CFPB will likely release the anticipated proposal in late July as the Bureau stated and to expect a codification of webinar issues that have been addressed by the CFPB.  Rob Alba of the ABA later confirmed that in addition to webinar items, the proposal may also include clarification of cure issues, liability issues, and what was referred to many times as the “black hole”, the ability to make changes to disclosures during the period of time after a customer has received their closing disclosure.  The earliest to expect the final update to the regulation is January 2017.

Another session related to TRID was presented by Treliant Risk Advisors regarding TRID Testing.  The panel broke the testing function into ten steps that included items such as: including all aspects of the compliance management system in your testing, evaluating to ensure sufficient scope, reviewing disclosure deadlines, testing tolerances, and recalculating tables on the LE and CD.  One item that caused a bit of buzz in the room was Treliant’s discussion of the regulations allowance for reissue of the LE even if you haven’t crossed the 10% tolerance threshold as a courtesy to the customer.  The panel agreed with what we have presented many times in our own training sessions, you are not required to reissue unless you surpass the 10% threshold but you are not prohibited.  If you do reissue, it does not reset your baseline tolerance requirement.

The TRID for Construction Loans session was well presented with model forms to guide us through some of the trickiest elements of a construction only and a construction to permanent transaction.  One clarification received by the audience from the panelist that helped author TRID related to the Loan Terms section on a construction only transaction.  On a construction, interest only transaction that balloons, the answer to the question, “Can this amount increase after closing?” should always be “NO” because the regulation was intended for this field to only be “YES” if a periodic principal and interest payment may increase, not an interest payment increase.  As one participant pointed out, and I tend to agree, it’s a bit deceptive to the customer when disclosed in that manner.

The Military Lending Act session had a couple of nuggets of information to be aware of including the comment that the DOD is expected to release additional guidance on the rule in the next two to three weeks.  In addition, the DOD and the CRA’s have yet to sign a contract to allow data sharing from the DOD database to the credit bureau reports; therefore, it is likely the credit bureau reports you utilize in your bank will not be a viable option to meet the safe harbor allowed in identifying a covered borrower.  As a bank, you need to be familiar and prepared to access the DOD database as of implementation date to meet the safe harbor.

The session on the inter-agency flood rules included quite a lengthy discussion on private flood regulation and what steps are being taken legislatively.  HR2901 passed Congress in late April and there is currently a Bill pending in the Senate to define both a federal flood policy and a private flood policy which may eliminate the need to compare and contrast private policies to FEMA policies.  The panel stated that passage of the Bill may eliminate the need for additional regulation.  In addition, the ABA did state that they have approached regulators about whether force-placing insurance and adding it into the loan balance results in an increase to the loan (triggering a MIRE event) that forces escrow requirements.  The ABA has yet to receive a response from the agencies on the request.

The HMDA session was very informative and left us all scratching our heads.  The new HMDA rules apply to transactions for which you take final action on or after 1/1/18.  That may mean you will have pipeline loans that will be impacted by the new rules from 2017.  So, in essence you don’t have as much time as you think.  This also sparked another question, if you are not supposed to collect GMI under the new expanded requirements until 1/1/18, how do you report GMI for those apps you took in 2017 but are not taking final action on until after 1/1/18.  There was no straight answer provided by the panel.  The panel did state; however, that the MISMO HMDA data specification toolkit was approved last week and should be released in upcoming weeks.

Overall, a very well attended, organized, and knowledge packed conference put on by the ABA in San Diego.  I look forward to wearing my mouse ears at next year’s conference June 11-14 at the Walt Disney World Dolphin Hotel in Orlando, Florida.

Kelly Owsley

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