Compliance Year in Review and What’s Next€¦ · • Removes TRID 3-day waiting period when...

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Compliance Year in Review

and What’s Next

Brian M. Shea, CRCM, CAMS

March 20, 2018

• Today’s presentation slides can be downloaded at

www.wolfandco.com/webinars/2018

• The session will last about 45 minutes, and we’ll then

have time for Q & A.

• Our audience will be muted during the session.

• Please send your questions in using the “Questions Box”

located on the webinar’s control panel.

Before we get started…

About Wolf & Company, P.C.

• Established in 1911

• Offer Audit, Tax, and Risk Management services to over

250 financial institutions

• Offices located in:

– Boston, Massachusetts

– Springfield, Massachusetts

– Albany, New York

– Livingston, NJ

• Over 200 professionals

As a leading regional firm founded in 1911, we provide our clients

with specialized industry expertise and responsive service.

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Financial Institution Expertise

• Over 60 Risk Management Professionals:

– IT Assurance Services Group

– Internal Audit Services Group

– Regulatory Compliance Services Group

– WolfPAC® Solutions Group

• Provide services to over 250 financial institutions:

– Approximately 90 FIs with assets > $1B

– Approximately 25 publicly traded FIs

– Constant regulatory review of our deliverables

• Provide Risk Management Services in 27 states and 2

U.S. territories

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Today’s Objectives

As part of today’s session we will discuss:

• A recap of major regulatory changes that took effect

in 2017

• Key regulatory changes coming up in 2018

• Areas of high or changed regulatory scrutiny

Outline

I. 2017 in Review

II. 2018 Priorities

III. Additional Areas

IV. Questions?

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2017 in Review

• Mortgage Servicing rules took effect

• Military Lending Act rules took effect for credit cards

• TRID Amendments issued (effective 2018)

• Payday Lending final rule issued (effective 2019)

• Arbitration rule shot down

• Supreme Court ruling on Fair Debt Collection

Practices Act

• Commercial Appraisal proposal issued

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2018 PRIORITIES

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CFPB Leadership Changes

• Director Richard Cordray departs agency in

November 2017

• Cordray names Leandra English as Acting Director;

President Trump overrides decision, naming Mick

Mulvaney

• Judge denies preliminary injunction from English in

January 2018

• Mulvaney takes action on various matters

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CFPB Leadership Changes

CFPB Expectations Going Forward:

• Slowdown of new rules and regulations

• Complete repeals of rules and regulations unlikely

absent Congressional action

• Possible delay of future rules (ex. prepaid rule)

• Reduction in “Rulemaking by Enforcement”

• Changes in Enforcement Strategy

• Complaint-driven focus

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Flood Insurance Program Expiration

• National Flood Insurance Program (NFIP) continues

to impose significant costs on taxpayers

• Industry and lawmakers desire reform

• Existence of program specifically tied into recent

budgetary battles in Washington and Government

shutdown(s)

• Of critical importance is what to do if the program

expires

• Helpful Resources:

– FDIC Financial Institution Letter 23-2010

– NCUA Guidance 2010-CU-08

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Flood Insurance Program Expiration

Key Impact of NFIP Shutdown:

• FEMA unable to issue new or renewed flood

insurance policies

• FEMA unable to increase coverage on existing

policies

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Flood Insurance Program Expiration

Impact on Lender:

• Loans in flood zones can still be made, without

violating flood regulations

• Other flood rules must still be complied with

• Still required to perform flood determinations

• Still required to provide any required flood notices

• Still have safety and soundness risks to consider

• Need to be ready to obtain flood insurance policies

as soon as NFIP is back in place

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Flood Insurance Program Expiration

Lender options for new loans:

• Have borrower still complete application and pay

premium, to be held by insurer until NFIP re-

authorized;

• Postpone the loan closing until NFIP re-authorized;

• Require borrower to obtain private flood insurance;

OR

• Make loan without payment or coverage (if willing to

accept the risk)

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Flood Insurance Program Expiration

Renewal considerations:

• FEMA typically processes payments as soon as

program is reauthorized

• Lender may want to keep accepting payments

• Alternatively require borrowers to obtain private

coverage

• Notify servicers, if utilized

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Flood Insurance Program Expiration

Criteria to consider in risk evaluations:

• Volume and concentration of lending in special flood

hazard areas

• Loans already in portfolio subject to renewal

• Lending activity during lapse of coverage

• Compliance-risk appetite

• Secondary market concerns

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Flood Insurance Program Expiration

Retroactivity

• Whether policies will be retroactive depends on

specifics of NFIP reauthorization

• If yes:

– Policy applied and paid for during lapse effective as of date

of application and payment

– If completed application and payment received by NFIP

Servicing Agent before lapse begins, covered property is

protected in event of flood after that date

– Also applies to borrowers who renewed policies on or before

lapse begins and policies that otherwise would have expired

during lapse

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Flood Insurance Program Expiration

Retroactivity

• If no:

– New or renewal policies can’t be obtained for period when

NFIP was not authorized unless obtained prior to lapse

– New policies or renewals issued after lapse effective on date

of reauthorization

– Losses would not be covered by NFIP if occur in period of

lapse

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TRID Amendments

• Published by CFPB on August 11, 2017

• Effective October 10, 2017, but not mandatory until

October 1, 2018

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TRID Amendments

Key updates include:

• Good Faith Requirements/Tolerances

• Shopping list

• Rounding

• Construction Loans

• Cash to Close Table

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TRID Amendments

Key updates include:

• Partial exemption for housing finance agencies/non-

profits

• Extends coverage to cooperative units

• Provides clarifications for trusts

• Sharing of disclosures with other parties in origination

process

• Other clarifications and amendments

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Reg. CC Amendments

• Published by Federal Reserve on May 1, 2017

• Effective July 1, 2018

• Primarily impacts electronic items such as remotely

deposited checks, electronic checks and

electronically created items

• Impacts warranties, indemnities and returns

• Doesn’t directly impact traditionally customer-facing

matters such as account opening disclosures, funds

availability schedules or hold notices

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Reg. CC Amendments

Major changes:

• Indemnities created for remotely

deposited checks

• New warranties for electronic

checks and electronic returned checks

• Creates indemnities for electronically

created checks

• Adjusts expeditious return process

(timing, notice) for all checks

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Marijuana and Banking

• January 4, 2018 memo from Attorney General Jeff

Sessions

• Repeals the Cole Memos

• 2014 FinCEN Guidance remains in effect

• Institutions will want to take this into consideration

when evaluating whether to bank marijuana-related

businesses

• Many state attorney generals seeking safe harbor for

marijuana banking

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SAR Updates

• Announced by FinCEN on

January 26, 2018

• New Online Form starting

June 2018

• Batch filers required to submit

via XML instead of ASCII

• Batch filers have 6 months from

go-live date to adhere to XML

(until 1/1/2019)

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SAR Updates

New/Revised Fields include:

• Geographic targeting order/Advisory/Other activity

• New Suspicious Activity Type – Cyber crime

• Additional subtype selections for suspicious activities

• Additional product type selections

• New IP address fields

FINCEN User Guide available

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Pending Legislation

Economic Growth, Regulatory Relief and Consumer

Protection Act

• Also known as Senate Bill S.2155

• Originally proposed by Senator Mike Crapo

• Passed Senate Banking Committee in December

2017

• Passed by Senate vote on March 14, 2018

Details are still subject to change until reconciled with

previously passed House bill and signed into law by

President

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Pending Legislation

Highlights:

• Increased exemptions for lenders from expanded

HMDA reporting

• Extends qualified mortgage (QM) consideration for

portfolio loans

• Extends 18 month exam cycle for institutions

between $1 - $3 billion

• Exempts smaller servicers from Reg. Z escrow rules

• Provides rural appraisal exemptions for transactions

of $400,000 or less

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Pending Legislation

Highlights:

• Removes TRID 3-day waiting period when lower APR

offer made

• Makes permanent certain SCRA and tenant

foreclosure protections

• Provides temporary authority under SAFE Act for

MLOs switching employers

• Requires credit bureaus to provide free credit

freezes, active duty member monitoring

• Provides protections for employees disclosing

financial elder abuse

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Additional Areas

Areas where we continue to see scrutiny:

• Consumer Complaints/Inquiries

• Overdraft Balances

• Reg. E Error Resolution

• BSA Exemption documentation

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Regulatory Change Best Practices

• Utilize many resources such as:

– National and state banking associations

– Local networking groups

– Regulator websites

– Vendor newsletters and alerts

• Interact with other institutions/compliance personnel

• Treat proposed rules versus final rules differently

• Look out for last minute clarifications/technical

corrections

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Regulatory Change Best Practices

• Work backwards from mandatory compliance date to

help track key dates and timelines

• Work with vendors, be proactive!

• Train impacted personnel

• Revise policies, procedures, forms, etc…

• Monitor and test beforehand

• Ensure coverage is within audit plan

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Brian M. Shea, CRCM, CAMS

Regulatory Compliance Senior Manager

Phone: (617) 261-8133

Email: bshea@wolfandco.com

Today’s Presentation can be downloaded at:

www.wolfandco.com/webinars/2018

Questions?