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There’s a couple of different ways construction applications come in. Some of you may simply do construction only. In other words, we’re only going to take requests for credit and process them for the construction financing. We’re going to let some other financial institution do the permanent financing. So, we only take construction loans for the construction phase of the project. We let XYZ Bank down the street, in the next city, in the next town, in the next state, wherever, they do permanent financing. This is our niche, just to do construction. That would be one application for one loan. That’s pretty straightforward.
A compliance review is only as good as the person(s) conducting it and we have a team of compliance rock stars. Our consultants have many years of experience in the compliance trenches. They review hundreds of institutions, of varying size, each year which gives them a unique perspective and valuable insights as to what works and what doesn’t. Our consultants don’t just sit in an office and study compliance regulations, they are out in the field experiencing them first-hand.
Every institution is unique and has their own challenges but there are some basic guiding principles that will ensure success in this area.
On July 7, 2020, FinCEN issued an Advisory on Imposter Scams and Money Mule Schemes Related to COVID-19. These two types of consumer fraud have been observed to be on the rise during the current pandemic. The advisory provides explanations of how these scams and schemes work, red flags that may help identify such activity, as well as, how to report these types of scams/schemes on the Suspicious Activity Report.
On the compliance side, both Regulation B (Equal Credit Opportunity Act) and Regulation Z (Truth in Lending Act) have requirements applicable to appraisals and/or other valuations developed in connection with an application. Specifically, the Regulation B rule applies to any application that is or will be secured by a first lien on a 1-4 family dwelling. The Regulation Z rule applies to any high-priced mortgage loan (HPML). While the requirements themselves are quite similar there are some differences.
When it comes to TRID, disclosing the “loan product” for a construction loan isn’t always as clear-cut as it seems. Let’s take a construction to perm (all-in-one) loan with one closing. Say the rate for the construction phase is going to be fixed at 4%. You know that the permanent phase will also have a fixed rate but you don’t yet know what it will be at this point. Logic would lead you to believe that the loan product should be disclosed as a fixed-rate transaction but the TRID rules aren’t always logical.
everybody knows that suspicious activity reporting element of your BSA AML program, it’s really the cornerstone. And a lot of how your system is going to be judged from a regulatory perspective is based on how well this suspicious activity reporting is working and how well you’re documenting it, because it’s really a vital element of the program.
On June 29, 2020, FinCEN released some new customer due diligence guidance for your hemp-producing customers. With all the COVID craziness, maybe it’s been awhile since you’ve looked at the expectations for hemp and/or marijuana related businesses. This new guidance for hemp customers really lays a ground work as to the types of questions you should be asking and monitoring you should implement.
If you charge overdrafts for ATM and one-time debit card transactions under Regulation E, chances are you provide Regulation E’s model opt-in form to obtain a customer’s consent prior to charging those fees. It would make sense, as using model forms are supposed to provide us with a sense of security, right?
It seems like proposals, final rules, guidance, etc., have been coming at us in full force lately. Here is a quick recap of some noteworthy items related to your lending function. Supreme Court Ruling on Sexual Orientation Recently, in Bostock v. Clayton County,...