By Leslie Callaway, CRCM, CAFP; Mark Kruhm, CRCM, CAFP; and Rhonda Castaneda, CRCM
Q: Under Regulation Z (Truth in Lending Act), creditors must send a revised Loan Estimate to a mortgage applicant if the bank wishes to charge the applicant to have an extension of an expired rate lock agreement. When the bank is aware of increases with other fees unrelated towards the extension from the rate lock agreement, must it update these unrelated fees on the revised Loan Estimate or may it wait until the Closing Disclosure to adjust those fees?
A: The financial institution must update the borrowed funds Estimate. Under §1026.19(e)(4), if the bank desires to increase or add a fee that was not disclosed on the initial Loan Estimate, the bank must re-disclose within three business days of learning from the fee increase or even the new fee. Additionally, all fees should be updated \”based around the best information reasonably available to the creditor at the time the revised disclosures are provided.\” As Comment 5 to §1026.19(e)(3)(iv) explains:
For example, if the creditor issues revised disclosures reflecting a new rate lock extension fee for purpose of determining good faith [of estimates], other charges unrelated towards the rate lock extension must be reflected around the revised disclosures based on the best information reasonably open to the creditor at the time the revised disclosures are supplied.
(Answer provided March 2022.)
Q: Section 215.4(b) of Regulation O permits banks to make loans to covered parties (insiders) up to and including certain aggregated amount without the prior approval of the bank's board of directors. The board's prior approval is required, however, for loans that exceed that aggregated amount borrowed limit. To ensure that insiders who've reached to limit do not have to wait for the board to satisfy to get approval for additional loans, may the board issue a blanket approval for any future loan requests that exceed the limit?
A: No. See, for instance, FDIC Advisory Opinion 81-22 which states that the record of approval “must reflect more than a mere notice of insider borrowing up to a stated amount.\” It continues that \”[t]he board should be aware of . . . basic facets of the loan during the time of approval.\” Quite simply, the board should have something relatively tangible to think about, (e.g., a specific loan request). However, you'll be able to approve a line of credit upon which the director may draw, anytime, presuming that it is approved at least every 14 months according to §215.4(b)(3). (Answer provided March 2022.)
Q: My bank has a compliance question associated with doing in business in Spanish. Because the bank is located close to the U.S.-Mexican border, the financial institution has posted signs in both English and Spanish throughout the bank's branches associated with COVID-19 security precautions (size limits, mask requirements, etc.) Our bank does not advertise in Spanish, however, many of the bank's customer support representatives and tellers do speak to customers in Spanish. Is the bank obligated to provide customers with account disclosures in Spanish because of our COVID signage?
A: No. Posting COVID signage in languages apart from English isn't advertising and does not trigger any regulatory requirements.
Speaking to someone in a language apart from English at account opening does not trigger any requirements to supply disclosures in another language under federal law, but banks need to look at state law.Some states, for example California, have very stringent and detailed laws addressing the supply of services to customers in languages apart from English.
There are also specific federal regulations addressing \”doing business in a language apart from English\” that fluctuate depending on exactly what the bank is doing. Under the remittance provisions of §1005.31(g) of Regulation E, for instance, advertising remittances in a language other than English or using a remittance transfer discussion in a language apart from English will trigger what's needed to supply all disclosures in that other language as well as in English. (Answer provided March 2022.)
Q: I have a question about the definition of a multifamily dwelling under Regulation C (Mortgage Disclosure Act). Regulation C defines a multifamily dwellingas a \”dwelling . . . which contains five or more individual dwelling units\” (§1003.2[n]). My bank has a home loan secured by two properties. One rentals are a duplex. The second property is a triplex. Because the property is secured by five individual dwelling units, is the loan secured by a \”multifamily dwelling\” under Regulation C?
A: No, this loan wouldn't be secured with a multifamily dwelling. As noted inside your question, a multifamily dwelling is a that \”contains\” five or even more individual dwelling units. Neither from the properties you describe \”contains\” five units. For purposes of this part of the definition, 5 units must be in the same structure (Comment 2 to §1003.2[n]). (Answer provided March 2022.)
Answers are provided by Leslie Callaway, CRCM, CAFP, CAMS, senior director of compliance outreach and development; Mark Kruhm, CRCM, CAFP, senior compliance analyst; and Rhonda Castaneda, CRCM, senior compliance analyst, ABA Regulatory Policy and Compliance. Answers don't provide, nor are they meant to replacement for, professional legal advice. Answers were current as of the response date shown at the end of the items.
