state of connecticut department of banking http\\. state consumer credit examination issues paul...
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State Consumer Credit Examination Issues
Paul Ligas
Principal Financial Examiner
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Questions ?
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bSTATE RESPONSIBILITIES
• Responsible for Truth-In-Lending - Reg Z• Examinations for all State Chartered
Financial Institutions• Expanded to address Real Estate
Settlement Procedures Act - Reg X• Last year conducted examinations at 12
Banks and 15 Credit Unions
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THE YEAR IN REVIEW
• State TILA ratings reflect the efforts of management in meeting state regulatory requirements.
• Especially the compliance and loan origination teams
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• Most often assigned ratings are in the “strong” and “generally strong” area.
• Ratings definitions are derived from the Compliance Examination.
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AREAS OF FINDINGS
ARM Calculation Stream
No longer valid due to changes in TIL. New form requires that the stream is calculated for the first five years and then must disclose maximum possible amount per loan documentation.
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AREAS OF FINDINGS
Rescission Time Periods
Borrowers continue to date both parts of the rescission form as of the closing date. This should be caught by robust post closing packet review. Remember that this will leave you open to a possible 3 year rescission period and in the worst case allow the borrower to have an interest free unsecured note for the three year period.
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AREAS OF FINDINGS
Rate Change Notices
Occasionally, the rate change notices contain errors and do not reflect the proper rate as permitted under the actual loan documentation.
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AREAS OF FINDINGS
RESPA issues There continue to be problems with GFEs and
HUD1/1A’s in the area of “no cost” fixed second mortgage products. Issues are caused when bank overestimates the reimbursement costs and then changes them on the Final HUD1/1A. This leads to a change in the amount of the reimbursement to the borrower which can not be reduced at time of closing. Changes require new documentation and if three day period is not available than borrower has option to waive the period but should be in writing and not on a form letter.
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2012 EXAMINATION FOCUS
Since the CFPB has not yet determined the new forms yet we will be going back to basics. Risk-based examinations will follow most of the old procedures.
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2012 EXAMINATION FOCUS
Advertising:• Electronic (Web page)• Print media
Rate Change Letters
Form Reviews• First and second mortgage• HELOC • Loan disclosures
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2012 EXAMINATION FOCUS
First mortgage loans
Refinance and purchase mortgage
Construction-to-permanent mortgage
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2012 EXAMINATION FOCUS
Second fixed mortgage loans
No cost versus cost
GFE /HUD1/1A consideration for changes
HELOCs
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2012 EXAMINATION FOCUS
Other Consumer Lending• Automobile: new and used• Personal: Secured versus unsecured • Personal lines of credit • Overdraft lines of credit
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2012 EXAMINATION FOCUS
TILA audits in years between examinations
Compliance Committee minutes
Compliance training for individuals
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2012 EXAMINATION FOCUS
Advertising Book
Web page compliance verification notes when available
Review at web page
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Exit meeting(s) with management• Area supervisors• Management selected participants
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Wherever necessary:• Credit Card review• Reverse Mortgage loans• Personnel Educational Loans
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EXAMINATION PROCESS
First Day Letter
How can we improve it?
How can we simplify it?
Confusion areas?
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AGENCY CONTACTS
Bank Relationship [email protected]
Department [email protected]
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AGENCY CONTACTS
Credit Union Relationship Contact [email protected]
Department [email protected]