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36 th Annual Texas Tech University Banking School. Legal Issues for Bankers. Ann Graham, J.D., M.B.A. Professor of Law, Texas Tech University School of Law Banking Law Blog: Texas Tech University School of Law. Financial Systems in Crisis.

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36th Annual Texas Tech University Banking School

Legal Issues for Bankers

Ann Graham, J.D., M.B.A.

Professor of Law, Texas Tech University School of Law

Banking Law Blog:

Texas Tech University School of Law

financial systems in crisis
Financial Systems in Crisis


Broad Safety Net

Regulating the Unregulated

Executive Compensation

Lending Issues

Consumer Protection

Large/Small - State/National

Regulatory Reform

Bank Failures – Too Big to Fail

consumer protection and bank compliance
Consumer Protectionand Bank Compliance
  • Consumer Financial Protection Agency?
    • Safety & Soundness depends on Consumer Protection
  • Policies & Procedures – Update All Affected
  • New Legislation:
  • Truth in Lending Act (TILA) – Reg Z
  • Housing and Economic Recovery Act (HERA)
    • Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act)
    • Mortgage Disclosure Improvement Act (MDIA)
consumer protection more new laws regs
Consumer Protection – More New Laws & Regs
    • Emergency Economic Stabilization Act of 2008 (EESA)
      • Amended MDIA
    • Preventing Mortgage Foreclosures & Enhancing Mortgage Credit Act – “Helping Families Save Their Homes Act of 2009”
    • Credit Card Accountability Responsibility & Disclosure Act of 2009 (Credit CARD Act)
  • Regulations:
    • RESPA - HUD’s Reg X * FACTA Reg V
    • HMDA – FRB Reg C
for lenders reg z changes
For Lenders – Reg Z Changes
  • Reg Z Changesfinalized July 2008 (orig. eff. 10/1/09)
  • MDIA & More Reg Z Changes (eff. 7/30/09)
    • New “Higher Priced Mortgage Loans” (HPMLs)
    • New Average Prime Offer Rate “APOR” (FFIEC site)
    • Lenders must assess, verify & document ability to repay for Higher Priced Mortgage Loans & HOEPA loans
    • New way to calculate Debt-to-Income (eff. 10/09)
    • Prepayment penalty restrictions
    • New Early TIL requirements:
more reg z
More Reg Z

Prepayment penalty restrictions on HPMLs

Limits on collecting fees until early disclosures

New early disclosure requirements

Redisclosure if APR becomes inaccurate

No coercion or undue influence of appraisers

Restricted S-T balloons on principal dwelling loans

Required to escrow tax & ins for 1st mtg. HPMLs

No pyramiding late fees on principal dwelling loan

New advertising requirements

new reg z waiting periods
New Reg Z Waiting Periods

Application: giving info in anticipation of credit decision

Early TIL Disclosures within 3 days

Wait 7 business days from early disclosures for earliest possible closing

If disclosures mailed, presume 3 days for receipt

Immediate redisclosure if APR inaccurate

New tolerances

Wait 3 bus. days from receipt of revised disclosure

WAIVER: Must be bona fide personal emergency, customer request, no forms

respa hud s reg x final 11 08 some changes eff 1 16 09 some 1 1 10
RESPA – HUD’s Reg X(final 11/08, some changes eff. 1/16/09, some 1/1/10)
  • Servicing Disclosure Statement – New Form
    • 3 business days after Loan Application
    • New Definition of Application
  • New Good Faith Estimate Form
  • Can’t charge appraisal fee as condition for GFE
  • GFE MUST be good for 10 business days unless changed circumstance
  • New tolerance limits, cure with refund at settlement or within 30 days
  • New HUD1/1A Forms & Instructions – 1/1/10
hmda reg c hmda lar
  • Changes eff. 10/1/09
  • For Higher Priced Mortgage Loans,
    • Report spread between APR and Survey-Based estimate of prime mortgage loans
    • If spread >1.5% for lst lien loan or >3.5% for 2nd
credit card act reg z
Credit CARD Act & Reg Z
  • Effective Aug. 20, 2009
  • For ALL open-end consumer credit accounts, including Credit Cards & HELOCs
    • Mail/deliver Statements 21 days before payment due
  • For Credit Cards
    • 45 days notice of increased APR or other sig. changes
    • Include right to cancel the account
  • All interest rate increases after 1/1/09 must be reviewed beginning Aug. 2010 for reduction
  • More changes 2/22/2010 -
safe act

Secure and Fair Enforcement for Mortgage Licensing Act of 2008

Requires Mortgage Loan Originators (MLOs) to register with Nationwide Mortgage Licensing System and Registry (NMLSR)

Fingerprints & background

Also for Agency Regulated institutions & subs

Proposed Rule:

appraisal issues
Appraisal Issues
  • Reg Z: Cannot Directly OR Indirectly Influence Appraiser
  • Need Policies & Procedures –
  • Use Appraisal Mgt. Company?
  • Borrower cannot pay for appraisal
  • Home Valuation Code of Conduct – HVCC
    • Industry Standard
    • Selling into Secondary Market
    • Who can talk to the appraiser
    • Annual Audit
allowance for loan lease losses
Allowance for Loan & Lease Losses

Guidance: Aug. 3, 2009

ALLL for Residential Mortgages secured by junior liens

Analyze each quarter

Examiners will be looking at loss mitigation

Loan Modification Guidance for Servicers:

service members
Service Members
  • Mortgage Protection for Servicemembers
    • Amends Servicemembers Civil Relief Act
  • Effective July 30, 2008
  • 6% interest rate cap for pre-service debt during military service and if mortgage up to 1 year after military service
  • Stay of court proceedings for 9 months after service – temporary until 12/31/2010
fair credit reporting act fcra 1970 fair accurate credit transactions act facta 2003
Fair Credit Reporting Act – FCRA (1970)Fair & Accurate Credit Transactions Act FACTA (2003)

Affiliate Marketing Restrictions

Accuracy & Integrity Guidelines

Direct Dispute Resolution


Comment period ends 8/31/09


more examiner focus
More Examiner Focus
  • Flood Insurance – New Q&A – 7/21/09

Effective 9/21/09

  • Bank Secrecy Act (BSA)/Anti-Money Laundering (AML)
    • FinCEN
    • CTRs and SARs
  • FDIC Nationwide Seminars on Deposit Insurance:
  • Sweep Account Disclosures (eff. 7/1/09) FAQ:
cra changes
CRA Changes
  • Higher Education Opportunity Act
  • Requires considering low-cost education loans to low-income borrowers
  • Meeting community credit needs
  • Agencies’ proposed regs:

“Making Homes Affordable” Program

Mortgage Loan Modifications

May Assign 50% risk weight, if not 90 days or more past due or on non-accrual

Interim Final Rule:

Balancing Act

federal preemption
Federal Preemption
  • Watters v. Wachovia (2007)
    • OCC has exclusive “visitorial power” over nat’l banks AND their operating subsidiaries
  • Cuomo v. Clearing House (2009)
    • States can enforce consumer protection statutes against national banks
    • By Lawsuit, not by “visitorial powers”
  • Administration’s Regulatory Reform Legislation
texas news
Texas News

Texas Banking Commissioner Charles Cooper

Regulatory Guidance 3009: Loan Participation Risks What happens if the Lead Bank fails & offsets deposit? Monitor Risk!


HOME EQUITY – Texas Constitution Art. 16, Sec. 50

legal info for bankers
Legal Info for Bankers
  • Agency Websites:
    • Financial Institution Letters (FILs)
    • *
    • *
  • Trade Associations:
    • ABA: * TBA:
    • ICBA: * IBAT:
    • CSBS:
  • Texas Statutes:
legal info for bankers22
Legal Info for Bankers
  • FTC
    • ID Theft:
    • Credit Reports:
  • FinCEN: BSA Issues: