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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: http://lawprofessors.typepad.com/banking/. 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: http://lawprofessors.typepad.com/banking/

Texas Tech University School of Law

financial systems in crisis
Financial Systems in Crisis

Bailouts

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: http://www.fdic.gov/news/news/financial/2009/fil09026.html
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
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 - http://www.fdic.gov/news/news/financial/2009/fil09044.html
safe act
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: http://www.fdic.gov/news/news/financial/2009/fil09028.html

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

http://www.fdic.gov/news/news/financial/2009/fil09043.html

Loan Modification Guidance for Servicers: http://www.fdic.gov/news/news/financial/2009/fil09045.html

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

ANPR: http://edocket.access.gpo.gov/2009/pdf/E9-15322.pdf

Comment period ends 8/31/09

ID Theft RED FLAG FAQs: http://www.fdic.gov/news/news/financial/2009/fil09030.html

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

http://www.fdic.gov/news/news/press/2009/pr09127.html

Effective 9/21/09

  • Bank Secrecy Act (BSA)/Anti-Money Laundering (AML)
    • FinCEN
    • CTRs and SARs
  • FDIC Nationwide Seminars on Deposit Insurance:
    • http://www.fdic.gov/news/news/financial/2009/fil09046.html#body
  • Sweep Account Disclosures (eff. 7/1/09) FAQ:http://www.fdic.gov/news/news/financial/2009/fil09039.html
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:
    • http://www.fdic.gov/news/news/financial/2009/fil09035.html
capital
Capital

“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: http://www.fdic.gov/news/news/financial/2009/fil09036.html

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!

FAQs: http://www.banking.state.tx.us/exec/faq.htm

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

legal info for bankers
Legal Info for Bankers
  • Agency Websites:
    • www.fdic.gov Financial Institution Letters (FILs)
    • www.federalreserve.gov
    • www.occ.treas.gov * www.ots.treas.gov
    • www.treas.gov * www.ffiec.gov
    • www.banking.state.tx.us
  • Trade Associations:
    • ABA: www.aba.com * TBA: www.texasbankers.com
    • ICBA: www.icba.com * IBAT: www.ibat.org
    • CSBS: www.csbs.org
  • Texas Statutes: www.capitol.state.tx.us
legal info for bankers22
Legal Info for Bankers
  • FTC
    • ID Theft: http://www.ftc.gov/bcp/edu/microsites/idtheft/
    • Credit Reports: http://www.ftc.gov/freereports
  • FinCEN: BSA Issues: http://www.fincen.gov/