Exam 4 Flashcards
How long do mortgage servicers have to make contact with delinquent members?
By the 45th day of delinquency, the servicer must provide delinquent members a written notice about loss mitigation options.
What are the requirements for credit unions to use coupon books instead of periodic statements?
- The loan must be a fixed rate loan. Each coupon must include the amount due, the amount of any late fees, the date late fees will be charged, and the due date. The coupon book itself must also include:
i. The contact information for home ownership counseling, including HUD’s toll-free phone number
ii. The principal balance as of the beginning of the time period covered by the coupon book
iii. A statement regarding how a member can obtain information such as an explanation of the amount due or a past payment breakdown
iv. The current interest rate
v. Any prepayment penalty
vi. Contact information for how members can receive more information about their loans
Are there any types of loans exempt from the periodic statement requirement? If so, what types of loans are exempt?
- Reverse mortgages
- Timeshare loans
- Certain charged–off loans
What is the timing of the notice requirements for force-placed insurance?
- First notice must be sent at least 45 days before charging the member for force-placed insurance
- Reminder notice must be sent at least 30 days after the first notic
When is a credit union considered a “small servicer?” What are some of the provisions that would still apply to “small servicers?” What are some provisions that do NOT apply to “small servicers?
- A credit union is a small servicer if, together with any affiliates, services 5,000 or fewer mortgage loans and the credit union (or an affiliate) is the creditor or assignee for all of them.
- Small servicers must still comply with the following service requirements:
i. Adjustable rate mortgage notices
ii. Prompt crediting of payments
iii. Responding to qualified written requests (the error resolution and information request requirements)
iv. Escrow account servicing requirements
v. The remainder of the force-based insurance requirements
vi. Two provisions of the loss mitigation requirements:
1. Small servicers must not make the first notice or filing for foreclosure unless a member’s mortgage is more than 120 days delinquent
2. Small servicers must not proceed to foreclosure judgment if the member is performing under the terms of a loss mitigation agreement
vii. Payoff statements requirements
viii. Service transfer requirements
What is the difference between an information request and an error notice?
- They both should include the member’s name and information that allows the servicer to identify the member’s mortgage loan account. But an error request must also include a description of the error that is believed to have occurred, whereas an information request must detail the information requested by the member.
What is an error for the purposes of the error resolution rule?
- Failure to accept a payment that conforms to the servicer’s written requirements
- Failure to apply an accepted payment to principal, interest, escrow, or other charges under the terms of the loan and applicable law
- Failure to credit a payment to a member’s mortgage loan as of the date of receipt
- Failure to pay taxes, insurance premiums, or other charges or to refund an escrow account balance
- Failure to provide an accurate payoff balance amount upon a member’s request
- Failure to provide accurate information to the member regarding loss mitigation options and foreclosure
- Failure to transfer accurately and timely information relating to the transfer of servicing of a member’s mortgage loan to another servicer
- Imposition of a fee or charge that the service lacks a reasonable basis to impose
- Moving for foreclosure judgment or order of sale or conducting a foreclosure sale in violation of RESPA loss mitigation procedures
What is a periodic payment? How must servicers handle these payments?
- …A periodic payment is defined as one that includes the amount necessary to pay principal, interest, and any applicable escrow.
- Credit unions must credit periodic payments as of the day the payment was received.
i. Staff commentary clarifies that date of receipt means the day payment reaches the credit union, not when the funds are actually collected.
How are partial payments treated? Can the credit union charge a late payment fee for a partial payment?
- The credit union has a few options for handling partial payments under the servicing rules:
i. Credit the payment upon receipt
ii. Return the payment to the member
iii. Place the partial payment into a suspense account until the funds are sufficient to cover a periodic payment - Based on inference, it appears that a credit union can charge a late fee on a partial payment. Verify in presentations, if possible
How do Regulations X and Regulation Z determine which persons might be successors in interest that are covered by some of the mortgage servicing rules?
- Generally, a successor in interest is a person who is transferred “an ownership interest in a dwelling securing a closed-end consumer credit transaction,” if that transfer occurs under specific circumstances. These circumstances include, but are not limited to:
i. A transfer due to a heath of the member
ii. Where a member’s spouse or children become owners of the property
iii. A transfer resulting from a divorce or similar agreement where a spouse becomes an owner of the property
iv. A transfer by operation of law upon the death of certain owners
What constitutes prohibited pyramiding of late fees?
- Pyramiding of late fees occurs when a member pays the current amount due without the prior month’s late fee, and the payment is applied to the late fee first, leaving an overdue balance on the current month and resulting in another late fee.
i. In other words, if a member makes a periodic payment on time without paying a past due late fee, the credit union may not charge an additional late fee.
What is dual tracking under the loss mitigation rule? How can credit unions avoid this?
- Dual tracking occurs when a servicer moves forward with foreclosure while simultaneously working with the member to avoid foreclosure.
i. To prohibit this, a servicer is prohibited from making the first notice or filing required for a foreclosure process until a member is more than 120 days delinquent.
How should a credit union treat a shortage in an escrow account? How should a credit union treat a deficiency in an escrow account?
- Shortages less than one month’s escrow payment:
i. The servicer may allow the shortage to exist and do nothing to change it
ii. The servicer may require the member to repay the shortage amount within 30 days
iii. The servicer may require the member to repay the shortage amount in equal monthly payments over at least a 12-month period - Shortages more than or equal to one month’s escrow payment:
i. The servicer may allow the shortage to exist and do nothing to change it
ii. The servicer may allow the member to repay the shortage in equal monthly payments over at least a 12-month period
What is considered a “designated loan?” What are the exceptions?
a. A loan secured by a building or mobile home (including manufactured homes) that is located on or will be located in a special flood hazard area (SHFA) within a community that participates in the National Flood Insurance Program (NFIP).
b. Exceptions include:
i. Any state-owned property covered under a policy of self-insurance satisfactory to the administrator of FEMA (the administrator publishes and periodically revises the list of states falling within this exemption)
ii. Property securing any loan with an original principal balance of $5,000 or less and a repayment term of one year or less
iii. Any structure that is part of any residential property but is detached from the primary structure and does not serve as a residence
Under what circumstances is a credit union required to escrow for flood insurance premiums and fees?
a. A credit union must require the escrow of all premiums and fees for flood insurance that is required in connection with loans made, increased, extended, or renewed on or after January 1, 2016.
b. For loans made before January 1, 2016, a credit union is required to escrow for flood insurance premiums and fees if it also escrows for taxes, insurance premiums, fees, or other charges.
c. Credit unions must offer borrowers the option to escrow premiums and fees for flood insurance for loans made before January 1, 2016 that are not subject to mandatory escrow.
d. There are six exceptions to the escrow requirement based on the type of loan or whether flood insurance is offered to borrowers under a group policy:
i. The loan is an extension of credit primarily for business, commercial, or agricultural purposes
ii. The loan is in a subordinate position to a senior lien secured by the same residential improved real estate or mobile home
iii. Flood coverage is provided under a group policy
iv. The loan is a HELOC
v. The loan is a nonperforming loan (90 days or more past due) and remains nonperforming
vi. The loan has a term of 12 months or less
Under which circumstances is a credit union required to provide the flood notice to borrowers? Be familiar with the exceptions.
a. Notice is required to be provided when a credit union makes, increases, extends, or renews a loan secured by a building or a mobile home located or to be located in an SFHA.
i. Notice is required regardless of whether the building or mobile home securing the loan is located in a community that participates in the NFIP.
b. The notice must include:
i. A warning, in a form approved by the administrator of FEMA, that the property is located in an SFHA
ii. A description of the flood insurance purchase requirements
iii. A statement that flood insurance coverage is available under the NFIP (if applicable) and may also be available for private insurers
iv. A statement that flood insurance that provides the same level of coverage as a standard flood insurance policy under the NFI{ may also be available from a private insurance company
v. A statement that the borrower is encouraged to compare flood insurance coverage, deductibles, exclusions, conditions, and premiums associated with flood insurance issued on behalf of the NFIP with coverage offered by private insurance companies
vi. A statement on whether federal disaster relief assistance may be available in the event of damage to the building or mobile home caused by flooding in a federally-declared disaster
c. Exception to requirement of credit union providing flood notice:
i. A credit union may obtain written assurances from a seller for the seller to provide the notice to the purchaser within a reasonable time before completion of the sale.
1. If this method is chosen, the credit union must maintain a record of the written assurance for as long as they own the loan.
When may a credit union rely on a past Standard Flood Hazard Determination form?
- If the determination is not more than seven years old
- The basis for the determination was set forth on the SFHDH
- There have not been any map revisions or updates since that determination was made.
What steps should a credit union’s BSA risk assessment follow?
a. Identify the specific risk categories unique to the credit union
i. Including specific products and services, members, and geographic locations
b. Analyze the data identified in step 1 above to better assign risk within the categories
What are the five pillars of a credit union BSA compliance program? What are the components or requirements of each pillar?
a. A system of internal controls to ensure compliance should address the following items:
i. Identifying the person responsible for BSA compliance
ii. Implementing risk-based Customer Due Diligence (CDD) policies, procedures, and processes
iii. Providing sufficient systems for filing SARs and CTRs
iv. Requiring the board and senior management to be informed of any compliance deficiencies
b. A system of independent testing – Conducted to evaluate the compliance program, assess a credit union’s BSA compliance, and to test systems.
i. Should be conducted by an internal audit department or outside auditors or consultants
ii. Should be based on the credit union’s risk profile
iii. Should be conducted every 12-18 months
c. An individual designated with the responsibility for day-to-day compliance – Designated by the board
i. Responsible for overseeing the day-to-day implementation of the compliance program and managing compliance with all regulations and internal procedures
ii. The regulatory requirement is not met by merely appointing someone as a BSA compliance officer. They must have the requisite expertise, knowledge, authority, and time to satisfactorily complete the job.
d. Training for appropriate personnel – Should be tailored to the employee’s responsibilities, be ongoing, and cover regulatory requirements and developments, as well as the credit union’s internal policies and procedures.
e. Risk-based procedures for ongoing customer due diligence – Requires credit unions to implement and maintain risk-based procedures for conducting identification and verification at account opening and performing ongoing maintenance.
What is the difference between acceptable identification documents for customers and for beneficial owners?
- The credit union may rely on photocopies or other reproductions of identification documents. The credit union can rely on another financial institution’s CIP with respect to a legal entity customer that is opening an account under certain conditions.
What minimum pieces of identifying information must be collected for CIP purposes?
- Name
- Date of birth (for an individual)
- Address (residential for an individual, business address for an entity)
- Identification number (SSN for an individual, taxpayer identification number for an entity)