s Utah Credit Unions

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					Regulatory Compliance
       Update



   Heather Line, Utah League of Credit Unions
                               April 16, 2010
Agenda
Recently Implemented:
•Mortgage Disclosure Improvement Act
•Credit Card Act Phase I
•New Regulation Z Mortgage Loan Rules
•Real Estate Settlement Procedures Act
•Overdraft Protection Disclosures
•Credit Card Act Phase II
•Expedited Funds Availability
•Higher Education Opportunity Act




                                         2
Agenda

Coming Soon:
•Internet Gambling
•Overdraft Program Restrictions
•Open-end Loan Revisions
•FACTA
•Privacy




                                  3
Agenda

Still waiting . . .
•SAFE Act
•Credit Card Act Phase III – Final Rules
•Home Equity Line of Credit Revisions
•Closed End Lending Revisions




                                           4
Agenda

Oldies, but goodies:
•Bank Secrecy Act
•Third Party Risk Management
•Disaster Planning




                               5
Recently Implemented
Mortgage Disclosure Improvement Act

New restrictions on Mortgage Loans:
•Good Faith Estimate must be given before any fees are
collected
•Early disclosures required for all consumer purpose,
dwelling secured loans (i.e. 2nd homes)
•Creditors must wait seven business days after they
provide early disclosures before closing the loan
•Creditors must provide new disclosures with a revised
annual percentage rate (APR), and wait an additional
three business days before closing the loan, if a change
occurs that makes the APR in the early disclosures
inaccurate beyond a specified tolerance.
                                                           7
Credit Card Act Phase I

First Round of Changes:
•Written notice to consumers 45 days before an APR
increase or significant changes to the terms of a credit
card account.
•Consumers have the right to cancel the credit card
account before the increase or change goes into effect.
•Periodic statements must be mailed at least 21 days
before payment is due.




                                                           8
New Regulation Z Mortgage Loan Rules

Higher Priced Mortgage Loans:
•New category of mortgage loans with new disclosure
requirements intended to catch nearly all subprime
loans.
•HPMLs are a first-lien mortgages loans that have an
annual percentage rate that is 1.5 percentage points or
more above the Federal Reserve Board’s "average
prime offer rate," or subordinate lien mortgages that are
more than 3.5 percentage points above this rate.




                                                            9
New Regulation Z Mortgage Loan Rules

Higher Priced Mortgage Loans:
•Lenders must consider the borrower’s ability to repay
the loan from income and assets other than the home’s
value.
•Ability to repay is based on the highest scheduled
payment in the first seven years of the loan.
•Creditors must verify income and assets
•Bans prepayment penalties if the payment can change
in the first four years
•Requires escrow accounts for property taxes and
insurance for all first lien mortgage loans.

                                                         10
New Regulation Z Mortgage Loan Rules

All Mortgage Loans:
•Prohibited from coercing an appraiser to misstate the
home’s value.
•New fair servicing requirements regarding charging late
fees, accepting loan payments and providing payoff
statements.
•New advertising rules.




                                                           11
Real Estate Settlement Procedures Act

•Major revisions
•Ensures estimates of settlement costs are more
accurate
•Facilitates better comparisons among lenders
•Revised Good Faith Estimate
•Revised HUD-1 Settlement Statement
•New tolerances between the GFE and HUD-1




                                                  12
Overdraft Protection Disclosures

•Expands existing rules that applied only to financial
institutions that advertised courtesy overdraft program to
all financial institutions
•Requires monthly and year-to-date overdraft and return
items fees paid to be disclosed on periodic statements
•Restricts “padded” balance amounts disclosed on
ATMs, online banking and VRUs




                                                             13
Credit Card Act Phase II

•Extensive changes to Regulation Z credit card rules
•Prohibitions and restrictions on rate increases
•Special underwriting rules for consumers younger than
21
•Over-the-limit fee opt-in
•New subprime card fee restrictions
•Prohibition against abusive billing practices and
payment allocation practices




                                                         14
Expedited Funds Availability

•Changes prompted by the consolidation of the Federal
Reserve check processing regions
•Uniform hold times for all checks, no matter where in
the US the paying financial institution is located




                                                         15
Higher Education Opportunity Act

•Applies to “private education loans”
•Any loan used for secondary education expenses is
covered (except for credit cards)
•Requires extensive new disclosures for covered loans
at application, approval and consummation
•Restrictions on using school insignia to promote loans.




                                                           16
Coming Soon
Internet Gambling

•New Regulation
•Prohibits gambling businesses from accepting
payments in connection with unlawful Internet gambling.
•U.S. financial firms must have policies and procedures
to prevent covered payments
•Operational controls will prohibit some card payments
•Due diligence at account opening will be required to
stop transactions on other payment systems




                                                          18
Overdraft Program Restrictions

•New consumer opt-in required before for credit unions
may assess overdraft fees in connection with ATM and
one-time debit transactions.
•Overdraft coverage for checks, ACH and reoccurring
debit transactions is unchanged.




                                                         19
Open-end Loan Revisions

•New disclosures required for all open-end consumer
loans: Application and solicitations, account opening,
periodic statements and change in terms.
•Policy and procedure changes for credit unions that
offer multi-feature open-end lending (MFOEL).




                                                         20
FACTA

•New guidelines for furnishing information to credit
bureaus
•New regulations regarding responding to consumer
disputes




                                                       21
Privacy

•New uniform privacy disclosures




                                   22
Still waiting. . .
SAFE Act

•Credit union mortgage loan originators will have to
register with a national registry
•Financial institution employees do not have to be
licensed with the state




                                                       24
Credit Card Act Phase III

•Prohibits credit card issuers from charging penalty fees
that exceed the dollar amount associated with the
consumer's violation
•Bans inactivity fees
•Prevents issuers from charging multiple penalty fees
based on a single late payment or other violation of the
account terms
•Requires credit card issuers to inform consumers of the
reasons for rate increases
•Requires rate change evaluations



                                                            25
Home Equity Line of Credit Revisions

•New uniform disclosures
•Will prohibit terminating an account for payment-related
reasons unless the consumer is more than 30 days late
making a payment
•Will provide additional protections related to account
suspensions, credit-limit reductions, and reinstatement
of accounts.




                                                            26
Closed-end Lending Revisions

Account disclosure changes:
   Will change the APR calculation to capture most
    fees and settlement costs paid by consumers
   Will require lenders to show how the consumer's
    APR compares to the average rate offered to
    borrowers with excellent credit
   Will require lenders to provide final TILA disclosures
    at least three business days before loan closing
   Will require lenders to show consumers how much
    their monthly payments might increase for
    adjustable-rate mortgages

                                                             27
Closed-end Lending Revisions

Additional rules:
•Would prohibiting payments to a mortgage broker or a
loan officer that are based on the loan's interest rate or
other terms
•Would prohibit a mortgage broker or loan officer from
"steering" consumers to transactions that are not in their
interest in order to increase the mortgage broker's or
loan officer's compensation.




                                                             28
Oldies, but goodies:
Bank Secrecy Act

•No new rules expected this year
•Close examiner oversight to continue




                                        30
Third Party Risk Management

•Expect increased focus
•CU’s must have a process to:
   Assess how outsourcing arrangements support
    objectives & strategic plans
   Understand the risks associated
   Ensure contract provisions for effective oversight
   Implement an oversight and monitoring program




                                                         31
Disaster Planning

•Remains a high priority
•NCUA requirements include:
   Business impact analysis
   Risk analysis to determine critical systems
   Comprehensive, written plan
   Internal controls for reviewing and revising the plan
    at least annually and conducting annual testing




                                                            32
Thank You

				
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