Question: We have a customer that is leaving
for boot camp for the Air Force. Am I correct in stating that boot camp is not
Boot camp is included in active
duty. "Military Service" is defined under SCRA as period of active
duty status. For members of the regular Armed Forces, active duty begins the
day they leave civilian life; for them, active duty is not synonymous with
deployment. For a member of a reserve component, the protections the SCRA
offers begin when a member of the Reserves or National Guard receives
mobilization orders. It is initiated upon receipt of mobilization orders in
order to give the soldier time to put his or her affairs in order.
There may be several active duty
periods during a member of the Reserves or National Guard’s career, including
the initial active duty for training ("boot camp") and subsequent
call-ups for service, whether or not the Servicemember volunteered for active
duty is immaterial. Finally, military service also includes any period during
which a Servicemember is absent from duty because of sickness, wounds, leave or
other lawful causes.
Our Lending to Servicemembers Policy
has great information regarding both the SCRA and MLA: https://www.compliancealliance.com/find-a-tool/tool/lending-to-service-members-policy
The term “active duty” means
full-time duty in the active military service of the United States. Such term
includes full-time training duty, annual training duty, and attendance, while
in the active military service, at a school designated as a service school by
law or by the Secretary of the military department concerned. 10 USC 101(d)(1) http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title32-section101&num=0&edition=prelim
current practice on residential balloon mortgages is to extend the maturity
date prior to the balloon period if the customer requests it prior to the
balloon and the borrower meets certain conditions. This is completed with a
change in terms document leaving the current amortization period the same. The
examiners have reviewed the process and are ok with this. We have a customer
that has approached the bank and would like to extend the maturity but would
like to shorten the amortization. She currently has 13 years left, but wants
the bank to shorten it to 12. I guess my concern is, do we now have to treat it
as a new request because it is a change that is increasing the monthly burden,
not decreasing it.
Answer: So the rules on whether a
"modification" would be considered a "refinancing" for Reg.
Z purposes can be found in 1026.20 here: https://www.consumerfinance.gov/eregulations/1026-20/2016-14782_20160627#1026-20
Generally speaking, if there's
satisfaction and replacement, or if the bank changes the rate based on a new variable
rate feature, it will be considered a refinance which would require new
disclosures. And although the rule doesn't specifically say this, we also
interpret that it's best practice to provide new disclosures for any increase
in credit, or if the prior obligation has already matured. So if any of these
are occurring, that's when a new set of disclosures should be provided--but
from what you describe, it doesn't sound like any of these are happening here.
Question: With the lapse in
funding for the NFIP, is it true that no new policies can be written?
Answer: On December 28, 2018
FEMA announced that it will resume the sale of new insurance policies and the
renewal of expiring policies.
This press release
rescinds initial guidance that was issued on December 26, 2018 to suspend sales
operations as a result of the current lapse in annual appropriations. The
National Flood Insurance Program has been reauthorized by congress until May
The guidance is
located here: https://www.fema.gov/news-release/2018/12/28/fema-resumes-selling-flood-insurance-policies-during-appropriations-lapse
Question: If the Bank identifies a
bookkeeping error or a posting error prior to a commercial customer notifying
the Bank, does the Bank still need to fill out the Error Resolution form and/or
follow the procedures set out in Reg. E for errors? We know that we need to
correct the error, of course.
Answer: Technically the bank does not need
to comply with the procedures set forth in section 1005.11 of Reg. E. This is
for multiple reasons, though. The first and foremost reason being that the
scope of Reg. E coverage is limited to consumer accounts, as the definition of
“account” is narrowed to include only consumer-type accounts. Thus, when a bank
encounters an error in respect to a commercial customer, the bank is not bound
by Reg. E. The second reason being that errors discovered by the Bank, itself,
are expressly carved out of the error resolution procedures of Reg. E. So, even
if the error was in regards to a consumer account, for section 1005.11
procedures to kick in, the customer would need to notify the Bank of the
(b)(1) “Account” means a
demand deposit (checking), savings, or other consumer asset account (other than
an occasional or incidental credit balance in a credit plan) held directly or
indirectly by a financial institution and established primarily for personal,
family, or household purposes.
12 CFR § 1005.2(b)(1): https://www.consumerfinance.gov/policy-compliance/rulemaking/regulations/1005/2/#b
5. Discovery of error by
institution. The error resolution procedures of this section apply when a
notice of error is received from the consumer, and not when the financial
institution itself discovers and corrects an error.
12 CFR § 1005.11(b)(1)-5: https://www.consumerfinance.gov/policy-compliance/rulemaking/regulations/1005/Interp-11/#11-b-1-Interp
However; check your disclosures to
ensure the bank has not given error resolution rights to commercial
customers. If it is disclosed, we must follow our contract with the
Question: Would the
bank be violating Reg. O if it offered a higher Money Market rate for just
Answer: There is not a direct prohibition
in Reg. O, since it primarily governs credit and not deposit accounts, like
money market accounts. However, many banks have it in their internal policy to
not give preferential interest rates to shareholders on deposit accounts either,
to follow the spirit and intent of Reg O. Also, remember preferential
treatment will oftentimes bring extra scrutiny.
Question: I have a loan officer who issued a
loan estimate that predates the application date by 1 day. While I don’t
believe this to be best practice, I’m not certain whether it’s also a violation
of regulation. Can someone please confirm?
Answer: Assuming the required six pieces of
information had not been received, then at least conservatively, yes, this
could be considered a violation. The timeline to provide an LE starts running
from the time the application is received, which is based on when the bank
received the sixth piece of required information. So an LE issued before the
application wouldn't have followed the rules of being provided within 3 days
after the application, and likely would not have included all of the required
(A) The creditor shall deliver
or place in the mail the disclosures required under paragraph (e)(1)(i) of this
section not later than the third business day after the creditor receives the
consumer's application, as defined in § 1026.2(a)(3).