compliance monthly November 2014 Compliance Monthly is intended to keep you informed of regulatory changes in advance of their effective date so your institution can have the necessary policies, procedures and processes in place to be compliant at the time of enactment. Finalized Rules: CFpb Rule for Easing Privacy Notice Requirements Now Effective The CFPB finalized a rule to ease the annual privacy notice requirement under the Gramm-Leach-Bliley Act. The new rule, which was proposed in May 2014, allows financial institutions that meet certain criteria to post their annual privacy notices online rather than delivering them individually. A bank may forgo mailing the annual GLBA disclosure if the information on it has not changed since the previous notice, if it does not share the customer’s personal information in a way that triggers GLBA opt-out rights, if it has other channels for disclosures or opt-outs required by the Fair Credit Reporting Act and if the bank uses the federal agencies’ model privacy notice form. The rule took effect October 28, 2014. Agencies Finalize Credit Risk Retention Rule Federal regulators finalized the Dodd-Frank Act’s mortgage risk retention rule, requiring the securitizer of asset-backed securities to retain not less than 5 percent of the credit risk of the assets collateralizing the asset-backed securities. The final rule applies 5 percent risk retention requirements only for nonqualified residential mortgages. All mortgages that qualify for sale to Fannie Mae and Freddie Mac will also be exempt from risk retention as long as the GSEs are under federal conservatorship. The final rule also does not require any retention for securitizations of commercial loans, commercial mortgages, or automobile loans if they meet specific standards for high quality underwriting. The final rule will be effective one year after publication in the Federal Register for residential mortgage-backed securitizations and two years after publication for all other securitization types. CFPB Modifies Current Mortgage Rules The CFPB has finalized its April 2014 proposal to make minor adjustments to its mortgage rules to ensure continuing access to credit. The adjustments include two changes that will help certain nonprofit organizations continue to provide mortgage credit and servicing to underserved populations. The changes also lay out limited circumstances in which lenders that exceed the Qualified Mortgage (QM) points and fees cap can pay a refund of the excess amount plus interest to consumers and still have the loan be considered a QM. The changes will be effective upon publication in the Federal Register. Proposed Rules: Flood Insurance Rules on Escrow, Detached Structures Proposed Federal regulators have approved a joint notice of proposed rulemaking to amend regulations pertaining to loans secured by property located in special flood hazard areas. The proposed rule would implement provisions of the Homeowner Flood Insurance Affordability Act of 2014 (HFIAA), which addressed affordability problems in the 2012 BiggertWaters flood insurance reform law. The proposal would exempt detached structures that are not used as a residence from a requirement to be insured, protecting homeowners from steep accumepartners.com Compliance Monthly November 2014 insurance bills for storage sheds or garages. While this provision was effective on enactment, the proposal would formally include it in the agencies’ rules. The proposed rule would require lending institutions to escrow premiums and fees for flood insurance for loans secured by residential improved real estate or mobile homes that are made, increased, extended or renewed on or after January 1, 2016 unless the regulated lending institution or a loan qualifies for a statutory exception. Lenders would be required to offer existing customers an option to escrow starting in January 2016 when the escrow requirements begin for new and renewed loans. The agencies plan to address, in a separate rulemaking, provisions of Biggert-Waters on the acceptability of non-NFIP policies and expectations for lender-placed flood insurance. Comments are due by December 29, 2014. Defense Proposes to Expand Military Lending Act Coverage The Department of Defense (DoD) has announced a proposal that would expand the scope of coverage of the Military Lending Act of 2006 (MLA). The proposal would extend MLA protections to any type of credit covered by the Truth in Lending Act except loans secured by real estate and purchase-money loans. Comments are due by November 28, 2014. TILA-RESPA Mortgage Disclosure Changes The CFPB has announced a proposal to modify and make technical amendments to its TILA-RESPA Integrated Disclosure rule. The first change would give creditors one business day to issue a revised version of the new Loan Estimate form after locking in a customer’s interest rate, instead of the previous same-day requirement. The second change would add language to the Loan Estimate form informing construction borrowers that they might receive a revised Loan Estimate if their loan takes more than 60 days to settle. Various technical corrections are also proposed. Comments are due by November 10, 2014. Other Compliance News: Updated Flood Insurance Manual Available FEMA has updated its NFIP Flood Insurance Manual to reflect program changes that become effective October 1, 2014. CFPB Updates Mortgage Rules Readiness Guide The CFPB updated its mortgage rules readiness guide to include the TILA-RESPA integrated mortgage disclosures. The guide is intended to help bankers assess their readiness to comply with the rules. The TILA-RESPA integration takes effect in August 2015. CFPB Issues Mortgage Servicing Compliance Bulletin The CFPB is issuing a compliance bulletin and policy guidance entitled “Compliance Bulletin and Policy Guidance--Mortgage Servicing Transfers” in light of potential risks to consumers that may arise in connection with transfers of residential mortgage servicing rights. This will replace the bulletin on mortgage servicing transfers issued in February. FinCEN Issues Virtual Currency Rulings FinCEN has issued administrative rulings on application of its regulations to a virtual currency payment system and a virtual currency trading platform. FinCEN was asked 1) whether the convertible virtual currency payment system a company intends to set up would make the company a money transmitter under the BSA; and 2) whether the convertible virtual currency trading and booking platform that a company intends to set up would make the company a money transmitter under the BSA. FinCEN ruled the Company would be a money transmitter in both scenarios. accumepartners.com Compliance Monthly November 2014 CFPB Issues Lists of Rural, Underserved Counties for 2015 The CFPB released lists of rural or underserved counties to use in 2015 in conjunction with the Ability-to-Repay, escrow, HOEPA and appraisal rules. Rural counties and county-level jurisdictions were generally defined by using a U.S. Department of Agriculture classification system and underserved counties were defined by data collected under the Home Mortgage Disclosure Act. IRS Offers Additional FATCA Clarification The IRS provided additional clarification on the treatment under the Foreign Account Tax Compliance Act of accounts opened between July 1, 2014, and January 1, 2015. According to the IRS, foreign financial institutions, withholding agents and other payers will be allowed to treat accounts opened during that period as “preexisting” for the purposes of FATCA’s new-account-opening procedures. Copyright 2014 Accume Partners, All rights reserved. Information contained in Compliance Monthly is not intended to provide specific advice and guidance. You should consult your own professional services provider in connection with matters affecting your own interests. accumepartners.com Compliance Monthly November 2014 about accume partners For 20 years, Accume Partners has been providing the banking industry with internal audit, regulatory compliance, technology risk management and enterprise risk management services. Through these key areas of focus, Accume is able to stay in front of change, bring balanced perspectives and the specialized knowledge demanded by today’s financial institutions. Accume professionals are former banking executives, regulators, auditors, accountants, compliance officers and risk managers with extensive experience in the pressing issues faced by the banking community. This experience, along with the insights gained from serving clients every day, provides us with the basis for effective insights, thought leadership and practical solutions. To learn more, please visit our website at accumepartners.com. For more information, please call or e-mail any of these Accume Partners’ contacts: Steven Peck Managing Director, Compliance 267.664.1274 speck@accumepartners.com David Smith Director, Compliance 570.606.7423 dlsmith@accumepartners.com James Nemecek Director, Compliance 215.565.6576 jnemecek@accumepartners.com Mark Lindig Chief Executive Officer 646.476.1961 mlindig@accumepartners.com Paul Nobbs Managing Director, NJ Banking and Financial Services 609.332.7132 pnobbs@accumepartners.com Nicole Lloyd Managing Director, Mid-Atlantic 717.903.3142 nlloyd@accumepartners.com Glenn Hoffman Managing Director, Technology Risk Management 203.803.7345 ghoffman@accumepartners.com K.D. Mehra Managing Director, NY Banking 347.576.5652 kmehra@accumepartners.com Eric Holmquist Managing Director, Enterprise Risk Management 215.817.2107 eholmquist@accumepartners.com accumepartners.com