Bankers Compliance Task Force Current News Archive - March 2005
March 31, 2005 The joint federal regulators have released a set of "Answers to Frequently Asked Questions" (FAQs) that address the new home loan price data disclosed this year for the first time under the Home Mortgage Disclosure Act (HMDA). This release coincides with the date that lenders must make their HMDA data available to the public upon request. The FAQs will aid users of the data with their evaluation and interpretation of the data and will be posted on each of the agencies' websites. The FAQs are a part of a larger agency effort to promote informed use of the 2004 data. For more information, visit: http://www.federalreserve.gov/.
March 30, 2005 Joint Statement on Providing Banking Services to Money Services Businesses. The regulators today issued a joint statement pointing out that the money services industry provides a valuable financial service, especially to individuals who may not have access to the formal banking sector. The joint statement indicates that the Bank Secrecy Act does not require, and neither FinCen nor the Federal Banking Agencies expect, banking institutions to serve as the de facto regulator of the money services industry. Banking organizations are advised to apply the requirements of the Bank Secrecy Act on a risk-assessed basis, as they do for all customers, taking into account the products and services offered and the individual circumstances. Decisions to accept or maintain an account with a money service business should be made by the banking institution's management, under standards and guidelines approved by its board of directors, and should be based on the banking institution's assessment of risks associated with the particular account and its capacity to manage those risks. The regulators indicate that additional guidance outlining further their compliance expectations will be issued shortly.http://www.fincen.gov/.
March 29, 2005 HUD has published an interim final rule that make available a new adjustable rate mortgage (ARM) product. The rule enables the HUD Secretary to insure five-year hybrid ARMs with interest rates adjustable up to two percentage points annually (this type of mortgage is known as a 5/1 ARM). The lifetime cap on annual interest rate adjustments for five-year ARMs is set at six percentage points. See the March 29, 2005 Federal Register at http://a257.g.akamaitech.net/.
March 28, 2005 The joint federal banking agencies are seeking comment on proposed changes to the supervisory framework for the classification of commercial credit exposures. The notice of proposed changes and request for comment was published in the Federal Register on March 28, 2005. For more information, visit: http://www.occ.treas.gov/.
March 28, 2005 The federal financial regulators have adopted, in final form - without change, the joint interim rule implementing changes to the Community Reinvestment Act (CRA). The final rule makes changes in: the standards for defining metropolitan and micropolitan statistical areas published by the U.S. Office of Management and Budget (OMB); census tracts designated by the U.S. Census Bureau; and Regulation C, which implements the Home Mortgage Disclosure Act (HMDA). The joint final rule is effective on March 28, 2005. To access the final rule, go to: http://a257.g.akamaitech.net/.
March 24, 2005 The OCC issued bulletin 2005-7 concerning the Fair Credit Reporting Act (FCRA) final rule which addresses prescreen opt-out disclosure requirements. The rule becomes effective on August 1, 2005. The final rule seeks to improve the required notice to consumers regarding their right to opt out of prescreened solicitations for credit or insurance. Under the final rule each prescreened offer is required to contain a short statement (short notice) that provides basic opt-out information, a toll-free number to call to opt out, and a separate longer statement (long notice) that provides additional information. The rule also establishes criteria relating to location, type size, manner of presentation, other matters for both the short and long notices, and also sets forth model notices. For more information see: http://www.occ.treas.gov/.
March 23, 2005 The federal banking regulators have jointly issued Interagency Guidance on Response Programs for Unauthorized Access to Customer Information and Customer Notice. The guidance is intended to help financial institutions understand their responsibilities under the Gramm-Leach-Bliley Act. It interprets the agencies' customer information security standards and states that financial institutions should implement a response program to address security breaches involving customer information. For more information, go to: http://www.fdic.gov/.
March 22, 2005 Federal financial regulators issued joint guidance on appraisal independence through a series of questions and answers. The document provides clarification of existing standards in such areas as selecting an appraiser, ordering an appraisal, accepting a transferred appraisal and reviewing appraisals. The new FAQ should be reviewed in conjunction with the interagency appraisal guidelines dated October 27, 1994 and the joint independence statement dated October 28, 2003. To access the guidance, go to: http://www.fdic.gov/.
March 17, 2005 The Federal Reserve has released the April 2005 HOEPA reference rates. You can access the daily H.15 rates at http://www.federalreserve.gov/ and the weekly H.15 rates at http://www.federalreserve.gov/.
March 17, 2005 The ABA announced that the Permanent Subcommittee on Investigations of the Senate Committee on Homeland Security released a supplemental staff report on "U.S. Accounts Used by Augusto Pinochet" as the basis for recommending that banks use Patriot Act 314(b) to warn another financial institution before transferring funds to it from an account being closed "due to money laundering concerns," and that regulators "should take reasonable steps to prevent suspect funds from being sent to another U.S. financial institution without an appropriate warning..." http://www.aba.com/
March 16, 2005 The OCC has announced that John Wagner is the new Director for Bank Secrecy Act and Anti-Money Laundering Compliance. To view the news release, visit http://www.occ.treas.gov/.
March 16, 2005 The Federal Reserve Financial Services has alerted financial institutions and their customer to be aware of the latest fraud scheme involving counterfeit postal money orders. For more details, visit http://www.frbservices.org/.
March 11, 2005 FinCEN has published its 2004 Annual Report which contains interesting and useful BSA filing statistics and information. For more information, see http://www.fincen.gov/.
March 9, 2005 FinCEN has issued a statement summarizing the outcome of its March 8, 2005 fact-finding meeting to identify the issues surrounding the ability of money services businesses to obtain banking services. To read more about this meeting and FinCEN's future plans concerning the MSB issue, please visit www.fincen.gov/msbfinalpress.pdf.
March 4, 2005 Evaluating Risk Re Money Service Businesses – During a recent search of FDIC orders, we came across a Cease and Desist Order issued by the FDIC on November 5, 2004. This order was issued as a direct result, in part, of “operating with inadequate internal controls and operating systems with regard to Money Service Businesses (“MSBs”)….” The Order mandated that the bank develop, adopt, and implement a written customer due diligence program included, among other things, provision for proper documentation for MSBs and foreign correspondent accounts and identification and proper risk coding of all MSBs. With the heightened focus on regulatory compliance with all aspects of the Bank Secrecy Act, a review of the Order is encouraged. The FDIC Order No. 04-233b may be found at www.fdic.gov/bank/individual/enforcement/NewOrders/04-233b.html.
March 3, 2005 Mortgage loan cancellation scam - Several banks in Mississippi with large mortgage loan portfolios have been hit with variations of a scam to cancel deeds of trust. These scams are generated by a number of websites that advertise to debtors to eliminate their mortgage debt. These involve the execution by the debtor of a new loan agreement and payment of $1500–$3000 to the scammer which then send a letter to the bank tendering a bogus bond to pay off the loan. This instrument looks like a surety bond but contains certain conditions which purportedly must be met to collect the bond, and if such conditions are not met, there is a statement that the bank consents to liquidated damages in the amount of ten times the bond. Also, there is a provision that the bank has ten days to respond or a power of attorney will be automatically granted to cancel the deed of trust. Responses to the scheme have been to: (1) do nothing, (2) respond to the party initiating the letter repudiating it, and (3) filing a declaratory judgment action in chancery court finding that any action taken by the other party will be null and void. The latter two actions are probably appropriate, since in at least one instance a Notice of Cancellation pursuant to the power of attorney has been delivered to a chancery clerk who, fortunately, had been notified in advance by the bank not to accept any cancellations of deeds of trust unless directly from the bank for the listed trustee. There apparently is a similar scheme for school loan relief that parallels this procedure. Some of the web sites are http://www.mtg-free.us.com/ and http://www.ccrsolution.com/.
March 3, 2005 In previous discussions of money service businesses, we had reported that there is a website that may offer your money service business customers help in resolving their internal compliance issues if the bank has decided to continue with the customer. This web site is http://www.fisca.org/. The site has a provision to order compliance manuals for money laundering. Also of note is a brochure published by this organization “designed to acquaint bankers with a check cashing business and demonstrate how a check casher is a good bank customer”—makes for interesting reading.
March 3, 2005 One of the three major arbitrational organizations, JAMS, has taken a position that it will not enforce an arbitration clause which precludes class actions. If your bank utilizes arbitration, you should ensure that JAMS is eliminated from your allowable choices and rely instead on the American Arbitration Association or the National Arbitration Forum.
March 3, 2005 The OCC has published an edition of Community Developments Insights addressing Individual Development Accounts, or IDAs. This publication describes how banks can use these matched savings programs as a tool to encourage lower-income persons and families to save money and thus build assets for particular financial goals. Through these programs, accountholders generally make monthly deposits that are matched by funds from private, government, or nonprofit sources. http://www.occ.treas.gov/
March 2, 2005 The FDIC has issued revised examination guidance on payday lending programs. The revisions provide more specific guidance to FDIC-supervised institutions to ensure that this high-cost, short-term credit product is not provided repeatedly to customers with longer-term credit needs. There are currently a small number of FDIC-supervised institutions engaged in payday lending. http://www.fdic.gov/
March 1, 2005 In a final rule, the OTS is making changes to its Community Reinvestment Act (CRA) regulations to reduce burden, provide greater flexibility to meet community needs, and restore the focus of CRA to lending. Specifically, the OTS is providing additional flexibility to each savings association evaluated under the large retail institution test to determine the combination of lending, investment, and services it will use to meet the credit needs of the local communities in which it is chartered, consistent with safe and sound operation. http://www.ots.treas.gov/
March 1, 2005 The OTS is adding a new subpart to its Rules of Practice and Procedure in Adjudicatory Proceeding to provide for expedited processing of certain actions to determine if a company is exercising a controlling influence over the management or policies of a saving association or savings and loan holding company. Under the new procedure, a company that holds no more than ten percent of the stock of a saving association may be found to control that savings association, thereby becoming an OTS-regulated entity. http://www.ots.treas.gov/
March 1, 2005 The OCC and OTS have announced that Chicago Title Insurance Company has consented to a cease and desist order and $5 million civil money penalty, as well as a $1.2 million penalty by the Texas Department of Insurance, in connection with the settlement of charges regarding its mortgage settlement practices. It was determined that Chicago Title engaged in a pattern of violations of Section 4 of RESPA, by providing inaccurate HUD-1 Settlement Statements to federally insured depository institutions and borrowers. For more information see http://www.ots.treas.gov/ and http://www.occ.treas.gov/
