Although there is much legislation in motion on Capitol Hill, financial institutions are already adapting to interim and/or final rules. This webinar will cover hot compliance issues affecting consumer lending, and will include flood insurance requirements, disclosures affecting mortgage loans, private student loans, and credit cards.

1. Welcome to
HOT TOPICS
in Lending Compliance
Wednesday, 01/27/2010 @ 2:00 p.m. EST
Please turn up your computer speakers to hear the
webinar which will begin shortly
To participate via phone dial: 877 669 3239
phone, 877.669.3239

2. Welcome to INSIGHTS
John F. White, CEO and former Big Four partner, has 40 years of accounting
& auditing experience, and founded ICS Compliance more than 10 y
g p p years ago
g
with a mission to provide focused, outsourced compliance services to the
financial services industry.
Your host today is National Director Michael Pappolla who has more than 14
years i the fi
in th financial services i d t
i l i industry.
Your presenter today is Compliance Services Director Roger Rumbaugh:
– More than 40 years banking experience in legal & regulatory compliance
– Expertise demonstrated through:
• Authoring articles for distinguished publications, such as ABA Bank
Compliance
• Consultation with more than 75 banks in multiple states
• Supplying expert testimony in more than a dozen civil & criminal court actions
• Appearing on programs of the ABA’s National Conference for Compliance
Managers, Bank Counsel & Auditors; Skylink Television Network; ABA’s
ABA s
Compliance Symposium; the Mid-Atlantic Compliance Conference, etc.

3. Today’s Program
Changing Legislation
g g g
What’s the Threat?
What s
What’s the Response?
Is Your Institution on Track?
Questions?
How to Learn More
This presentation is being recorded and will be available for download
next week from the News Center at www.ICScompliance.com

4. Changing Legislation
Significant amendments to federal consumer protection statutes
Lending-related examples:
– The Credit Card Responsibility and Disclosure Act
– The Mortgage Disclosure Improvement Act
– The Home Ownership and Equity Protection Act (of 1994)
– The Higher Education Opportunity Act
– The Real Estate Settlement Procedures Act and implementing
HUD Regulation X

5. What’s the Threat?
Citations for violations of statutes and regulations
g
Assessment of penalties and other sanctions as a result
of violations
Reputational risk

6. What’s the Response?
Understand the changes and assess impact on
practices, policies, and procedures
Amend policies and procedures
Train applicable personnel
Review (audit) to ascertain compliance
Adjust
Adj t as d
deemed necessary
d

7. Is Your Institution on Track (to avoid problems)?
The Flood Disaster Protection Act of 1973 and
The National Flood Insurance Reform Act of 1994
Although unchanged for years, financial institutions nationwide are consistently
cited for violations of various provisions of:
the statutes and their implementing regulations, which prohibit federally regulated
lending institutions from making, increasing, extending, or renewing a loan
secured by improved real estate or a mobile home located, or to be located in a
Special Flood Hazard Area of a community participating in the National Flood
Insurance Program, unless the property securing the loan is covered by flood
insurance
coverage
compliance procedure
amount of coverage

8. The Credit Card Responsibility & Disclosure Act
Regulation Z amended to:
– Require mailing of statements on credit card accounts (only) at least 21 days
prior to the payment due date
– Require a 45-day advance notice of significant changes in terms, as well as a
specific format requirement for such notices
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– Require that the payment due date for payments on credit card accounts be the
same numerical day of each month (effectively barring use of the 29th, 30th, or
31st of each month)
– Require crediting of payments on credit card accounts as of the date of receipt,
except when a delay does not result in a finance or other charge
– Require uniform statement format
– Require expanded “tabular format” disclosures, both on or with applications for
credit cards, and on or with Account Agreements

9. The Credit Card Responsibility & Disclosure Act (cont’d)
Additional Regulation Z amendments/restrictions affecting credit cards and
open-end credit offered to college students:
– Prohibits card issuers from opening a credit card account, or increasing a credit
limit on an existing account unless the consumer’s ability to make minimum
payments is determined using the consumer’s income or assets and current
determined, consumer s
obligations
– Prohibits opening a credit card account for a consumer under 21 years old,
u ess the consumer as submitted
unless t e co su e has sub tted a written app cat o a d p o ded a qua ed
tte application and provided qualified
co-signer or joint obligor
– Prohibits assessment of fees in excess of 25 percent of the credit limit of the
credit card account within the first year after the account is opened (exception –
late f
fees, over-the-limit f
fees, and returned-payment f fees)
)

10. The Mortgage Disclosure Improvement Act
Regulation Z amended to:
Require early estimated Truth in Lending Disclosures in conjunction with an
early,
application for any consumer principal dwelling-secured loan
Prescribe a 7 business day waiting period between early disclosures and
consummation
Require re-disclosure if/when the annual percentage rate changes, either up or
down, by 1/8 or 1/4 of one percentage point (depending on the type of transaction),
followed by a 3-day waiting period
Define when either initial or corrected disclosures are mailed to consumers, the
consumer is considered to have received the disclosures three business after
mailing
Prohibit fees (other than a nominal fee to obtain a credit report) from being imposed
upon consumers before disclosures are provided

11. The Home Ownership and Equity Protection Act (of 1994)
Regulation Z amended to define, and provide protections to consumers in
conjunction with “higher-priced mortgage loans.”
A higher-priced mortgage loan is a loan secured by a consumer’s principal dwelling, with
an annual percentage rate equal to or greater than 1.5% above the Federal Reserve
Board’s Average Prime Offered Rate (APOR) for a first lien-secured loan, or 3.5% above
the APOR for a junior lien secured loan;
lien-secured
Lenders must determine a consumer’s ability to repay a higher-priced mortgage
Lenders may not impose a penalty for prepayment of a higher-priced mortgage loan
after the first two years, and may not impose a prepayment penalty at any time during
the term of a higher-priced mortgage loan if prohibited by state law, or if the consumer’s
payment can change during the first four years of the loan term.
For applications received on or after April 1, 2010, which result in first lien secured
1 2010 lien-secured
higher-priced mortgage loans, lenders must establish an escrow account for property
taxes & mortgage-related insurance required by the lender. Mortgage-related insurance
is essentially hazard (homeowner’s) insurance, & may also include flood insurance.

12. The Higher Education Opportunity Act
Amendments to Regulation Z define a Private Education Loan as a loan
made for postsecondary educational expenses.
– Exclusions: open-end credit, real estate-secured loans, and Federal loans under
title IV of the Higher Education Act of 1965
Applies to loans made for postsecondary education expenses even if the
expenses,
amount financed exceeds $25,000
Requirements:
– Disclosures with applications (or solicitations that require no application)
– Disclosures when the loan is approved
– Disclosures at consummation
– Consumers’ right to cancel

13. The Real Estate Settlement Procedures Act
HUD’s Regulation X, which implements RESPA, amended to:
Revise definition of application to include the borrower’s name monthly income,
borrower s name, income
social security number, property address, estimate of the value of the property,
mortgage loan amount sought, & any other information deemed necessary by loan
originator (lender)
Completely reconfigure the format of the Good Faith Estimate of Settlement Costs
Include a new definition changed circumstances added to define situations under
which the originator/broker/lender would be required to issue an amended or revised
Good Faith E ti t
G d F ith Estimate, & requirement to maintain documentation in support of the
i tt i t i d t ti i t f th
change for 3 years from re-issue
Completely reconfigure the format of the HUD-1 & HUD-1A Settlement Statements
Impose strict tolerances, above which closing costs may not increase between the
time the GFE is provided & settlement
Requires the settlement agent to prepare HUD-1 & HUD-1A Settlement Statements
(including any revisions thereto)

14. Questions?
Please submit your questions through the Q&A panel
to the right of your screen
If you have questions specific to your Institution, feel free to e-mail them to
Mike Pappolla at: mpappolla@ICScompliance.com or call him at: 856.220.2240

15. Thank you for participating in today’s webinar:
today s
HOT TOPICS
in L di C
i Lending Compliance
li
Visit the News Center at www.ICScompliance.com for:
p For more information,
please contact:
• Recording of this webinar
Michael Pappolla, Director
• Answers to questions not discussed on this webinar
mpappolla@ICScompliance.com
• Details on our next webinar
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