Tools, Tools, Tools
If compliance specialists got a nickel for each time they answered a question on what loans are covered by which regulations or rules, we'd all be in a higher tax bracket. So, in the spirit of holiday giving, we've prepared something to make your life easier.
The following pages contain coverage charts for the core lending regulations that seem to generate the most questions from lending staff. The charts contain the coverage rules or conditions for the most common problems and questions: Truth in Lending, Real Estate Settlement Procedures, Equal Credit Opportunity, and Home Mortgage Disclosure. They are designed to answer the basic question: "Is this loan covered?" Hopefully they will save you a lot of questions and some mistakes.
Copy them, circulate them (tie them up with holiday ribbon and hand them out at your holiday party!), and use them for training. Then leave work on time and have a good holiday.
When and What: Coverage Rules for Lending Regulations: Regulations B & C
ECOA and Regulation B apply to all credit. Although ECOA is often described as a "consumer protection law," the law itself and Regulation B are not limited to consumer purpose credit. Thus, the act and regulation apply to loans made in the commercial lending department to business applicants or to applicants for a business purpose. The act broadly prohibits any type of discrimination against any applicant, including business applicants. Regulation B contains detailed rules on prohibited and permissible practices.
Similarly, HMDA and Regulation C require the reporting of loans secured by dwellings, without regard to whether the applicant is a consumer or a business. The act is designed to measure the willingness of a bank to lend in all parts of its community. The HMDA information is an important tool in evaluating a bank's performance under the Community Reinvestment Act. For this reason, information on commercial properties and rental units is included in HMDA reports. However, corporations generally do not have a race or gender. Thus, for purposes of HMDA reporting, the requirement to collect and report monitoring data (race, gender, age, and, marital status) only applies to applicants that are natural persons.
Regulation/Rule Definition/Coverage HMDA/Regulation C: Reporting coverage Originations and purchases of home purchase loans, home improvement loans, and refinancings of either. Section 203.4 ECOA/Regulation B: Monitoring Data Applications for credit to purchase or refinance a dwelling occupied or to be occupied by the applicant as a principal residence and the residence will secure the loan. Section 202.13 ECOA/Regulation B: Appraisal Notice Application for credit that is to be secured by a lien on a dwelling. Section 202.5a(a)
When and What: Coverage Rules for Lending Regulations: RESPA
When and What: Coverage Rules for Lending Regulations: Regulation Z
Copyright © 1996 Compliance Action. Originally appeared in Compliance Action, Vol. 1, No. 18 & 19, 12/96