The CFO of my bank has charged me with providing a synopsis of the penalties for non-compliance with these new rules. I am struggling with this. I find a reference in Reg at 226.1(e) which simply refers me to various sections of the Act itself (108, 112, 113, 130, 131, 134) and also to the Competitive Equality Banking Act of 1987. Is there a short answer for my CFO? Most of what I read doesn't seem to apply to, in particular, the 3-day delay in closing if the APR at closing is outside of tolerance with the APR on the ETIL. Can someone help me?

I don't know if he's wanting something with which to threaten the loan officers or if he's wanting to see how much trouble the bank might be in for just ignoring the new rules...

Bare bones - if it is over stated and exceeds the tolerances, you must redisclose per SF Fed.

You are welcome. I've been in this business since 1974 and in compliance since 1994 and I still struggle!!

As I told RR Joker in another conversation, in the world of compliance, especially lending compliance, you learn something new every day no matter how long you've been in it.

Yes - I'm listening to it now. They clarified that overstatement of the APR is OK, if it complies with §226.22.

They also said a P-TIL disclosure doe not need top be given to non-borrowers (owners of a house used as collateral that get the RofR).

....meaning 226.22 as a whole, considering F/C test in (4) & (5).....not just the basic test in (1) and (2)?

as a whole.

I'm going to throw out an analysis I did yesterday in a PM on 226.22. I by no means claim I am 100% correct. It is only my opinion as I read the regulation. I'm just throwing it out for discussion. As I said in my last sentence in blue I will use the KISS method until an official release in made by the agencies.



Additional tolerance for mortgage loans. In a transaction secured by real property or a dwelling, in addition to the tolerances applicable under paragraphs (a)(2) and (3) of this section, if the disclosed finance charge is calculated incorrectly but is considered accurate under §226.18 (d)(1) or §226.23(g) or (h), the disclosed annual percentage rate shall be considered accurate:

(i) If the disclosed finance charge is understated, and the disclosed annual percentage rate is also understated but it is closer to the actual annual percentage rate than the rate that would be considered accurate under paragraph (a)(4) of this section; Note that this section also refers to the rate being closer to the actual rate.

(ii) If the disclosed finance charge is overstated, and the disclosed annual percentage rate is also overstated but it is closer to the actual annual percentage rate than the rate that would be considered accurate under paragraph (a)(4) of this section. This section states the overstated APR is only accurate under (a)(4) (which refers to .18(d)(1)) if the disclosed APR is closer to the actual APR. This refers back to the example in the OSC of the APR being quoted as 9% but the actual APR would be 8.65% then a disclosure of 8.5% to 9.25.% would be considered accurate. So in each of these cases you are going to have to determine if the "overstated" APR is actually closer to the Actual APR. Who's going to be responsible for these calculations? IMO an overstated APR is not automatically accurate! I also don't want to put the burden on document prep people to have to figure out if the APR is out of tolerance due to a finance charge or if the overstated APR is closer to the actual APR. Way too much room for error. Until the agencies see fit to release an official interpretation I will use the KISS method and redisclose either way. For us it may affect 2 out of 10 loans, most likely 1 out of 10.


If you take each individual section on their own you can put an argument together to support your position either way, but if you take the sections as a whole as they are referenced then there are other considerations to be taken, such as is the disclosed APR actually closer to the actual APR? If not then it is not accurate, and again I ask who are you going to make responsible for making these determination whether the disclosed APR is accurate under the "closer" rule?

Again I don't disagree that we should not have to redisclose when the ETIL APR is higher than the actual APR but I just don't see the exemption as it is currently written without an official interpretation from the agencies themselves.

Surely you don't expect us to believe that!

Would you struggle with me and help me with my question above?

Is anyone else listening to the SF Fed's call? Yikes...

I emailed an updated copy of the training too to Mary Beth and Andy. Not sure when it'll be updated:

http://www.bankersonline.com/tools/lender/newloanrules07-09qcl.html

I was/am in your camp Dan. They have addressed this in 3-4 listener questions. They have consistently said if the APR is overstated, it may not be of tolerance as outlined in §226.22.

They also are saying "EACH borrower must get their OWN disclosures". What bank provides John AND Jane with their own? They mentioned it would be OK to use one envelope with a disclosure for each. How stupid!

David,
I agree with you - how stupid. And I don't get it. Where does it say all must have received? Did I miss this?

THAT is an awesome training guide QCL! Thanks for sharing

I haven't had to refer to those sections for a very long time and I will have to go back and read them in order to answer your question. It's not something I stored in my memory bank. You have to remember when my model came out I'm not sure if 8k wasn't the most memory you could get in a computer and that was a mega computer!! IOWs I need an upgrade!!!

But to answer the one question. No there's no short answer without referring to the applicable sections.

BTW, I'm glad I don't have those sections committed to memory!

Question from FRB Teleconference about having a credit card # that won't be charged until after the 3 days following P-TIL. The speaker said "this would psychologically limit the customer from shopping around" and advised bankers tread lightly. He didn't say you couldn't, but he didn't like it.

Actually - earlier in the call he did say you couldn't. And now it seems like he stepped around it.

In the FRBSF conference call, they stated that fax or email could be considered received if we could document they are received, and this would start the clock for the waiting periods. Am I interpreting this correctly? I thought anything other than in-person delivery would be subject to the three-day waiting period for considering the disclosures received, so even if we faxed or emailed, we are subject to the 3-day period. But this sounds like we might be able to consider disclosures received as soon as we have documentation of receipt via email or fax, even sooner than the 3-day period.

Yes EmilyAnn,
There is info in the rule indicating that if delivery is by other method (ie Overnight delivery etc.) and you have proof of receipt, you can start the clock counting from when you know they received the disclosures.
So, they just clarified that by Fax would use the same logic = you would need to have "proof" of receipt.
IMO = that means just a 'verification' that the fax went to the number dialed is not enough.

I can't give you the exact location but this is discussed in the pre-amble that if you document by time stamp or other means when the fax or email was received then you could consider it received as of that date and time. It even mentioned using overnight delivery and documenting receipt by using the delivery receipt.

I see it now - page 73 of the 7/30/08 FR Notice. Thanks!

In addition, although the final rule provides a presumption of receipt if the early mortgage loan disclosure is delivered by mail, it does not prevent creditors from choosing any permissible method available to deliver the early mortgage loan disclosure, such as overnight courier or e-mail if in
compliance with the E–Sign Act. Creditors may impose such fees any time after the consumer actually receives the early mortgage loan disclosure. Evidence of receipt by the
consumer, such as documentation that the mortgage loan disclosure was delivered by certified mail, overnight
delivery, or e-mail (if similar documentation is available), is sufficient to establish compliance with § 226.19(a)(1)(ii).

Where in Bankers Online would you find the tool for calculating the correct days?

Yes, Dan...but they were somewhat hesitant to dare explain...they eluded to what you actually detailed.

I can tell you that we will disclose either way, because I'm not asking anyone to be responsible for those calculations! LOL!

Believe it or not we do and have for years. Our software program is set to print 3 copies by default. 2 goes to the applicants and 1 in the file.

Okay, I couldn't attend the call yesterday (we were getting required supervisor training at work!) Am I to infer from this comment that if the final TIL's APR is either above or below the APR on the early TIL that we have to redisclose? so no reprieve for those loans where the final APR is LOWER that the early TIL?

Just a thought or recommendation. The BOL calculating tool is great-I can see us "requiring" it to be in every loan file-just as we do the BOL escrow tool. However, a couple recommendations-could the font be made smaller so dates like Wednesday,September 2, 2009 will show up rather than as ################### and what about a calculated line that says when a fee (other than for the CR) can be collected-for example an appraisal fee on a refinance, prior to closing. Thank you.