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#1959311 - 09/04/14 03:55 PM TIL & General Compliance Question
Nids Offline
New Poster
Joined: Mar 2014
Posts: 24
In a nut shell, 8 months ago I was told I was going to be the compliance officer with absolutely no training. Everything I have learned has been basically self-taught so I apologize if these are basic questions.

1. We have a loan that is going from a fixed rate to a variable rate. The borrower would like to modify the loan prior to the change to a variable rate into a fixed rate loan. This will be a loan modification and not a refi, correct?

2. If it is a modification, no new disclosures are required, correct?

3. Our closer thought just an effective interest rate disclosure was needed to disclose the rate. Then she thought we may need a final TIL instead. Everything I read says no disclosures are needed on a note modification. Can someone please clarify what is needed?

As for learning more; any suggestions on what I can do? My company is on a spending freeze so it needs to be inexpensive. I have participated in webinars on the new CFPB rules, but are there any basic lending classes anyone would recommend so I can understand lending in general? I've been reading information on ECOA, TIL and RESPA, but it is a lot to take in and not always easy to understand.

Thank you!

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#1959340 - 09/04/14 04:38 PM Re: TIL & General Compliance Question Nids
Dan Persfull Offline
10K Club
Dan Persfull
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
1. Adding a variable rate feature that was not previously disclosed constitutes a refinancing and must be disclosed as such. Commentary 1026.20(a)(3)(b).

2. See #1.

3. See #1.

Contact your state association, take advantage of on-line training sources such as BVS if available, stay active with BOL. If the bank is serious about compliance they need to lift their spending freeze and allow you to attend some schooling.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#1959347 - 09/04/14 04:48 PM Re: TIL & General Compliance Question Nids
Richard Insley Offline
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Richard Insley
Joined: Oct 2000
Posts: 10,179
Toano, VA
The addition of a variable rate feature to a loan meets Reg. Z's standard for a "refinancing." (See Section 1026.20(a), Official Interpretation #3.) For Reg. Z purposes, a "refinancing" is a new transaction requiring new disclosures to the consumer.

Originally Posted By: Nids
I (am) the compliance officer with absolutely no training...My company is on a spending freeze.
Your company is run by suicidal morons. Failing to provide a risk manager the necessary training is the same as ignoring the risks that are supposedly being managed! Your next compliance examination will not be a happy event.
_________________________
...gone fishing.

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#1959355 - 09/04/14 04:56 PM Re: TIL & General Compliance Question Nids
Nids Offline
New Poster
Joined: Mar 2014
Posts: 24
The original note is a fixed/variable reprice note so the variable rate was disclosed. I was told the borrower wanted to go to a fixed rate before the variable rate period so they were doing a note mod. So am I understanding it correctly that it is actually a refinance?

I work for a VERY SMALL lending institution. Apparently they did TONS of these fixed/variable reprice notes so I foresee this coming up a lot and want to make sure they do it right.

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#1959356 - 09/04/14 05:00 PM Re: TIL & General Compliance Question Nids
Doug Hendrickson Offline
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Doug Hendrickson
Joined: Oct 2009
Posts: 3,927
You've got to get yourself training.

One avenue is the ICBA certification:

http://www.icba.org/events/eventdetail.cfm?EventID=308401

This seminar is also held at other locations around the country during the year.

Also check out the BOLConferences Lending Triage for keeping up to date on changes to Loan regulations:

http://www.bolconferences.com/lct2014/

They do a live streaming video which cuts down on travel expenses and more than one person at your organization can also attend.
_________________________
I hear and I forget. I see and I remember. I do and I understand.--Confucius

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#1959365 - 09/04/14 05:20 PM Re: TIL & General Compliance Question Nids
Richard Insley Offline
10K Club
Richard Insley
Joined: Oct 2000
Posts: 10,179
Toano, VA
The loan terms sound like a plain-vanilla teaser-priced ARM. Now that the teaser period is almost over, the borrower asks you to remove the VR language from the original note and (probably) adjust the fixed interest rate that will apply for the rest of the term of the loan.

Whether or not you have a Reg. Z "refinancing" depends on the steps you take to make the changes. If you leave the original note in place and handle the changes via a modification agreement, then it is not a "refinancing." If, instead, you cancel the original note and get the borrower(s) to sign a new one containing the revised terms, then Reg. Z calls it a "refinancing" and requires all new disclosures.
_________________________
...gone fishing.

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#1959369 - 09/04/14 05:28 PM Re: TIL & General Compliance Question Nids
Nids Offline
New Poster
Joined: Mar 2014
Posts: 24
They are just doing a note modification, not cancelling the original note. So as far as I could tell, it was not a refinance (I may have explained that poorly earlier). What confused me was when the closer asked me if she is supposed to provide a final TIL or the effective interest rate disclosure. She really thinks she needs to do a TIL. I just want to be absolutely sure of my answer.

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#1959437 - 09/04/14 07:19 PM Re: TIL & General Compliance Question Nids
Richard Insley Offline
10K Club
Richard Insley
Joined: Oct 2000
Posts: 10,179
Toano, VA
Originally Posted By: Nids
I just want to be absolutely sure of my answer.
Read Section 1026.20(a) and related Official Interpretations (bottom of same page)--that's the rule for Reg. Z purposes. If any other rules come into play (ex-investor or insurer requirements, state law, etc.) they would apply in addition to Reg. Z.
_________________________
...gone fishing.

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#1959478 - 09/04/14 08:31 PM Re: TIL & General Compliance Question Nids
John Burnett Offline
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John Burnett
Joined: Oct 2000
Posts: 40,086
Cape Cod
Nids,

Welcome to Bankers' Threads. You have our good wishes as you struggle to assume the CO responsibilities. As for the costs to get your training, I can only suggest that your bank appears to be "penny-wise and pound-foolish." It can cost the bank a heck of a lot more in penalties if it continues to take that view.
_________________________
John S. Burnett
BankersOnline.com
Fighting for Compliance since 1976
Bankers' Threads User #8

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#1959741 - 09/05/14 05:41 PM Re: TIL & General Compliance Question Nids
Nids Offline
New Poster
Joined: Mar 2014
Posts: 24
Thank you everyone! I will do my best to talk my bosses into paying for training. Until then, I appreciate your assistance. Once I get comfortable with everything I hope to pay it forward by helping others with these types of questions.

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#1959747 - 09/05/14 05:54 PM Re: TIL & General Compliance Question Nids
Skittles Offline
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Skittles
Joined: Sep 2002
Posts: 13,965
TN
Generally another good place to check for training is your state banking association. I get most of my outside training through ours.
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#1959807 - 09/05/14 07:10 PM Re: TIL & General Compliance Question Nids
Richard Insley Offline
10K Club
Richard Insley
Joined: Oct 2000
Posts: 10,179
Toano, VA
Originally Posted By: Nids
basic lending classes...so I can understand lending in general?
See if your credit servicing manager will give you an overview of credit instruments and walk you through the mechanics of lending.
_________________________
...gone fishing.

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