Compliance in Unfamiliar Territory - A Small Bank

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Question:

I'm new to the compliance area for a small community bank. I came from a larger national bank where compliance was handled from a compliance deptartment. My question is the following:In reviewing several loans recently where we granted a loan for the purchase of land with a one year term with P and I due at maturity, I found no GFE, preliminary disclosure, or SDS. Are they needed on this type of loan? We also took as additional security a certificate of deposit. The note is a promissory note and does not have a security clause in it. We have an assignment of deposit account in file but no separate security agreement for the CD. I say we need one the lender says no. Who is right?

Answer:

I am assuming this is a consumer purpose loan:

Land only loans are not subject RESPA disclosures. HUD's Reg. X (RESPA) 3500.5.

A brief description of the security is required in your TIL disclosure. The assignment could serve as your security agreement, but it should reference the loan documents and in my opinion the note should reference that it is secured by a separate security agreement.

First published on BankersOnline.com 11/07/05