Flood FAQ – What can be used to determine value for flood insurance purposes?
According to the Interagency Questions and Answers Regarding Flood Insurance published on October 1, 2011, FAQ #9 states, “[Lender] may use an appraisal based on a cost-value (not market-value) approach, a construction-cost calculation, the insurable value used in a hazard insurance policy (recognizing that the insurable value for flood insurance purposes may differ from the coverage provided by the hazard insurance and that adjustments may be necessary; for example, most hazard policies do not cover foundations), or any other reasonable approach, so long as it can be supported. It is important for lenders to recognize that, when calculating the minimum amount of insurance that is required to be purchased, the insurable value is only relevant to the extent that it is lower than either the outstanding principal balance of the loan or the maximum amount of insurance available under the NFIP.” I should also note that FAQ #10 was withdrawn per the referenced FAQ.
Flood - Letter of Map Change
I recently spoke about Letter of Map Change notifications (Example) that have been sent to County Commissioners in the southern Indiana area related to the recently updated FEMA Flood Maps. I am not sure if this information is being picked up by the Flood Hazard Determination companies or not since the letter from FEMA states, “Because these LOMCs will not be printed or distributed to primary map users…”. This is something you may want to check into.
Should a financial institution allow employees to send/receive text messages to/from customers?
According to a case decided by the Supreme Court of the United States, City of Ontario, California, Et El v. Quon, No. 08-1332, June 17, 2010, an employer may not have any legal rights to text messages sent to and received from a bank customer unless the device used by the employee is owned by the employer and the employer has strict procedures as it relates to the use of text messaging and retention of such messages. The best solution I could provide is a well-drafted Cell Phone, Computer, Internet and Email Use Policy. If you want a resource to check out, I would recommend the website for Law Office of Melissa C. March (http://www.yourlegalcorner.com/articles.asp?cat=emp&id=70).
LaserPro Documents and eSign – Which document needs “wet” ink versus electronic ink?
The Consumer Financial Protection Bureau (CFPB) is working on a project to help facilitate the ability for banks to electronically close mortgage loans more efficiently and still maintain the legal rights of the consumer as well as the lender. The biggest question I have been asked is which documents should be signed with original “wet ink” signatures and which can be signed electronically. Here is a summary of the documents available in LaserPro that I believe need original signature. I also list those that I believe can contain electronic signatures and those that I do not believe require signatures. I would advise each read to consult their legal counsel as to the laws in the state(s) they lend.
Vendor Management – Items to review for a sound vendor management program.
Over the past several months I have spoken with many compliance and risk management professional looking for best practices when evaluating a new vendor or reviewing a current vendor. From my perspective, every vendor should be treated the same initially and then based on what service(s) the vendor provides will determine what happens during the review.
New Vendor
Who are they?
What will they do for your organization?
When will they provide these services (term of the agreement)?
Where the vendor is located, United States, foreign country, etc.? Do they have more than one location,? If so, you need to know ever location in which your company will be provided services?
Why is the company using this vendor?
How will this vendor provide services to the company? Is this a technology provider that will have access to the company’s systems? Will they have access to customer information?
These are the initial questions that you need to ask and many should be covered in the legal agreement by and between the parties. NOTE: Do not sign any agreement until someone, preferably legal counsel, has reviewed and CLEARLY understands the terms and conditions of the agreement.
What additional information is important?
If the vendor will have access to company and/or customer information, you will want to make sure they can comply with the Gramm-Leach-Bliley Act. The contract should include specific terms and conditions.
If the vendor it a technology service provider, do that have an SSAE 16 SOC 1 or SOC II report that can be reviewed?
You should review audited financial statements for the vendor. Are they healthy from a financial perspective?
Is the vendor considered a Technology Service Provider under the FFIEC guidelines? If so, FDIC-regulated institutions should complete a “Notice of Performance of Bank Services Form” (attached). This document should be completed for each vendor and be submitted to the FDIC regional director for your institution.
If the vendor is significant, you will need to conduct a site visit as a means to visually verify what they say they do. Also, make sure you get a list of references, including previous customers. You want to hear the good, bad and ugly.
Listen to your gut. If it doesn’t feel good, slow down and consult the assistance of others. When you sign the dotted line, there’s no going back.
RESPA Integrated Disclosures
The word on the street is that the transaction currently exempt under RESPA (property of 25 acres or more, business purpose loans, temporary financing, vacant land, etc.) would not apply once the Integrated Disclosure become effective. According to the CFPB’s Compliance Guide, “The TILA-RESPA rule applies to most closed-end consumer credit transactions secured by real property. Credit extended to certain trusts for tax or estate planning purposes is not exempt from the TILA-RESPA rule. (Comment 3(a)-10). However, some specific categories of loans are excluded from the rule. Specifically, the TILA-RESPA rule does not apply to HELOCs, reverse mortgages or mortgages secured by a mobile home or by a dwelling that is not attached to real property (i.e., land). (§1026.19(e) and (f)).”
I believe that is enough “random thoughts” for now.
Scott