I hope your management is looking at what has gone wrong at banks that failed recently. If they have, then you are probably hearing talk about how to prevent bank failure. No one wants this to happen to their organization and no one wants their name attached to a bank failure. No time like the present to start to discuss compliance and your role in keeping the ship running smoothly and in “ship shape”.

Regulators and bloggers, pundits, and news media tend to all look for blame. They live in the past tense, who should have been minding the ship? So for your organization, who is minding the store? Now is a great time to add value to compliance within your organization.

Back in 1968 and again in 1970, bankers thought the world was coming to an end. We were handed Regulation Z that required many additional disclosures and interest rate restrictions. It was considered by many to be the end of “earning” a decent return on loans.

Well, fast forward to 2023, the new rules on “junk” fees is going to have a significant larger impact. In the attached article you will see the CFPB is saying that ALL banks they examined for junk fees have decided to no longer charge an NSF fee. What, wait?! Why are they going to that extreme?

In this writers opinion, bankers are running scared of negative publicity. How do you address that? Simple. Fix the problem before your next exam.

https://files.consumerfinance.gov/f/documents/cfpb_supervisory-highlights-junk-fees-special-edition_2023-03.pdf

Read this article closely. Compliance Officers everywhere should be jumping on this and protecting their banking organization “ahead” of the next exam.

I read the significant issue is that these banks, Regions and Wells Fargo, specifically named, were charging fees that were not disclosed.

Role number one of any compliance officer is to know what your disclosures say. So read them again, make sure they agree with what your staff are telling new and existing customers. THEN make sure the system is doing what your disclosures outline is to happen.

We all know that for NSF fees, often the check is represented before the account owner got the NSF notice in the mail. Another fee is charged but the account owner did not have the notice thus regulators consider they did not have enough time to cure the situation. So, why not set up the NSF to charge if they remain NSF after 3 or 4 days? Why should you not charge it at all?

I think this new push on junk fees and consumer protection provides all bankers a catalyst to push for electronic notices. Think about it, if your organization does electronic NSF notices at the end of nightly processing and again in the morning when the determination to pay or return is made, and then impose the charge on day 2, if the account remains NSF, the consumer cannot say or claim they had no time or notice regarding the account being NSF.

Let’s all try to think out of the box, but do it quickly. Your institution needs you to protect them BEFORE the next exam. Have a plan in place. –

Need help? Want to brainstorm about your idea or solution? Give me a call or text me at 314-803-6593.

Many of my clients have one individual responsible for IT security and technology, regulators are not liking that…….. We once considered all technology under one umbrella and managed by one person.

The Information Security Officer needs to be independent of IT operations and report directly to the board, board committee, or senior management. This means a “very” senior level person.

This expectation is outlined in the 2015 and 2016 FFIEC IT Handbook. One states, “to ensure appropriate segregation of duties, the ISO should be independent of IT operations staff and should not report to IT operations management”. The other states, “the ISO should be in enterprise-wide risk management rather than a production resource devoted to IT operations”.

While examiners are not prone to say, you need to hire more people, they do make comments regarding lack of segregation of duties, lack of mitigation of risk and they can lower your IT rating from a “1”. Message received????

You may want to consider now just how you are/will segregate these duties internally. Document the steps you take. If you cannot totally separate these duties, document your recognition of increased risk. Also, document the boards approval and any plans you have in the foreseeable future to hire another IT skilled person, maybe 2 or 4 years down the road. Having a written plan goes far in giving your examiner a comfort level in your level of oversight.

Unless you have been under a rock, you are aware LIBOR is going away as an option for loans tied to a fluctuating interest rate.

Effective 10-1-2021, you should have a new index. Things to consider:

There is a notice requirement to borrowers with loans currently tied to LIBOR. I am recommending at least 60 days notice to consumers. The requirement is that they have adequate time to consider the changes and effect of the changes on their loan. While 30 days is sufficient by regulation when adverse action is taken on an account owned by a consumer, the guidance that states they must have adequate time to consider the changes makes this a bit ambiguous. Sixty (60) days should be more than enough notice.

This notice provided must be sufficient for them to understand the changes. So take some time writing your notice, not just a simple, “LIBOR is changing”. I do not believe that would be deemed sufficient by any regulator.

You should have already created a two-fold written plan for the change, and

Prepared a written assessment of the effect on 1- consumers and 2-your organization.

Tip of the day: If you offer ARM loans tied to LIBOR, you may need to reorder your CHARM booklets. They have been updated for the upcoming LIBOR changes.

Here are a few of the changes effective during COVID (2020)

April 2020 Regulation D changes eliminating the six (6) transaction requirement for savings and money market accounts. The reserve requirements were eliminated, thus the Reg. D requirements are no longer in effect.

July 2020 HMDA reporting requirements changed from 25 closed end loans to 100. This means for small banks, they may no longer be required to report.

July 2020 Remittance transfers exemption increased from 100 to 500.

These rules are some that may have been easily overlooked. Check here for upcoming changes related to LIBOR in coming days.

There may be some lenders that have never offered a forbearance on a mortgage loan or maybe it has just been awhile. Here are some helpful tips:

Within 5 days of receiving a request for forbearance, you must acknowledge receipt.

Within 30 days of receiving a request for forbearance, you must provide notice of your decision.

If you deny the request, you must provide within 14 days of your decision the appeals notice. I would recommend you provide this immediately, your borrower will need this information before 14 days.

If you are struggling with what information to gather for the request, remember, the forbearance you provide under the CARES Act must be coronavirus related and your borrower must state such. FANNIEMAE has a great application for forbearance form which can be used for your inhouse loans as well.

Under Fannie Mae’s guidelines for single-family mortgages:

• Homeowners who are adversely impacted by this national emergency may request mortgage assistance by contacting their mortgage servicer
• Foreclosure sales and evictions of borrowers are suspended for 60 days
• Homeowners impacted by this national emergency are eligible for a forbearance plan to reduce or suspend their mortgage payments for up to 12 months
• Credit bureau reporting of past due payments of borrowers in a forbearance plan as a result of hardships attributable to this national emergency is suspended
• Homeowners in a forbearance plan will not incur late fees
• After forbearance, a servicer must work with the borrower on a permanent plan to help maintain or reduce monthly payment amounts as necessary, including a loan modification

Solicitation Notice 745 https://www.fanniemae.com/content/guide_form/745.doc

Application for forbearance Form 710 https://singlefamily.fanniemae.com/media/16051/display

Next post: What happens after forbearance?

I write this as you are in our 3rd week of enacting our pandemic plan. We are learning much about this Covid-19 but still have so much information we need. I read yesterday about a young man diagnosed with Covid-19 that went about coughing on people in public and attempted to spread the virus. I thought now that’s just crazy.

Then today, I received an alert from law enforcement stating terrorism groups (like ISIS) are encouraging individuals diagnosed with Covid-19 to spread the virus by coughing or sneezing in large groups. Encouraging targeting churches, meetings, and groups where the virus will have the most impact on the largest number of people.

If you have not closed your lobbies completely to the outside world, if you are still allowing customers to breach your space, please reconsider immediately and envoke your pandemic plan, close your lobbies and limit personnel.

With everyones cooperation, we will ultimately get through this but we have to be smart.

Be safe and healthy out there. Don’t venture out in public where people tend to congregate. Warn your staff.

The guidance for servicers is out on Fannie Mae forebearance for borrowers affected by the Coronavirus. https://singlefamily.fanniemae.com/media/22261/display Statistically, this will effect almost 50% of the mortgage loans in the US.

If you service loans for Fannie Mae, this guidance definitely includes you. But what if you are not a Fannie Mae servicer? NPR last week had an article about the Fannie Mae and Freddie Mac forebearance. They stated in the article, it is assumed most lenders will follow this direction even if their loans are not insured by Fannie or Freddie. I think that is a fair assumption. No community bank wants to hear that the big out of town bank down the street is treating its customers better than they are. I believe everyone will be providing forebearance under much the same guidelines. This is not to say, as bankers we do want to help our community as much as possible and will or may have already come up with a great plan for borrowers.

I have been receiving calls already about procedures for providing a forebearance on mortgage loans. What about car loans or unsecured loans (most of you are probably saying, what’s that?). Do you have any loans where the funds were used for education? All these questions and more.

Let’s start the dialog here.

The pandemic we have planned for over the last 14 years is upon us. Many of you have closed your lobbies. What services can you conduct now at the drive-up that you could not last month? Share with our subscribers some of the changes you have made. Everyone benefits from sharing. What about employees, who’s working, who’s not? Are employees using sick days or are you compensating them while they stay home?

Last week, my husband and I went to 2 restaurants. The first was business as usual. You noticed nothing different except fewer people were there. The second was really prepared, every other table was marked with an X and the word no with masking tape. Enforcing the six foot rule. All the condiments were removed from the tables. If you needed salt, they brought it upon request and then they knew what needed to be wiped down on the table before seating the next person. But the last item was what really impressed me, they had paper menus. A photocopy of their regular menu. After you used it, they threw it away.

So obviously, the second restaurant was taking the spread of virus seriously and creatively implemented a plan. I suspect there are many of you that have come up with that one thing that will impress us all. Please share.

In January 2020,  employers in states that have changed their marijuana laws will not be able to drug test employees at random nor for pre-employment, unless there is reasonable suspicion to believe an employee is under the influence while working.

Illinois and Missouri both apply, so whether you have a physical location in IL or MO, or are located in one of the next states to change their marijuana use laws– don’t end up unprepared for the impact that out-of-office marijuana use will have on the job.

You might want to check with your legal counsel to confirm these changes affect you and what your alternatives are.