News & Updates

Consumer Compliance Handbook Update: June 2010

The Federal Reserve Board recently released their latest update to the Consumer Compliance Handbook. The update reflects recent changes to Regulation C, Home Mortgage Disclosure, Regulation DD, Truth in Savings, and Regulation X (the implementing rule for the Real Estate Settlement Procedures Act [RESPA]).

Regulation C (12 CFR 203) implements the Home Mortgage Disclosure Act (HMDA), enacted by Congress in 1975 as Congress believed that some financial institutions had contributed to the decline of some geographic areas by their failure to provide adequate home financing to qualified applicants on reasonable terms and conditions. One objective of HMDA and Regulation C is to provide the public with information that will help show whether financial institutions are serving the housing credit needs of the neighborhoods and communities in which they are located. A second purpose is to aid public officials in distributing public-sector investments so as to attract private investment to areas where it is needed. A third purpose is to assist in identifying possible discriminatory lending patterns and enforcing anti-discrimination statutes.

Updates to the Regulation C examination procedures reflect changes to the threshold for the reporting of pricing information on higher-priced loans. The changes to Regulation C conform the threshold for rate spread reporting to the definition of “higher-priced mortgage loans” included in amendments to Regulation Z (Truth in Lending).

Regulation DD (12 CFR 230), which implements the Truth in Savings Act (TISA), became effective in June 1993. The purpose of Regulation DD is to enable consumers to make informed decisions about their accounts at depository institutions through the use of uniform disclosures. The disclosures aid comparison shopping by informing consumers about the fees, annual percentage yield, interest rate, and other terms for deposit accounts. A consumer is entitled to receive disclosures:

• When an account is opened
• Upon request
• When the terms of the account are changed
• When a periodic statement is sent
• For most time accounts, before the account matures

The regulation also includes requirements on the payment of interest, the methods of calculating the balance on which interest is paid, the calculation of the annual percentage yield, and advertising.

Changes to the Regulation DD examination procedures address the requirement that all depository institutions must disclose aggregate overdraft fees on periodic statements. The changes also address the requirements for balance disclosures provided to consumers through automated systems.

The Real Estate Settlement Procedures Act of 1974 (RESPA) (12 USC 2601 et seq.) (the ‘‘Act’’) became effective on June 20, 1975. The Act requires lenders, mortgage brokers, or servicers of home loans to provide borrowers with pertinent and timely disclosures regarding the nature and costs of the real estate settlement process. The Department of Housing and Urban Development (HUD) promulgated Regulation X (24 CFR 3500), which implements RESPA.

RESPA examination procedures have been updated to reflect regulatory changes by the Department of Housing and Urban Development (HUD) to Regulation X. A number of technical changes provide streamlined mortgage servicing disclosure language, eliminate outdated escrow account provisions regarding the phase-in period, and permit an “average charge” to be listed on the Good Faith Estimate (GFE) and HUD-1/1A Settlement Statement. Key substantive changes include a standardized and binding GFE form and revised HUD-1/1A Settlement Statement.

Source:
Consumer Compliance Handbook:
http://www.federalreserve.gov/boarddocs/supmanual/cch/cch.pdf