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Insights and resources
EVENT | December 9, 2026
CFO Roundtable: Prepare your financial institution for 2027 and beyond
Staying compliant today requires looking ahead to the regulatory and reporting expectations of tomorrow. Join us from 12:30-2:00 pm CT on December 9 for the CFO Roundtable, a forward-looking learning opportunity for chief financial officers, chief risk officers and other accounting leaders. This two hour session will provide strategic clarity on key audit, accounting and tax developments to help your institution prepare for 2027 and beyond. Proactively preparing for change helps your institution maintain a competitive advantage. Join us for the context and practical guidance needed to lead your team with clarity and confidence. Save your seat today.
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Avoiding adjustable-rate mortgage loan compliance challenges
Adjustable-rate mortgage (ARM) loans can present compliance challenges throughout the entire loan life cycle. From application disclosures to rate adjustment notices, even minor errors can result in regulatory violations, customer confusion and operational risk. Keep reading to learn about several common ARM compliance errors and for guidance on avoiding them. Timing of early disclosures A common mistake is the timing of early ARM disclosures, including the Consumer Handbook on Adjustable-Rate Mortgages or a suitable substitute and a loan program disclosure for each variable-rate program in which the consumer expresses an interest. These do not always allow you three business days from the application date to provide the disclosures, like other early disclosures. Regulation Z states that these disclosures must be provided at the time an application form is provided or before the consumer pays a non-refundable fee, whichever is earlier (except that the disclosures may be delivered or placed in the mail not later than three business days following receipt of a consumer’s application when the application reaches the creditor by telephone, or through an intermediary agent or broker). Based on that requirement, an in-person application request requires the disclosures to be provided on the date of application and cannot be mailed later. Common mistakes with loan program disclosures Other common issues include incorrect information in the ARM loan program disclosure. If the initial interest rate is a discounted or premium rate (not based on the index and margin in effect), this fact must be disclosed in the early disclosure, but it is often missing. If using the optional 15-year historical example, make sure the disclosure identifies the month and day being used for each year in the table, verify the indexes disclosed are correct, and the margin used was one in effect within the prior six months. Often, the table is not updated properly or quickly enough. When disclosing the initial interest rate and payment example for a $10,000 loan, make sure a current rate is being used. Also, when updating the index and margin, make sure the example payment reflects the newly disclosed rate. Avoiding violations with ARM rate changes ARM rate changes and notification requirements probably cause the most errors. Using the wrong index is a common mistake. For example, an index that specifies a weekly average may be inaccurately disclosed with the daily version of the index. The weekly average is calculated on Friday and is generally published the following Monday, but the daily index is often used instead of the weekly average, resulting in errors and incorrect interest rates being assigned to borrowers. Make sure the index is pulled from the correct source and matches what was disclosed in the promissory note. Another common issue involves periodic caps. Institutions should verify that the caps disclosed in the promissory note match those being used to calculate rate adjustments. It is common to have different caps for the first-rate change than for subsequent rate changes. The system might be set up for those initial caps, but not updated for the caps that will follow for any subsequent rate changes. Errors in rate change notices are common Rate change notices present additional challenges. An example of an error is failing to provide sufficient detail when describing the index used to determine the new rate. Some systems limit the number of characters, so it takes a bit of creativity to fit the required details, especially when trying to spell out the “X”-year weekly average constant maturity U.S. treasury securities index, which is quite lengthy. The weekly average part is often omitted when truncating, but it is an important distinction in the index used and should be included. Also, the estimated balance and projected new payment must be based on the projected balance and number of remaining payments due at the time the rate will be changed. But some notices include the current balance at the time the notice is generated rather than a projected balance, which also results in the new payment being inaccurately calculated on the notice. In addition, the requirement to disclose rate limits and foregone interest rate increases can be confusing, as the disclosures required by § 1026.20(c)(2)(iv) regarding foregone interest rate increases apply only to transactions permitting interest rate carryover. Usually, a promissory note does not include such a provision, yet the foregone interest disclosure is being included anyway. Even though the interest rate was not increased fully due to a limit or cap percentage, there is no foregone interest when the note does not allow for such carryover of interest. Another issue is the required timing of the ARM adjustment notices. An initial notice must be sent at least 210 days, but no more than 240 days, before the new payment at the adjusted rate is due. The subsequent notices must be sent at least 60 days, but no more than 120 days, before the new payment at the adjusted rate is due. Occasionally, the credit agreement for an ARM originated AFTER January 1, 2015 (the date Regulation Z ARM notice requirements were effective) does not have an adequate lookback period for selecting the index prior to the change date (at least 45 days), resulting in issues with meeting the timing requirements for the ARM adjustment notices. For example, if the credit agreement does not contain a lookback period and requires the index to be selected on the change date, it is not possible to send an ARM adjustment notice at least 60 days before the new payment at the new rate is due, because the index will not yet have been published. Remaining compliant While ARM loans present numerous compliance challenges, many of the most common errors can be prevented through strong procedures, staff training and periodic quality-control reviews. Regular validation of disclosures, rate calculations and notice content can help institutions remain compliant while providing accurate information to borrowers. Read more FDICIA requirements: How banks approaching $1 billion should prepare for FDICIA compliance Tips for mastering accurate CECL regulatory reporting 6 steps to strengthen your financial institution’s call report preparation process
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Repos and foreclosures are trending up. How should financial institutions prepare?
Both repossessions and foreclosures have been rising over the past year. The uptick creates additional risk for lenders, especially community financial institutions that have made issuing auto and home loans a core part of their business model. Are those institutions prepared to deal with this trend, which, for now, seems likely to continue? From an accounting, customer service and risk management perspective, there are key actions you should be taking today to shore up your processes and ready your team. Keep reading to learn more. Rising repossessions and foreclosures create risks for financial institutions With consumer debt recently rising to a record high of almost $19 trillion , Americans are feeling mounting financial pressure. This is starting to show up in repossession and foreclosure rates, the latter of which are higher than at any point in the last 6 years . Consumers are also increasingly underwater on vehicle loans, many of which reflect inflated COVID-era pricing for even used cars. For financial institutions, this environment comes with risks. Institutions may face increased risk to their actual loan portfolios, as well as related challenges like incorrectly accounting for repossessions in their books. Consider factors like: Portfolio risks: Your institution is at risk of a spike in repossessions or foreclosures on the loans you’ve issued directly to customers or members. However, the bigger risk may fall on institutions that participated in loan pools or indirect lending, especially involving auto loans. In these situations, the borrowers may not be your customers or members and lack a relationship with your institution, resulting in less loyalty to repay their loans than borrowers who bank with you. There is also a risk with the reliance on the lead lender’s collection and reporting practices in a participation situation. Liquidity dangers: Are you ready to handle a major jump in defaults from a liquidity perspective? For community financial institutions that lack the resources of their giant national competitors, a notable drop in borrowers meeting their repayment obligations could pose a genuine liquidity risk you should weigh with your risk management team. Team inexperience: Foreclosure rates are significantly higher than in previous years, so your team may not be fully prepared to navigate an uptick from a process or compliance perspective. This could materialize as inexperience in collection efforts or workouts — with shortfalls in the latter area leading to foreclosures that could otherwise have been avoided had your team been ready to offer restructured payment terms. Incorrect accounting: Many financial institutions make GAAP accounting errors with vehicle repossessions. For example, if your institution takes ownership of a vehicle during the repossession process, you are supposed to immediately write down the value of that vehicle. However, institutions often wait until the vehicle is sold before writing it down, which can lead to delayed recognition of losses and regulatory findings. So what should you do to address these risks? Here’s where to start. How should financial institution CFOs adapt to meet the current repossession and foreclosure uptick? To meet the heightened repossession and foreclosure environment, financial institution CFOs and finance leaders should take action to manage risks, improve processes and maintain compliance. Watch for warning signs and make sure you know what to do if more of your loans start going into default, including from both a process and accounting perspective. Key action steps include: 1. Double-check your accounting processes Don’t make avoidable accounting mistakes. Double-check your accounting processes to make sure you are accounting for repossessions and foreclosures correctly. Under GAAP, you should be basing your accounting of either asset type on fair value minus costs to sell, so work with your team to ensure that you’re doing so and consider bringing in additional advisory support if you need further guidance. 2. Get in touch with your borrowers when you notice warning signs You have a great deal of information about your borrowers, so watch that data and look for warning signs for both individual borrowers and in broader trends. Do you see signs that your customers or members are taking on more credit card debt, perhaps to cover living expenses? This is a red flag that they may be at risk of falling behind on loan payments. If you notice a borrower is headed for trouble, don’t wait for them to default. Instead, be proactive: Approach the borrower to go after a workout or a refinance that will allow them to continue meeting their loan obligations. Also, make sure your team understands how to take this type of action and why it matters. 3. Keep an eye on your participations If you’re involved in a group of pooled loans with other financial institutions, carefully assess your risks there. Do your due diligence: Get all the documents and reports you can from the lead lender and make sure you know what your options are if the loans in the participation start to go bad. (If you’re the lead lender, make sure you’re sharing all relevant information with the other participants.) 4. Inform your borrowers about last-ditch options Beyond workouts or refinancing, make sure your borrowers also know about last-ditch options like a voluntary repossession or a deed in lieu. These are obviously far from ideal, but may be less damaging to a borrower’s credit than a standard default and can also allow your institution to complete an inevitable repossession or a foreclosure more quickly. 5. Brush up on compliance rules Different states have their own rules around repossessions, foreclosures and collections. Make sure you and your team are aware of and in compliance with the appropriate compliance standards for any states you operate in, and that you have access to resources to stay on top of regulatory changes. 6. Decide how to handle collections Do you handle collections internally or outsource to a collections agency? There’s no right or wrong answer, but think about yours. 7. Reassess your allowance for credit losses As delinquencies, repossessions and foreclosures increase, make sure your allowance methodology is keeping pace with changing portfolio risk. Review whether your reserves reflect current performance, emerging loss trends and relevant qualitative factors, including economic conditions, collateral values, borrower behavior, underwriting practices and collection experience. Waiting until a loss is realized or collateral is sold can delay recognition of credit deterioration and leave reserves short of the portfolio’s actual risk. 8. Look to advisory support A third-party advisory and accounting firm can help you better navigate the current consumer debt climate. Look to advisory support to help assess your risks, review your current loan portfolio, double-check your accounting, review your controls and strengthen your regulatory compliance. Read more Financial institutions need proactive general ledger certification How to mitigate ransomware attacks on financial institutions Can traditional banking avoid losing Gen Z to fintech?
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