Compliance management is an ongoing effort, but certain laws and regulations prompt annual requirements, updates and other key tasks to maintain an adequate program. Here’s a rundown of some of those tasks that may be necessary to review each year, especially when moving into a new calendar year.
Under the Home Mortgage Disclosure Act (HMDA), the number of mortgage loan originations for all of 2021 should be documented to determine reporting requirements for 2022. If the financial institution exceeds either the closed-end mortgage loan or the open-end line of credit loan volume threshold in each of the two preceding calendar years (2020 and 2021), it must begin to collect and file for the 2022 reporting year.
For financial institutions required to collect HMDA 2021 data for reporting in 2022, an annual HMDA scrub might be in order to verify all data is submitted correctly by the March 1 reporting deadline. This HMDA scrub may entail verification of data points back to source documents on a sample basis or on the entire Loan Application Register (LAR).
Fair lending analysis
Once the HMDA LAR is submitted, regulators can use this data as part of their fair lending examinations. This might be a good time to perform your own fair lending data analysis so you know what your data is saying and are able to tell your own story if any disparities are found.
As a reminder, the 2020 census data tract boundaries were released by the U.S. Census Bureau in February 2021 for use with data collected beginning January 1, 2022. Ensure your geocoding systems have been updated with the 2020 census data to begin using the new data in 2022. This could affect not only your HMDA LAR data collection but also Community Reinvestment Act (CRA) reporting.
The CRA public file must be updated by April 1 of each year. Make sure the census tracts reported for the CRA assessment area and each branch location use 2020 census data.
Also, check your annual asset size for CRA purposes so you know whether you are or will be moving into a new size category for CRA examinations. Those moving from being a small bank to an intermediary small bank will need to ensure community development activities are tracked.
Large CRA banks: Ensure your small business and small farm data has been collected and reviewed for accuracy and that required data is filed by March 1.
Annual thresholds should be reviewed for total points and fees for high-cost mortgages. These are adjusted annually on January 1 based on the annual change in the Consumer Price Index. Make sure systems used for identifying high-cost mortgages and verifying points and fees on qualified mortgage loans are updated.
HELOC and ARM disclosures
This may be the time historical tables and payment examples are updated for home equity line of credit application disclosures and initial adjustable-rate mortgage disclosures, based on the effective date used for updates.
The remittance transfer threshold found in Regulation E changed during 2020. Now the safe harbor is provided to those with 500 or fewer remittance transfers in the previous calendar year and 500 or fewer remittance transfers in the current calendar year. Year-end is a good time to document your count of remittance transfers to determine whether you must begin complying with the remittance transfer rules or you are able to stop complying if you did not have the safe harbor before but do now.
Verify compliance with the mortgage loan originator compensation rules, especially for any planned year-end bonuses. A reminder might be needed to ensure any non-tax-deferred bonus based on profits does not exceed 10% of the individual loan originator's total compensation. Any changes to incentive plans for mortgage loan originators should be reviewed for compliance.
If you service mortgage loans with private mortgage insurance (PMI), ensure your annual PMI disclosure is scheduled to be sent at the applicable time during the year.
Currency transactions, Regulation O insiders
For Bank Secrecy Act (BSA), schedule the annual review of your currency transaction reporting exemptions, and schedule time to renew your 314(b) registration if applicable.
Make sure annual related interest forms are completed for all Regulation O insiders if applicable. This may also be the time to obtain the annual board resolution defining the executive officers for Regulation O if you are using the more restrictive definition.
Other annual tasks that may be due at this time include providing an annual report to the board regarding the Regulation V Red Flags program and Gramm-Leach-Bliley Act information sharing program and security program. Check that annual independent Secure and Fair Enforcement for Mortgage Licensing Act and BSA audits were completed and reported to the board.
Privacy notices and compliance issues
Send annual privacy notices if your sharing practices have changed or if you share in a manner that requires an opt-out disclosure. Ensure your compliance risk assessment has been updated and compliance monitoring and audit schedules have been established.
Finally, it’s a good idea to check the status of employee training to ensure deadlines for completion are or were met and to set the schedule for the coming year.
This is not an exhaustive list of things to do for the transition from one year to the next, but we hope it’s a helpful reminder of key tasks that should not be missed.
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