As we near the end of 2020 and begin planning for 2021, remember to add a reminder on your calendar for the tasks that have to be completed within certain annual regulatory time frames. Below are some time-sensitive items that may impact your financial institution.
Regulation C - Home Mortgage Disclosure Act (HMDA)
HMDA has various timing requirements for data collection and reporting. Financial institutions that are subject to HMDA reporting must ensure their Loan Application Register (LAR) is updated within 30 calendar days after the end of the calendar quarter for loans and applications for which the institution has taken final action. This requirement is found in Section 1003.4(f).
Section 1003.5 requires that data collected on the LAR be submitted annually by March 1. The data reported is from the prior year. An authorized representative of the financial institution must certify to the accuracy and completeness of data submitted, and a copy of the LAR must be retained for at least three years.
A financial institution that reported, for the preceding calendar year, at least 60,000 covered loans and applications (excluding purchased covered loans) must submit its LAR quarterly, as detailed in Section 1003.4(f).
HMDA data should be tested for accuracy prior to submission, so it is important to have a formal review process in place to ensure loan file data supports the information in the data fields and, when there are discrepancies, that the LAR is corrected.
Consider adding to applicable calendars the quarterly and annual reviews of the HMDA LAR and submission dates.
Regulation P – Privacy of Consumer Financial Information Act
Financial institutions must provide a clear and conspicuous privacy notice to individuals not less than annually. Annually is at least once in any period of 12 consecutive months. Therefore, you will want to ensure these notices are going out no later in 2021 than when they were delivered in 2020.
Banks and credit unions are not required to provide an annual notice if two conditions are present. First, if does not share information with nonaffiliates requiring an opt-out under Regulation P and, second, if information sharing policies and practices have not changed since the last notice.
Regulation Z – Truth in Lending Act (TILA)
Financial institutions that offer variable-rate Home Equity Lines of Credit (HELOCs) must update their HELOC application program disclosures annually based on the timing disclosed in the historical table of the form.These disclosures must be updated as soon as reasonably possible after the new index value becomes available. For fixed-rate plans, program disclosures must have a recent annual percentage rate imposed under the plan. A recent annual percentage rate is a rate that has been in effect under the plan within the 12 months preceding the date the disclosures are provided to the consumer.
When a bank or credit union offers adjustable-rate mortgages (ARMs), subject to 1026.19(b), the ARM program disclosures must be revised once a year, as soon as reasonably possible after the new index value becomes available. Updates are also required when the loan program changes.
Though reasonably possible is not defined, management should set a time frame that meets regulatory expectations and industry standards. For example, if the index value used in these disclosures is from the last business day of January, it would seem reasonable that the disclosures would be updated by the end of February. In addition to updating the disclosures in the loan software, it is equally important to remove outdated paper disclosures that loan staff might have tucked away in a drawer and to update these disclosures on websites. Not taking these two additional steps are common problems we find when testing HELOCs and ARMs.
Regulation BB – Community Reinvestment Act (CRA)
The requirements of Regulation BB differ by regulator, and most credit unions are not subject to this rule.
Banks examined by the FDIC and Federal Reserve must have the information in their CRA public files, both at the main location and branches, current as of April 1 of each year. These banks must make available at the main office and, if an interstate bank, at one branch office in each state, all information required to be in the public file. Each branch must have a copy of the public section of the bank's most recent CRA performance evaluation and a list of services provided by the branch.
For OCC-supervised banks and savings associations, effective October 1, 2020, the manner in which the public file is made available to the public is up to the institution. In the preamble to the regulation, the OCC indicated that the public file may be made available to the public through any means, including websites, as long as accommodations are made for anyone who does not have internet access. The information in the public file must still be current as of April 1 of each year.
Currently, all banks subject to CRA data collection and reporting, must annually report their CRA data by March 1 for the prior calendar year. Banks, except a small bank or a bank that was a small bank during the prior calendar year, must also report by March 1 of each year a list for each assessment area, showing the geographies within the area. Just like with HMDA, it is important to have a process in place to test the integrity of the data prior to submission.
The Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act)
Under the SAFE Act, Mortgage Loan Originators (MLOs) must renew their registration during the annual renewal period. The annual renewal period is November 1 through December 31 of each year. During the renewal period, an MLO must confirm and update his or her registration records. It is important to ensure these renewals are done on a timely basis because any registration that is not renewed during this period will become inactive, and the individual cannot act as an MLO at a covered financial institution until renewal requirements are met.
The items above are just some of the regulatory timing requirements financial institutions will want to ensure they have reminders for as we move into 2021. Other tasks you may want to set reminders for are sending Regulation O-related interest forms to insiders, annual private mortgage insurance notices and escrow disclosures, and annual error resolution notices if not on statements. Having a plan in place will help keep your institution on track and ensure updated information is provided to the public within regulatory guidelines.