State of Connecticut Department of Banking http\\. State Consumer Credit Examination Issues Paul Ligas Principal Financial Examiner

State of Connecticut Department of Banking http\\. Questions ?

State of Connecticut Department of Banking http\\. STATE RESPONSIBILITIES Responsible for Truth-In-Lending - Reg Z Examinations for all State Chartered Financial Institutions Expanded to address Real Estate Settlement Procedures Act - Reg X Last year conducted examinations at 12 Banks and 15 Credit Unions

State of Connecticut Department of Banking http\\. THE YEAR IN REVIEW State TILA ratings reflect the efforts of management in meeting state regulatory requirements. Especially the compliance and loan origination teams

State of Connecticut Department of Banking http\\. THE YEAR IN REVIEW Most often assigned ratings are in the “strong” and “generally strong” area. Ratings definitions are derived from the Compliance Examination.

State of Connecticut Department of Banking http\\. AREAS OF FINDINGS ARM Calculation Stream No longer valid due to changes in TIL. New form requires that the stream is calculated for the first five years and then must disclose maximum possible amount per loan documentation.

State of Connecticut Department of Banking http\\. AREAS OF FINDINGS Rescission Time Periods Borrowers continue to date both parts of the rescission form as of the closing date. This should be caught by robust post closing packet review. Remember that this will leave you open to a possible 3 year rescission period and in the worst case allow the borrower to have an interest free unsecured note for the three year period.

State of Connecticut Department of Banking http\\. AREAS OF FINDINGS Rate Change Notices Occasionally, the rate change notices contain errors and do not reflect the proper rate as permitted under the actual loan documentation.

State of Connecticut Department of Banking http\\. AREAS OF FINDINGS RESPA issues There continue to be problems with GFEs and HUD1/1A’s in the area of “no cost” fixed second mortgage products. Issues are caused when bank overestimates the reimbursement costs and then changes them on the Final HUD1/1A. This leads to a change in the amount of the reimbursement to the borrower which can not be reduced at time of closing. Changes require new documentation and if three day period is not available than borrower has option to waive the period but should be in writing and not on a form letter.

State of Connecticut Department of Banking http\\ EXAMINATION FOCUS Since the CFPB has not yet determined the new forms yet we will be going back to basics. Risk-based examinations will follow most of the old procedures.

State of Connecticut Department of Banking http\\ EXAMINATION FOCUS Advertising: Electronic (Web page) Print media Rate Change Letters Form Reviews First and second mortgage HELOC Loan disclosures

State of Connecticut Department of Banking http\\ EXAMINATION FOCUS First mortgage loans Refinance and purchase mortgage Construction-to-permanent mortgage

State of Connecticut Department of Banking http\\ EXAMINATION FOCUS Second fixed mortgage loans No cost versus cost GFE /HUD1/1A consideration for changes HELOCs

State of Connecticut Department of Banking http\\ EXAMINATION FOCUS Other Consumer Lending Automobile: new and used Personal: Secured versus unsecured Personal lines of credit Overdraft lines of credit

State of Connecticut Department of Banking http\\ EXAMINATION FOCUS TILA audits in years between examinations Compliance Committee minutes Compliance training for individuals

State of Connecticut Department of Banking http\\ EXAMINATION FOCUS Advertising Book Web page compliance verification notes when available Review at web page

State of Connecticut Department of Banking http\\. EXAMINATION PROCESS Exit meeting(s) with management Area supervisors Management selected participants

State of Connecticut Department of Banking http\\. EXAMINATION PROCESS Wherever necessary: Credit Card review Reverse Mortgage loans Personnel Educational Loans

State of Connecticut Department of Banking http\\. EXAMINATION PROCESS First Day Letter How can we improve it? How can we simplify it? Confusion areas?

State of Connecticut Department of Banking http\\. AGENCY CONTACTS Bank Relationship Contact Department Manager Examiner

State of Connecticut Department of Banking http\\. AGENCY CONTACTS Credit Union Relationship Contact Department Manager