ABA Banking Journal - April 2008 - (Page 55)

MIB X AL O Think before you target My bank wants to do a targeted mailing advertising home loans to a select a group of people, based on certain criteria (such as assets). Is there anything we should consider before doing this? First, consider whether the targeting will exclude people on a prohibited basis who might otherwise qualify for this offer. Second, consider whether the results of your campaign are likely to be so significant as to affect your Community Reinvestment Act performance and in what way. Third, evaluate your marketing materials to ensure that the targeted audience would understand your offer and not be deceived by your sales pitch. Last, if you are using a third party, such as a credit reporting agency, to create your marketing list, ensure that you are complying with any applicable prescreening rules. Q. A. evidencing the credit obligation if signing only the mortgage or other security agreement is sufficient to make the property available to satisfy the debt in the event of default. However, if under state law both spouses must sign the note to create an enforceable lien, the creditor may require the signatures.” So, here’s your bottom line: Make sure you have a good understanding of your state laws. Regulation B also states that: “Generally, a signature to make the secured property available will only be needed on a security agreement. A creditor’s reasonable belief that, to ensure access to the property, the spouse’s signature is needed on an instrument that imposes personal liability should be supported by a thorough review of pertinent statutory and decisional law .” RESPA and customer acknowledgments My auditor stated that we are in violation of the Real Estate Settlement Procedures Act because our Transfer of Servicing Agreement is not signed (acknowledged) by each borrower. Is this required? This is a tricky question! The requirement to obtain an acknowledgment (signature) on the transfer of servicing disclosure was removed from RESPA in 1996. However, this was never removed from HUD’s Reg X. Until the regulation is changed, the requirement is still there. Nevertheless, unless your own bank policy and procedures require the borrower’s acknowledgment, the best thing to do is to look at the exam procedures from your primary federal regulator to see what they are looking for in their examinations, and proceed accordingly. (See http://www.federalreserve.gov/boarddocs/caletters/2003/0309/caltr0309.htm) Should non-obligated spouse sign? We are doing a loan for a commercial entity and the owner/principal has pledged his personal residence as a guarantee for this loan. We have a mortgage from the husband and wife, which both signed, but we only have a secured guarantee from the husband and no guarantee from the wife. Can we require the non-obligated spouse to sign the loan guarantee? It’s my understanding that should this loan default and we need to foreclose on the property we would have to go through the guarantee in order to accomplish that. It is generally a violation of Regulation B’s spousal signature rules to require a guarantee from the non-obligated spouse. However, creditors may require spouses to sign any instruments required by state law (which might include a loan agreement) to create a valid security interest. According to the Regulation B Commentary: “The rules in §202.7(d) bar a creditor from requiring the signature of a guarantor’s spouse just as they bar the creditor from requiring the signature of an applicant’s spouse.” Sub-paragraph (4) states: “… some state laws require that both spouses join in executing any instrument by which real property is encumbered.” If an applicant offers such property as security for credit, a creditor may require the applicant’s spouse to sign the instruments necessary to create a valid security interest in the property. The creditor may not require the spouse to sign the note Q. A. Q. A. Notify after discharge A borrower with an adjustable rate mortgage applied to our bank for relief under the Servicemembers Civil Relief Act (SCRA). We lowered the rate to 6%, as required by the act. My question is—when the servicemember is discharged from active duty, is there any notice that must be sent when the rate returns to the contract rate? The SCRA itself does not appear to contain language mandating such a disclosure. However, because this is an ARM, you need to look at Regulation Z. According to Federal Reserve staff, when the SCRA no longer applies and the rate readjusts to the contract rate, the creditor must provide the advance notice required by §226.20(c), which states: “An adjustment to the interest rate with or without a corresponding adjustment to the payment in a variable-rate transaction subject to §226.19(b) is an event requiring new disclosures to the consumer.” Although you may be sending periodic rate adjustment notices while the servicemember is deployed, if the rate adjusts after discharge, you must still notify the borrower in accordance with the Reg Z requirements. Q. A. Leslie Callaway, CRCM, contributing editor, works with ABA experts to answer member questions. Submit questions to lcallawa@aba.com. Disclaimer: Our answers do not provide, nor are they intended to substitute for, professional legal advice. Subscribe at www.ababj.com ABA BANKING JOURNAL/APRIL 2008 55 http://www.federalreserve.gov/boarddocs/caletters/2003/0309/caltr0309.htm http://www.federalreserve.gov/boarddocs/caletters/2003/0309/caltr0309.htm http://www.ababj.com

Table of Contents Feed for the Digital Edition of ABA Banking Journal - April 2008

ABA Banking Journal - April 2008 Contents Editor's Column You Can't Beat Wal-Mart: Or Can You? Snapshot: Non-Interest Income Shoulders More Weight ABA National Conference for Community Bankers Report 100th Anniversary: Then & Now ABA Resources ABA Chairman's Position Banks Plus Insurance: How to Make It Work Pass the Aspirin 2008: Year of Rich Internet Apps? Tough Time For That IPO Your Audience Needs to Know Who You Are Telepresence: Costly But Very Cool Webnotes Better Websites Mean Tougher Compliance Mailbox Banker's Mart To Advertise/Index of Advertisers The Economy

ABA Banking Journal - April 2008

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