Compliance officers understand the challenges that loan servicing faces since the implementation of Dodd-Frank and how new regulations compare to mortgage servicing, insurance tracking, blanket VSI, and lender-placed insurance. Remaining knowledgeable with ever-changing regulations regarding RESPA, NFIP, TILA, GSO’s and the Joint Agencies has proven challenging for even the largest lenders.
In 2012, Miniter Group made a commitment to embrace our lenders’ new regulatory environment. We set out to create a pro-active compliance department to provide expert advice to our lender partners while monitoring all legislative and regulatory initiatives that will affect them.
Our Compliance Department compiles information from our lenders regarding regulatory trends from examiners. This information is recorded in our knowledge base; whenever a regulatory trend is discovered, the information is disseminated to our lenders. We do this through email blasts, white papers, and scheduled webinars.
During that situation, the timing of initial notifications and force-placement of flood insurance had many lenders scrutinized by their regulators.
The confusion created by regulators during flood zone map changes in the first quarter of 2015 is an excellent example of the benefits of this process. During that situation, the timing of initial notifications and force-placement of flood insurance had many lenders scrutinized by their regulators. Interpretation by the regulators was not consistent between geographic regions. Miniter Group’s compliance department issued blast emails along with a series of white papers to help lenders address the situation with their regulators.
The Miniter compliance team also oversees our proprietary software development and execution of our Borrower-CentricSM workflows. This team is responsible for proactively providing all Vendor Management documentation to your compliance department on a predetermined calendar and with the guarantee that you will meet your regulatory requirements.
Lending Regulation Compliance
We are here to work with you to develop and monitor your outsourced collateral risk management solutions. We welcome you to explore the compliance sections of our website. Download one of our compliance white papers related to vendor management for more information.
Delivering a compliant flood risk management program for your portfolio, especially one that includes lender-placed flood insurance, requires constant monitoring of FEMA, NFIP, GSO and Joint Agency proposed and existing regulation. The National Flood Insurance Program (NFIP) is funded by Congress, and flood losses in recent years have put stress on this program.
In 2012, Congress passed the Biggert-Waters Act (BW-12) which was met with harsh resistance from congressional constituents mainly in New Yok and New Jersey. The law was reversed and replaced by Homeowners Flood Insurance Affordability Act of 2014 (HFIAA), which reinstated grandfathering of low-cost flood insurance and has exhausted the NFIP premium pool as a consequence. In 2018, the NFIP is operating at a significant deficit and we will see more changes to the NFIP as congress addresses these accelerating flood losses. There may even be an attempt to privatize the NFIP during the next congressional funding debate.
Miniter Group has dedicated resources that monitor all activity around the NFIP. As we mentioned above, we develop our tracking software in-house, which allows us to quickly implement any compliance changes. Outsourcing your insurance tracking activities to Miniter will ensure you stay in compliance during the ever-changing National Flood Insurance Program.
The Consumer Financial Protection Bureau (CFPB) set out to change the force-placed insurance industry. This created many challenges for compliance officers throughout the banking industry. At Miniter Group, we embraced these changes — we saw them as an opportunity to enhance our industry.
The first draft of the new Real Estate Settlement Procedures Act (RESPA) law in 2012 was 750 pages long, and force-placed insurance was mentioned 369 times.
As the CFPB continued to enhance the RESPA regulation from 2013 to 2016, Miniter Group was able to disseminate these regulations and then develop and implement operational processes to meet the requirements of these new regulations. During this time, Miniter’s compliance department worked with many of our lenders to deliver the correct compliant solution from the onset.
Today, Miniter’s Compliance department continues to monitor RESPA, TILA and the GSO regulatory compliance initiative as they develop.
All regulatory bodies have increased scrutiny with regard to third-party relationships. This has put additional workloads on lenders’ compliance departments. The FDIC Examination Manual has 104 questions related to evaluation of an effective Vendor Management Program. Regulatory focus has shifted to a more rigorous selection process and stronger oversight.
Miniter recognized this trend in 2014 and has proactively redesigned our entire company to meet the regulatory requirements regarding third-party vendors who house your customers’ sensitive information.
Frequently Asked Questions
My borrower’s or member’s property has just been remapped into a Special Flood Hazard Area. What is the right way to handle this?
FDPA rules require you to send notice to your borrowers (or members in the case of credit unions) as soon as you become aware that the property is now in a SHFA. This notice begins the 45-day cycle before flood insurance must be in place. It is often a fairly straightforward process, but it can become complicated quickly by certain factors. For example, there might be existing flood insurance policies that are simply made insufficient by the change in the flood maps. When this happens, your institution should carefully weigh its options and its risks.
Should we force-place insurance on the last day of the notice cycle (the “45th day”) or the first day after it (the “46th day”)?
You may be surprised to know that you may place insurance as soon as the borrower’s flood policy has expired. Under the FDPA requirements, you may begin to charge the borrower immediately, but you will be responsible for refunding the borrower in the case of any overlapping coverage. Flood insurance must be in place no later than the 46th day, and best practices dictate that you delay the placement to avoid refunding premiums.
Our borrowers or members hate the language of the insurance lapse notice. May we simply rewrite it?
Legally, yes, but there is reason for pause before doing so. The CFPB’s rule on RESPA provides model forms, but there is no direct requirement to use them. Rather, the model forms provide an outline the CFPB has approved for providing the information that is required. As such, while you may depart from the model form, the model forms provide the only true guarantee that your notices will be found to comply with RESPA requirements. Even so, we have found there are ways to craft these notices so that they meet all the goals and requirements as detailed by RESPA in the most effective way possible.