OCC's Top Ten for 2000

OCC has tallied the common violations for the first six months of Year 2000. There aren't a lot of surprises, but there are some significant changes. Here are the violations to watch for, in reverse order of frequency.

Ten: Truth in savings advertising rates. Violations here include failures to state the APY or to place the APY in an inappropriately small type size. Usually the top ten list is dominated by lending regulations. This year, however, Truth in Savings made the list. Pay attention to those savings account ads!
Nine: Errors in the content of the Truth in Lending calculations, beginning with the finance charge. Failure to include all charges is a perennial problem. Keep working on it. We recommend that you conduct periodic surveys of lenders to find out what sorts of fees they are charging. Also check on what fees any third parties are charging. Then you tell them which fees to include in the finance charge.
Eight: Flood hazard insurance made the list. Make sure your notices of flood insurance availability are sent when required. Also make sure that they contain all the required information, including when and how to obtain flood insurance.
Seven: Not all lenders give all of the reasons for adverse action. Granted, the Official Staff Commentary to Regulation B permits giving no more than four. But up to the number four, creditors must give all of the principal and specific reasons. Don't limit your notification procedures to giving one reason or two reasons. The correct number of reasons depends on the application.
Six: Loan Application Registers should be completed within 30 days of the end of each quarter. Examiners like to find LARs up to date when they come in to examine - and use the LAR information. Don't let this ostensibly clerical function slip - particularly when you know you are scheduled for an examination.
Five: Flood regulations strike again. One of the more common violations examiners (and compliance auditors) find is the absence of the required FEMA standard determination form in the loan file. If you think you have this under control in your bank, just go check the commercial loans that are secured by improved real estate. Chances are they aren't properly researched and insured when it comes to flood hazards.
Four: Escrow accounting rules in RESPA call for aggregate accounting rather than single item accounting. Aggregate accounting makes maximum use of the borrower's escrow money. However, examiners find lots of errors in this accounting method on HUD-1s. If you continue to have problems on the HUD-1, an easy way to correct for this is to issue an initial escrow accounting statement in addition to the HUD-1.
Three: RESPA strikes again. The regulation requires lenders to disclose any required service providers on the Good Faith Estimate. This usually includes services such as the credit report, appraisal, bank's attorney, and the flood hazard certification. Make sure that all your required providers are included.
Two: Flood strikes again. Failure to comply with the general requirements of flood insurance - and in particular requiring flood insurance when property is in a flood hazard zone - is now the second most common violation. Violations of flood insurance requirements are now triggering civil money penalties. Regulators take this one very seriously, so don't be part of the violations club.
One: RESPA tops the list. It used to be Truth in Lending, but that has slipped down the list in deference to RESPA. Timing requirements for the Good Faith Estimates are now the top violation. The GFE should go to the customer within three days of taking the application. HUD has recently clarified that the lender need not give more than one GFE per loan application, but the GFE that is given should be on time! Review your procedures, identify any weak spots, and get this problem fixed.