ABA Bank Compliance - March/April 2017

any additional extensions of credit subject to these limits are considered. See 12 CFR 215.4(c) and (d).” Additionally, review OCC Interpretive Letter #1096 ( www.occ.gov/static/ interpretations-and-precedents/apr08/int1096.pdf), that states in part “… no new loans may be made, 4 and existing loans may not be renewed, except in compliance with Regulation O.” Footnote 4 referenced therein, says the ‘executive officer’ in the scenario provided … [which supposedly could be replaced with ‘insider’]“… agreed not to make further draws against [the] line of credit… In light of [the] facts, this letter does not address the question of making a draw on a grandfathered line of credit after becoming an [insider].” In other words, if a person becomes an ‘insider’ then any existing ‘extensions of credit’ would not be subject to the various requirements, yet any future ‘extension of credit’… including draws on an existing line of credit… would. So if the new ‘insider’ had exceeded the stated ‘lending limit’ then no new loans or draws would be permissible. It would, of course, be prudent to discuss the issue with legal counsel and/your primary regulator in order to obtain their opinion/interpretation.

(Response Provided 01/2017)

Email Correspondence

QIf a customer who has agreed to receive email messages from the bank sends an email to the bank asking it to send him additional product information, can the bank reply to that email and include a product information/marketing piece and not be subject to CAN-SPAM?

ANo. According to the FTC: “If recipients have given their prior affirmative consent to get messages from you, you’re exempt from the requirement of identifying the message as an ad or solicitation—but that’s it. All other CAN-SPAM requirements still apply. Therefore, email to those people still has to include accurate header information and subject lines and a valid physical address. And you still must include information on how to opt out of receiving future email and honor opt-out requests promptly” www.ftc.gov/news-events/blogs/business- blog/2015/08/candid-answers-can-spam-questions (Response Provided 01/2017)

Mortgage Loan Modifications

QIt has always been my understanding that we cannot do a modification for a consumer purpose mortgage loan to increase the interest rate, increase the loan amount, change the interest rate from a fixed rate to a variable rate, or to change the payment type, i.e. principal and interest to interest only, or vice versa. Do you agree, and if so are there any other instances?

AAssuming your question relates to closed-end loans, then two primary factors come into play. The first is whether a variable-rate feature is added to, or the interest rate is increased from that previously disclosed on, the loan. See the Commentary to 1026.20(a)- 3. The second is whether the change may be made via a modification or would require the satisfaction and replacement of the note (i.e., a ‘refinancing’) will be determined by state/contract law. See the Commentary to 20(a)- 1 for additional guidance. Please note that regardless of how the first factor is ‘triggered’ (i.e., a modification or a refinancing), it would be considered a ‘refinancing’ under Regulation Z. However, as relates to the second factor, 1026.20(a) ( 1) through ( 5) identifies exceptions to what is considered a refinancing. One of those exceptions include a reduction in the interest rate and related payment (as long as the term is not increased). In addition, other provisions such as right of rescission could come into play if, for example, there is an increase in the loan amount which causes an additional security interest in a consumer’s principal dwelling.