Must the Bank Update the Loan Estimate if It Becomes Aware of Increases to Fees Unrelated to Extension of Rate Lock Agreement?

Q: Under Regulation Z (Truth in Lending Act), creditors must send a revised Loan Estimate to a mortgage applicant if the bank wishes to charge the applicant for an extension of an expired rate lock agreement. If the bank is aware of increases to other fees unrelated to the extension of the rate lock agreement, must it update these unrelated fees on the revised Loan Estimate or may it wait until the Closing Disclosure to adjust those fees?

A: The bank must update the Loan Estimate. Under §1026.19(e)(4), if the bank wishes to increase or add a fee that was not disclosed on the initial Loan Estimate, the bank must re-disclose within three business days of learning of the fee increase or the new fee. In addition, all fees must be updated “based on the best information reasonably available to the creditor at the time the revised disclosures are provided.” As Comment 5 to §1026.19(e)(3)(iv) explains:

For example, if the creditor issues revised disclosures reflecting a new rate lock extension fee for purpose of determining good faith [of estimates], other charges unrelated to the rate lock extension must be reflected on the revised disclosures based on the best information reasonably available to the creditor at the time the revised disclosures are provided.

Q: Section 215.4(b) of Regulation O permits banks to make loans to covered parties (insiders) up to a certain aggregated amount without the prior approval of the bank’s board of directors. The board’s prior approval is required, however, for loans that exceed that aggregated loan amount limit. So that insiders who have reached that limit do not have to wait for the board to meet in order to get approval for additional loans, may the board issue a blanket approval for any future loan requests that exceed the limit?

A: No. See, for example, FDIC Advisory Opinion 81-22 which states that the record of approval “must reflect more than a mere notice of insider borrowing up to a stated amount.” It continues that “[t]he board should be aware of . . . basic aspects of the loan at the time of approval.” In other words, the board must have something relatively tangible to consider, (e.g., a specific loan request). However, it is possible to approve a line of credit upon which the director may draw, at any time, presuming that it is approved at least every 14 months in accordance with §215.4(b)(3). (Answer provided March 2021.) 

Q: My bank has a compliance question related to doing in business in Spanish. Because the bank is located close to the U.S.-Mexican border, the bank has posted signs in both English and Spanish throughout the bank’s branches related to COVID-19 security precautions (size limits, mask requirements, etc.) Our bank does not advertise in Spanish, but some of the bank’s customer service representatives and tellers do converse with customers in Spanish. Is the bank obligated to provide customers with account disclosures in Spanish because of our COVID signage?

A: No. Posting COVID signage in languages other than English is not advertising and does not trigger any regulatory requirements.

Speaking to a consumer in a language other than English at account opening does not trigger any requirements to provide disclosures in another language under federal law, but banks should look at state law. Some states, such as California, have very stringent and detailed laws addressing the provision of services to customers in languages other than English.

There are also specific federal regulations addressing “doing business in a language other than English” that vary depending on what the bank is doing. Under the remittance provisions of §1005.31(g) of Regulation E, for example, advertising remittances in a language other than English or having a remittance transfer discussion in a language other than English will trigger the requirements to provide all disclosures in that other language as well as in English. (Answer provided March 2021.) 

Q: I have a question about the definition of a multifamily dwelling under Regulation C (Home Mortgage Disclosure Act). Regulation C defines a multifamily dwelling as a “dwelling . . . that contains five or more individual dwelling units” (§1003.2[n]). My bank has a mortgage loan secured by two properties. One property is a duplex. The second property is a triplex. Since the property is secured by five individual dwelling units, is the loan secured by a “multifamily dwelling” under Regulation C?

A: No, this loan would not be secured by a multifamily dwelling. As noted in your question, a multifamily dwelling is one that “contains” five or more individual dwelling units. Neither of the properties you describe “contains” five units. For purposes of this part of the definition, the five units must be in the same structure (Comment 2 to §1003.2[n]). (Answer provided March 2021.)