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Entries in Lending (7)


FEMA Issues New Rules, Although Not A Watershed Moment 

Five federal regulatory agencies recently announced a joint rule that modifies regulations that apply to loans secured by properties located in special flood hazard areas. Flood hazard areas are delineated on maps issued by the Federal Emergency Management Agency (FEMA) and pertain to areas within the floodplain having a one percent or greater chance of flood occurrence in any given year.

The final rule requires regulated lending institutions, or servicers acting on their behalf, to escrow premiums and fees for flood insurance for any loan secured by residential improved real estate or a mobile home. The rules impact loans that are made, increased, extended, or renewed on or after January 1, 2016. Under a small-lender exception, certain lending institutions with total assets of less than $1 billion may not be required to escrow flood insurance premiums.

Additionally, the joint rule grants regulated lending institutions the authority to secure flood insurance coverage for a borrower with insufficient coverage and include the cost of the coverage in the outstanding loan. This type of coverage is known as “force-placed flood insurance coverage.” The rule also stipulates circumstances under which a lender must terminate force-placed flood insurance coverage and refund payments to a borrower. For example, if a borrower obtains a flood insurance policy that overlaps with a force-placed policy, the lender or servicer must refund any premiums paid by borrower for this overlap period.

Lastly, the rule includes a statutory exemption from the requirement to purchase flood insurance for a structure that is a part of a residential property if that structure is detached from the primary residence and does not also serve as a residence, such as a garage or barn. However, lenders may nevertheless require flood insurance on detached structures to protect the collateral securing the mortgage.

A copy of the final rule will be published in the Federal Register shortly, but an advance copy is available here.

If you have any questions about how your property may be impacted by FEMA’s new rules please contact Charlie Katz-Leavy or Mat Todaro.


Maine Bureau Proposes New Regulation 28: Lending Limits for State-Chartered Institutions

On October 12, 2012, the Maine Bureau of Financial Institutions issued notice that it has proposed a complete repeal and replacement of Regulation 28: Loans to One Borrower Limitations.  Regulation 28 establishes certain lending limits for Maine-chartered financial institutions.  The purpose of the new Regulation is to establish guidelines for determining credit exposure from derivative transactions in connection with loans.  Derivative transactions can include swaps, loans, options and other financial agreements, and are an important tool in managing the risks underlying financial transactions.  Beginning in January of 2013, the Dodd-Frank Act will prohibit state-charted financial institutions from engaging in derivative transactions unless state law requires them to identify and manage credit risks associated with derivative transactions.  The proposed Regulation 28 implements various methods for financial institutions to use in considering these risks, adopting a number of methodologies used in the OCC’s new interim final rule for national banks.

The Bureau anticipates that it may amend the proposed Regulation 28 before it becomes final, to incorporate future amendments to the OCC’s rule.  The deadline for public comment on the new regulation is November 19, 2012.


Jim Cohen Gives Presentation on Fair Lending at MBA Bank Expo 2012

On Wednesday, April 11, Jim Cohen, along with Andrea Shaw, Esq., from TD Bank, presented "Fair Lending Hot Topics" to a group of attendees atthe Maine Bankers Association's Bank Expo 2012.  The presentation focused largely on disparate impact discrimination in lending practices. It was one of 18 educational sessions offered at the event.  Click here for a copy of the presentation materials.


Maine financial institutions, in the news . . . 


Maine Bureau of Financial Institutions Updates Bulletin #8

On November 1, 2011, the Maine Bureau of Financial Institutions published a revision to Bulletin #8.  The primary purpose of the revision was to update the list of staff at the Maine Bureau of Financial Institutions.  More generally, the bulletin reminds supervised financial institutions extending credit to BFI professional personnel and examiners or their family members that such loans must be disclosed to the Superintendent (or the Department of Professional and Financial Regulation in the case of a loan to the Superintendent).  The bulletin also reminds financial institutions that, under federal law, extensions of credit to examiners are prohibited in certain instances, and otherwise must be on terms generally available to other borrowers.