Many banks continue to struggle with the complexities of consumer protection regulations such as the Truth in Lending Act’s Loan Originator Compensation Rule. Recently, the Federal Reserve Board launched Consumer Compliance Supervision Bulletin, a monthly publication designed to keep bankers and others informed about consumer protection developments, provide high-level summaries of relevant supervisory issues, and offer practical tips for banks to consider when managing consumer compliance risks.
You can find the bulletin at https://www.federalreserve.gov/publications/files/201807-consumer-compliance-supervision-bulletin.pdf.
CRE Appraisal Threshold Raised To $500,000
Now that you can use evaluations, rather than appraisals, for CRE transactions below the new threshold, it’s a good idea to review your evaluation policies and procedures to ensure that they reflect fair market value.
Loan Participations: Handle With Care
Loan participations—that is, loans by two or more lenders to a single borrower—offer several benefits to community banks. They can help you:
- Increase lending activity despite low local demand.
- Serve customers whose credit needs exceed legal lending limits.
- Diversify your portfolio.
- Enhance liquidity, interest-rate risk management, capital, and earnings.
If you’re considering this strategy, be sure to work closely with your legal and financial advisors to manage the risks involved. Among other steps, you should conduct your own due diligence on the borrower, even if another institution takes the lead.
Also be sure to carefully review the participation agreement, which details each party’s rights and responsibilities. Pay particular attention to who is responsible for collections or payments in the event of a default, and take other steps to manage the risks associated with these transactions.
We Can Help
Elliott Davis advisors stand ready to assist with this or any of your other compliance-related questions.