The Gold Book

The federal agencies that supervise banks, thrifts, and credit unions, and the Farm Credit System, published guidance last week that updates the Interagency Questions and Answers Regarding Flood Insurance that were most recently published on July 21, 2009 at 74 FR 35914-35947.

The guidance finalizes two questions and answers that had been previously proposed.

The agencies request comment on three additional proposed updates to questions and answers relating to force placement of flood insurance.

It is the intention of the agencies that, after public comment has been received and considered and the guidance has been adopted in final form, the agencies will issue a final update to the 2009 Interagency Questions and Answers Regarding Flood Insurance. The final update will continue to supplement other guidance or interpretations issued by the agencies and the Federal Emergency Management Agency.

Under a provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), insured depository institutions may pay interest on demand deposit accounts (DDAs) starting July 21, 2011. Under another section of the Dodd-Frank Act, the FDIC provides unlimited deposit insurance for noninterest-bearing transaction accounts through December 31, 2012.  If on or after July 21, 2011, an insured depository institution modifies the terms of a DDA so that the account may pay interest, the institution must notify affected customers that the account no longer will be eligible for unlimited deposit insurance coverage as a noninterest-bearing transaction account.

The IRS has recently issued announcement 2011-40 which provides for mid-year adjustments to the 2011 mileage rates. The rates were changed to reflect the increase in gas prices since last year.

Effective July 1, 2011, the business standard mileage rate will rise to 55.5 cents per mile and the medical/moving mileage rate to 23.5 cents per mile. The charitable standard mileage rate remains at 14 cents per mile for the remainder of 2011.

The standard mileage rate is used by taxpayers to deduct costs of operating vehicles for business purposes. The standard rate is also used by many businesses to reimburse employees for mileage. The moving/medical rates are used to compute deductible costs of operating a vehicle for medical or moving purposes. The charitable mileage rate is used to determine vehicle costs for charitable purposes.

Please be advised that on March 31, 2011, New York passed amendments to the Abandoned Property Law. The new law, effective immediately and due with the next reporting cycle, provides the following:

Lower dormancy periods (from 5 years to 3 years) for the following property types:

• Money or securities held in escrow, but excluding escrow accounts for which the duty or obligation for which such amount was deposited has not been performed and such performance is still required
• Amounts due on deposits or any amount to which a shareholder of a savings and loan or a credit union is entitled
• Accumulations of interest or other increments held by a bank for payment of an interest in a bond and mortgage apportioned or transferred by it

In addition to adjusting dormancy periods, the new law also amended New York’s reporting provisions.  There are three major changes to keep in mind for your next report to New York:

1.       Publication requirements: Every banking organization must publish on or before September 1st of each year a notice naming potential owners of unclaimed property being held by the banking organization.  This provision provides a little more flexibility in that the previous requirement mandated that the banking organization had to publish the notice within 30 days of filing their report.

2.       Preliminary reports no longer required: Certain industries (mainly in the financial services industry) were required to file a preliminary report and conduct a publication prior to remitting a final report/remittance.  This bill removes the preliminary report requirement.  The bill further confirms the reporting deadlines and cut-off dates.  Once the statutory due diligence and publication requirements have been satisfied, the report and remittance would be due (for banking institutions) by November 10th.

3.       Miscellaneous: NY State law still mandates that all unclaimed funds valued at $20 and higher follow the statutory due diligence requirements.  The State Controller’s Office posts all owners entitled to property valued at $20 and higher on their website for at least one year.Gift cards remain at a 5 year dormancy period.

Please check back soon for as we continue to update the Abandoned Property section of The Gold Book.

New abandoned property law changes for NYS are effective immediately.  Notably, the escheatment period for deposit accounts has been reduced from 5 to 3 years, and the reduction in time period applies to other types of abandoned property as well.  The November report must reflect the new time period.  Other changes have been made in the law regarding preliminary reports and publication requirements.

Check back soon for updated information and news about updates to the abandoned property section of The Gold Book.

Federal Reserve proposes rule under Regulation Z pertaining to a consumer’s ability to repay a mortgage and minimum mortgage underwriting standards.

The Federal Reserve Board on Tuesday requested public comment on a proposed rule under Regulation Z that would require creditors to determine a consumer’s ability to repay a mortgage before making the loan and would establish minimum mortgage underwriting standards.

The revisions to the regulation, which implements the Truth in Lending Act (TILA), are being made pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act. The proposal would apply to all consumer mortgages (except home equity lines of credit, timeshare plans, reverse mortgages, or temporary loans).

Consistent with the act, the proposal would provide four options for complying with the ability-to-repay requirement.

• First, a creditor can meet the general ability-to-repay standard by considering and verifying specified underwriting factors, such as the consumer’s income or assets.
• Second, a creditor can make a “qualified mortgage,” which provides the creditor with special protection from liability provided the loan does not have certain features, such as negative amortization; the fees are within specified limits; and the creditor underwrites the mortgage payment using the maximum interest rate in the first five years. The Board is soliciting comment on two alternative approaches for defining a “qualified mortgage.”
• Third, a creditor operating predominantly in rural or underserved areas can make a balloon-payment qualified mortgage. This option is meant to preserve access to credit for consumers located in rural or underserved areas where banks originate balloon loans to hedge against interest rate risk for loans held in portfolio.
• Finally, a creditor can refinance a “non-standard mortgage” with risky features into a more stable “standard mortgage” with a lower monthly payment. This option is meant to preserve access to streamlined refinancings.

The proposal would also implement the Dodd-Frank Act’s limits on prepayment penalties.

The Board is soliciting comment on the proposed rule until July 22, 2011. General rulemaking authority for TILA is scheduled to transfer to the Consumer Financial Protection Bureau on July 21, 2011. Accordingly, this rulemaking will not be finalized by the Board.

The Board’s notice for the proposed rule can be found here:

Highlights of Proposed Ability-to-Repay Rules (26 KB PDF)

Notice (1.15 MB PDF)

The FDIC recently released a FAQ (Q & A) in response to the Overdraft Payment Supervisory Guidance issued in November 2010.

It can be found here:

http://www.fdic.gov/news/conferences/overdraft/FAQ.pdf

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The US Department of Justice recently issued Design Standards for facilities including financial institutions ATMs. Section 220 of the 2010 Design Standards adds specific technical requirements for speech output, privacy, tactilely discernible output and output controls, display screens and Braille instructions. ATMs will be required to be speech enabled.

Institutions considering the purchase of new ATMs should consult the 2010 Design Standards either at the American with Disabilities Act home page or the Department of Justice website.

Although the standards are not yet mandatory, banks should check with ATM vendors for more information regarding future hardware and software requirements.

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On Friday December 3, 2010, the Internal Revenue Service announced the 2011 optional standard mileage rates to be used for calculating the deductible costs of an automobile for business, charitable, medical or moving purposes. These are the rates used to determine the amount of an employee’s ordinary and necessary expenses of local travel or transportation away from home that may be reimbursed.

The 2011 rates are as follows:

• 51 cents per mile for business miles driven
• 19 cents per mile for medical or moving miles driven
• 14 cents per mile for miles driven in service of charitable organizations