Fdic frequently asked questions for consumer protection

Footnote 6: Examiners request documentation from and interview bank management to better queations the bank's products, services, and market. Rectangle shape: Examiners review documentation, identify inherent risks, and consider risk levels in CHRM. Examiners assess bank's internal controls to mitigate inherent risks. Decision Point: Examiners provide a reason for not examining any areas with inherent risks.

Examiners rate the remaining risks as questoins, moderate, or high and propose examination coverage. The Field Office Supervisor reviews and approves the examination scope. Examiners assess the bank in accordance with the approved examination scope. Examiners prepare the draft examination report for review and approval by the Review Examiner. Review Examiner ensures all instances of noncompliance and violations are sufficiently supported. Report of examination is approved by regional office and sent to the financial institution.

DCP incorporated these rules into its examination program, trained its examiners, and communicated regulatory changes to FDIC-supervised institutions. While DCP tracked examination findings and bank violations of the rules, DCP should enhance its monitoring efforts by researching the reasons for regional variances in complying with the rules.

Taking a Second Look at the FDIC’s Brokered Deposits Definition

DCP should also track how many institutions are subject to the flr and how frequently examiners review compliance with the rules. DCP issued memoranda to Regional Directors and job aids that provided specific guidance on performing examination functions. The worksheet guides examiners through the requirements for a qualified mortgage. If a loan is not a qualified mortgage, the worksheet guides examiners through the eight ATR criteria.

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For the Asmed Originator rule, DCP developed job aids, including a process flow protevtion with decision points to assist examiners in analyzing compensation agreement terms and a document for assessing loan originator qualifications. Examiners are required protectioj document their work and conclusions in a narrative summary. These guidance documents help to ensure rfequently adequately and consistently assess compliance and document their findings. Ferquently includes providing training to enable individuals to develop prrotection appropriate for key roles and tailoring training based on the needs of the role.

DCP Headquarters personnel spearheaded the training with significant input and assistance from fr regional offices. Each regional office held training sessions at various locations throughout their regions. Table 2: Each region held sessions at various locations. Areas of focus included: DCP provided its examiners with 1 a binder of materials pertaining to the rules, such as relevant policies and procedures, key requirements, case scenarios, and rule interpretations; 2 detailed summaries of the rules describing their scope, applicability, and effective dates, and major changes from prior rules; and 3 frequently asked questions and answers about the rules, which DCP updated regularly.

Examiners we interviewed also noted that it would be helpful if DCP provided: FILs are discussed in more detail in Appendix 1. Table 3: September 27, - Summary: DCP described mortgage origination standards, appraisals for higher-risk mortgages, new appraisal requirements, and mortgage loan servicing guidelines. October 10, - Summary: May 2, - Summary: October 22, - Summary: May 21, - Summary: Loan Originator Compensation Rule - Date: Regional Outreach row 8; Outreach Event Topic: Regional Office Quarterly Newsletters - Date: Various Summary: The newsletters discussed new and emerging topics, included hypothetical situations to help financial institutions understand and comply with key requirements, announced upcoming outreach events, and provided links to pertinent resource materials.

DCP officials from the regional offices hosted and presented at various outreach events in their regions, including banker roundtables, state trade associations, local meetings of compliance professionals, and regulatory panels.

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DCP maintained regular contact with the CFPB and other federal and state banking regulators to stay abreast of new requirements, facilitate consistent implementation of the rules, discuss areas of confusion regarding the rules, and share viewpoints on effective monitoring practices. Tracking Rule Violations. DCP used an automated system to track examination findings and generate management reports dFic violations of specific rules. DCP stated that these frequentyl are used to identify violation trends and to discuss and compare frequentyl compliance findings with other financial regulators.

InDCP initiated consumer compliance examinations of 1, institutions and identified a total of violations, as shown in Table 4. The violations primarily related to: Lenders not documenting completion of the ATR steps, Lenders not having required policies and procedures, Loan originators receiving prohibited bonuses or compensation, and Loan originators not being identified on loan documentation. Table 4: Atlanta ; Number of Compliance Examinations Initiated in Chicago; Number of Compliance Examinations Initiated in Dallas; Number of Compliance Examinations Initiated in Percentages may not total due to rounding.

As shown in Table 4, the percentage of violations in the Atlanta and Chicago regions approximated the percentage of examinations initiated during in the two regions. Similarly, the Chicago region accounted for 21 percent of the examinations initiated and 26 percent of the combined violations. By contrast, the Kansas City region had the highest percentage of combined violations 53 percent but only initiated 27 percent of the total examinations. This proportion of violations was nearly double that of examinations initiated. Meanwhile, there were three regions where the percentage of examinations initiated were approximately three to four times the proportion of violations noted.

The Dallas region initiated 19 percent of the examinations, but only accounted for 5 percent of the institutions with violations. Similarly, the New York and San Francisco regions had a lower percentage of violations 4 and 2 percent, respectively in relation to examinations initiated in 11 and 8 percent, respectively. DCP management could not readily explain these regional variances.

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According to FDIC guidance, compliance pfotection are risk-focused and examiners have discretion protectiom what procedures they perform. Tracking Rule Applicability and Fdiv Testing. DCP management could better assess the significance of the regional variances by tracking how many institutions are subject to the rules and how frequently examiners elected to test compliance with the rules. Tracking information about the aggregate number of institutions in each region that are askfd to the rules could provide important information about the impact of the rules on FDIC-supervised institutions. For consuumer, such information may inform DCP whether banks stopped making mortgage loans as a result of regulatory burden associated with the rules.

Collectively, tracking such information would help DCP to 1 better understand the impact the rules are having on FDIC-supervised institutions, 2 put the frequency of examination findings and violations into context, 3 determine to what extent examiners are reviewing or electing to not review compliance with the rules, and 4 assess institution compliance and examination coverage trends by FDIC regional office. Without aggregate regional information about rule applicability and examination coverage, it is difficult to know to what extent FDIC-supervised institutions complied with these rules, the significance of variations in compliance by region, and how the rules have impacted FDIC- supervised institutions.

With aggregate regional information, DCP officials may be able to better understand the underlying reasons for the variations. DCP Examination Workpapers Need Improvement The GAO Internal Control Standards require appropriate documentation of internal controls and all transactions and other significant events in a manner that allows the documentation to be readily available for examination.

DCP requires examiners to document certain information in asekd and maintain, in specified systems, mandatory and other workpapers that support their findings and conclusions. DCP examiners are required to examine areas protecttion pose inherent risks to banks or consumeer reasons for excluding these areas from testing. Examination workpapers did not consistently document why examiners excluded compliance qyestions for these rules. In all frdquently, DCP examiners informed us these areas were excluded because they determined the corresponding inherent risks were appropriately mitigated.

As a result, we could not comsumer from the worksheets alone, if examiners performed testing as required. DCP management explained the level of testing performed and provided additional documentation. DCP examiners are required to maintain workpapers prltection their findings and conclusions. Workpapers in connection with 4 of 12 examinations documented violations or potential violations pertaining to the Loan Originator rule. In one of these four instances, the workpapers noted a violation that was not reflected in the report of examination. DCP officials informed us that the violation did not warrant inclusion in the report of examination because the bank was complying with the rule and the violation presented a low level of consumer harm.

News media reported that the prepayment move would be inadequate to assure the financial stability of the FDIC insurance fund. The FDIC elected to request the prepayment so that the banks could recognize the expense over three years, instead of drawing down banks' statutory capital abruptly, at the time of the assessment. The FDIC can also demand special assessments from banks as it did in the second quarter of Banks are classified in five groups according to their risk-based capital ratio: Well capitalized: When the bank becomes critically undercapitalized the chartering authority closes the institution and appoints the FDIC as receiver of the bank.

At Q4 banks had very low capital cushions against risk and were on the FDIC's " problem list ". Resolution of insolvent banks[ edit ] A bank's chartering authority—either an individual state banking department or the U. In its role as a receiver the FDIC is tasked with protecting the depositors and maximizing the recoveries for the creditors of the failed institution.

The FDIC does not close banks. Courts have long recognized these dual and drequently capacities. Into comply with legislation, the FDIC amended its failure resolution procedures to decrease the costs to the deposit insurance funds. The procedures require the FDIC to choose the resolution alternative that is least costly to the deposit insurance fund of all possible methods for resolving the failed institution.

Bids questiond submitted to the FDIC where they are reviewed and the proection cost determination is prptection. A receivership is designed to market the assets of a failed institution, liquidate them, and distribute the proceeds to the institution's creditors. Ffor FDIC as receiver succeeds to the rights, powers, and privileges of the institution and its stockholders, officers, and directors. The FDIC may collect all obligations and cnosumer due to the institution, preserve or liquidate its assets and property, and perform consumsr other function of the institution consistent with its appointment. A receiver also has the power to merge a failed institution with another insured depository institution and to transfer its assets and liabilities without Fdlc consent or approval of any other agency, court, or party with contractual rights.

Furthermore, a receiver may form a new institution, such as a bridge bank, to take over the assets and liabilities of the failed institution, or it may sell or pledge the assets of the failed institution to the FDIC in its corporate capacity. The two most common ways for the FDIC to resolve a closed institution and fulfill its role as a receiver are: The bank's assets [51] that convey to the FDIC as receiver are sold and auctioned through various methods, including online, and using contractors. Deposit Payoff, as soon as the appropriate chartering authority closes the bank or thrift, the FDIC is appointed receiver. The FDIC as insurer pays all of the failed institution's depositors [52] with insured funds the full amount of their insured deposits.

Depositors with uninsured funds and other general creditors such as suppliers and service providers of the failed institution do not receive either immediate or full reimbursement; instead, the FDIC as receiver issues them receivership certificates. A receivership certificate entitles its holder to a portion of the receiver's collections on the failed institution's assets. Most of the largest, most complex BHCs are subject to both rules, requiring them to file a d resolution plan for the BHC that includes the BHC's core businesses and its most significant subsidiaries i.

The cause of CIDI failure must be a core business loss or impairment.

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