Section 4 Unit 5 Lesson 4 Introduction to Patriot Act Flashcards
Patriot Act requirements
Enacted in 2001.
BSA/AML Bank Secrecy Act/Anti-Money Laundering. The USA Patriot Act affected teh BSA in a big way
Anti Money Laundering Programs
Screening and monitoring of financial transactions.
Financial Institutions must have internet anti-money laundering policies and procedures.
Employees must receive regular anti-money laundering training.
Institutions must employ AML compliance officer to oversee program
The program must be regularly audited.
What is CIP
Under USA Patriot Act, all lenders and banks are not required to create Customer Identification Programs to verify customer identities.
Names
Date of birth
Residential and work addresses
A tax ID number
Government-issued Certificate of existence
CDD Rule
Financial institutions must implement the Customer Due Diligence (CDD) rule which involves monitoring records to facilitate ongoing identification and checking customer information against the list of suspected terrorists.
CDD Rule requirements
Verify Customer Identity
Verify the beneficial owners of companies opening accounts
Understand the nature and purposes of customer relationships to develop customer risk profiles
Introduction to the E-sign Act
Electronic Signature in Global and National Commerce Act
signed in 2000.
Homeowners Protection Act
(HPA) also called PMI cancellation Act, is an important law that you need to understand, because it impacts borrowers who may be required to pay for private mortgage insurance (PMI).
HPA is enforced by CFPB
How long PMI is required
HPA allows borrowers with loans created after 1998 to have their PMI cancelled when their equity reaches 22% of the original value of the property. Lender must cancel PMI
Automatic vs Requested Termination of PMI
According to HPA, the lenders are required to automatically terminate PMI when the principal balance is scheduled to reach 78% of the original property value or at the midpoint of the loan’s amortization schedule (even if it hasn’t reached the magical 78%)
However, borrowers may also request PMI termination from their lender any time the principal balance goes below 80% of the original value. Request should be in writing. Lenders may require appraisal to verify the property’s value.
Returning Unearned Premiums
If the PMI is not cancelled due to the borrower’s request of by the automatic termination method, the lender must terminate by first day of the month that immediately follows the midpoint date of the loan amortization period.
The lender must return all unearned PMI premiums that might have been paid back to the borrower within 45 days of PMI cancellation datte