2019 Journal of Community Bank Case Studies

2019 COMMUNITY BANK CASE STUDY COMPETITION

able to qualify for an extended examination cycle of eighteen months. These banks were required to meet the standards of being well capitalized, well managed, and highly rated (ICBA, S. 2155 Has Been Signed 3). The new provisional change raises the eligibility for the eighteen-month examination cycle to banks under $3 billion in total consolidated assets that also meet the requirements (ICBA, Agencies Advance). Community banks strive not only for cost- saving strategies, but for efficiency as well. Kentucky Bank is now on the 18-month exam cycle with the FDIC and KDFI. Kentucky Bank states, “We allocate approximately 250-350 people hours per exam. So, on average the change in exam cycle saves us between 250- 350 hours every three years or approximately $20,000 (Figure 2). Although this provision will not directly impact new customers, it will lower bank expenses. In addition to the five provisions outlined in the Bank Provisions Chart, Kentucky Bank expects positive financial results from the

recent TRID adjustment. TRID, the TILA/ RESPA Integrated Disclosure Rule, also known as the “Know before You Owe” rule, addresses federal mortgage rules under TILA and RESPA. TILA is the Truth in Lending Act, and RESPA is the Real Estate Settlement Procedures Act (TILA-RESPA). The Federal Reserve writes, “. . . under the new TRID rules, banks are being forced to lengthen the amount of time that lapses between the application and the closing, which is forcing consumers into longer, higher-cost rate lockets” (Record of Meeting 3). The most recent provisions to the act include replacing the Good Faith Estimate and early TIL disclosure with a Loan Estimate, and HUD-1. Final TIL disclosure was also replaced with a Closing Disclosure. These provisions correct many issues with the rule (American Land Title Association). The Loan Estimate was required to have been delivered or placed in the mail no later than the third business day after receiving a customer’s application, while the Closing Disclosure was required to be provided to the customer at least three business days prior to consummation of the closing (Amerifirst Home Mortgage). The most recent provision required compliance with the 2017 TILA-RESPA rule for mortgage applications. According to the CFPB, “The amendments relate to when a creditor may compare charges paid by or imposed on the consumer to amounts disclosed on a Closing Disclosure, instead of a Loan Estimate, to determine if an estimated closing cost was disclosed in good faith” (Federal Mortgage Disclosure Requirements). Directly relating to

Community banks strive not only for cost- saving strategies, but for efficiency as well.

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