Comerica 2015 Annual Report Download - page 24

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Truth in Lending Act (“TILA”) and Real Estate Settlement Procedures Act (“RESPA”). In November 2013, the CFPB
issued a rule implementing new TILA RESPA Integrated Disclosures (“TRID”) to replace the initial Truth-in-Lending disclosure
and Good Faith Estimate for most closed-end consumer mortgage loans. The effective date was October 3, 2015. Significant
changes in TRID include: (1) expansion of the scope of loans that require RESPA early disclosures, including bridge loans, vacant
land loans, and construction loans; (2) changes and additions to “waiting period” requirements to close a loan; (3) reduced tolerances
for estimated fees and (4) the lender, rather than the closing agent, is responsible for providing final disclosures. Although Comerica
outsources most of its consumer mortgage loans, consumer construction financing has been suspended pending further clarification
from the CFPB. This regulation has also resulted in a suspension of consumer bridge loan financing. Such financing has not been
a significant business for Comerica.
The Truth in Lending Act (TILA) requires credit card issuers to post consumer credit card agreements to their websites
and submit them quarterly to the CFPB commencing February 5, 2015. The CFPB implemented the rule on April 17, 2015. The
CFPB delayed implementation of submissions of the agreements to the CFPB until the first week of April 2016. Comerica outsources
its consumer credit cards, and does not anticipate any negative impact.
Home Mortgage Disclosure Act (HMDA). In July 2015 the CFPB implemented and expanded new HMDA rules. The
final rule adopts a dwelling-secured standard for all loans or lines of credit that are for personal, family, or household purposes.
Thus, most consumer-purpose transactions, including closed-end home-equity loans, home-equity lines of credit, and reverse
mortgages, are subject to the regulation. Most commercial-purpose transactions (i.e., loans or lines of credit not for personal,
family, or household purposes) are subject to the regulation only if they are for the purpose of home purchase, home improvement,
or refinancing. The final rule excludes from coverage home improvement loans that are not secured by a dwelling (i.e., home
improvement loans that are unsecured or that are secured by some other type of collateral) and all agricultural-purpose loans and
lines of credit. Comerica is monitoring and implementing changes as required.
FDIC Guidance on Brokered Deposits. On January 5, 2015, the FDIC issued guidance in the form of “Frequently Asked
Questions” to promote consistency by insured depository institutions in identifying, accepting, and reporting brokered deposits.
On November 13, 2015, the FDIC issued proposed updates to the FAQs. All insured depository institutions (including those that
are well capitalized) must report brokered deposits in their Consolidated Reports of Condition and Income (Call Reports). Comerica
is currently evaluating the impact of these FAQs, including the proposed updates, to various business units throughout the
organization, and believes they will only have a nominal impact.
Flood Insurance Reform. The Biggert-Waters Flood Insurance Reform Act of 2012 (“Biggert-Waters Act”), as amended
by the Homeowner Flood Insurance Affordability Act of 2014, modified the National Flood Insurance Program by: (i) increasing
the maximum civil penalty for Flood Disaster Protection Act violations to $2,000 and eliminating the annual penalty cap; (ii)
requiring certain lenders (including Comerica) to escrow premiums and fees for flood insurance on residential improved real
estate; (iii) directing lenders to accept private flood insurance and to notify borrowers of its availability; (iv) amending the force
placement requirement provisions; and (v) permitting lenders to charge borrowers costs for lapses in or insufficient coverage.
These requirements will impact Comerica loans and extensions of credit secured with residential improved real estate. The civil
penalty and force placed insurance provisions were effective immediately.
On July 21, 2015, certain federal agencies issued a joint final rule exempting: (1) detached structures that are not used
as a residence from the mandatory flood insurance purchase requirements and (2) HELOCs, business purpose loans, nonperforming
loans, loans with terms of less than one year, loans for co-ops and condominiums, and subordinate loans on the same property
from the mandatory escrow of flood insurance premium requirements. Additionally, the final rule requires Comerica to escrow
flood insurance payments and offer the option to escrow flood insurance premiums on residential improved real estate securing
a loan, effective January 1, 2016. The federal agencies will address the private flood insurance provisions of the Biggert-Waters
Act in a separate rulemaking. Comerica will continue to monitor the development and implementation of the private flood insurance
rules.
Future Legislation and Regulatory Measures
The environment in which financial institutions will operate after the recent financial crisis, including legislative and
regulatory changes affecting capital, liquidity, supervision, permissible activities, corporate governance and compensation, and
changes in fiscal policy, may have long-term effects on the business model and profitability of financial institutions that cannot
be foreseen. Moreover, in light of recent events and current conditions in the U.S. financial markets and economy, Congress and
regulators have continued to increase their focus on the regulation of the financial services industry. Comerica cannot accurately
predict whether legislative changes will occur or, if they occur, the ultimate effect they would have upon the financial condition
or results of operations of Comerica.
UNDERWRITING APPROACH
The loan portfolio is a primary source of profitability and risk, so proper loan underwriting is critical to Comerica's long-
term financial success. Comerica extends credit to businesses, individuals and public entities based on sound lending principles