Skip to main content

Borrower Identification Under the Patriot Act

Oct 24, 2014

Question: The company that generates my loan documents includes a form which requires the closing agent to obtain two forms of ID from the borrower. Does the Patriot Act require us to obtain and verify a borrower’s identity at closing with at least two forms of identification?

Answer: No. There is no set number of forms of ID required by the USA Patriot Act. Section 326 of the USA Patriot Act requires financial institutions to implement a Customer Identification Program (CIP) that is appropriate for the size and location of the financial institution. This regulation requires the CIP to be in writing, incorporated into the institution’s Identity Theft Prevention and Red Flags program, and approved by the Board of Directors, a committee of the Board of Directors, or Senior Management.

A financial institution must implement reasonable procedures for verifying the identity of any person who applies for a residential or commercial mortgage loan. These procedures may vary based upon the circumstances of each situation and whether any “Red Flags” are present based on the information obtained by the financial institution regarding the consumer.

It should be noted that the Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Financial Crimes Enforcement Network, National Credit Union Administration, Office of the Comptroller of the Currency, Office of Thrift Supervision, and the United States Department of the Treasury have recommended that “given the availability of counterfeit and fraudulently obtained documents, a bank is encouraged to obtain more than a single document to ensure that it has a reasonable belief that it knows the customer’s true identity”. [Interagency Interpretive Guidance on Customer Identification Program Requirements, April 28, 2005.]

This Guidance can be located by clicking here.





Joyce Pollison is director of legal and regulatory compliance for Lenders Compliance Group. She may be reached by phone at (516) 442-3456.


 

About the author
Published
Oct 24, 2014
In Wake Of NAR Settlement, Dual Licensing Carries RESPA, Steering Risks

With the NAR settlement pending approval, lenders hot to hire buyers' agents ought to closely consider all the risks.

A California CRA Law Undercuts Itself

Who pays when compliance costs increase? Borrowers.

CFPB Weighs Title Insurance Changes

The agency considers a proposal that would prevent home lenders from passing on title insurance costs to home buyers.

Fannie Mae Weeds Out "Prohibited or Subjective" Appraisal Language

The overall occurrence rate for these violations has gone down, Fannie Mae reports.

Arizona Bans NTRAPS, Following Other States

ALTA on a war path to ban the "predatory practice of filing unfair real estate fee agreements in property records."

Kentucky Legislature Passes Bill Banning NTRAPS

The new law prohibits the recording of NTRAPS in property records, creates penalties if NTRAPS are recorded, and provides for the removal of NTRAPS currently in place.