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Speaker Reg changes add to tough lending landscape
HOLLYWOOD, Fla. (6/23/08)--Credit unions can continue to expect regulatory changes while in the throes of a difficult lending environment, but some changes may present
Bill Klewin of CUNA Mutual Group updated Discovery Conference attendees last week on key lending regulatory issues. (Photo provided by CUNA Mutual Group)
opportunities, attendees at the CUNA Mutual Group's Discovery Conference were told Thursday. "The lending environment is difficult now, and part of that is increased regulatory scrutiny, but there are some positives,” said Bill Klewin, associate general counsel, CUNA Mutual. “First, with 11% capital, credit unions have money to spend. It’s an excellent time to invest in technology to take apps, close loans and embrace electronic signatures to meet the needs of your next generation of lenders.” Klewin updated attendees on regulatory issues important to credit union lending, including:
* Truth in Lending (Regulation Z)--The Federal Reserve Board’s 2007 proposal could have a harmful effect on multi-featured open-end lending. It would change the way about 3,500 credit unions do lending based on Truth-in-Lending. Credit Union National Association and CUNA Mutual officials have proposed alternatives to the Fed proposal, emphasizing the harm this proposal would cause credit unions. * RESPA--Housing and Urban Development’s (HUD) Real Estate Settlement Procedures Act (RESPA) would result in significant change to how the closing process works. The regulation likely would result in a requirement for the ability to perform underwriting earlier in the lending process. It assumes closings would occur in a face-to-face environment. Final regulations are expected in early 2009. * Unfair Deceptive Acts and Practices Rule--The regulation would prohibit certain activities with credit cards and overdraft protection programs. Credit unions and others would be unable to raise rates on existing balances based on changes in a member’s creditworthiness. “This could be a big deal from a safety and soundness standpoint,” Klewin said. “The net result is a credit union may not get the kind of return on its portfolio that it is today.”
E-signature legislation, which passed in 2000, has not been fully embraced by the financial services industry, Klewin said. The e-commerce legislation provides e-signatures with the same force as a paper contract. However, uncertainty over technology and security has limited its use by many credit unions and banks. Klewin added the legislation affords credit unions an opportunity to prepare for the expectations of future borrowers. “The new generation of borrowers, Gen Y and younger Gen X’ers, will insist on this technology. It would behoove credit unions to look into how this technology can be integrated into their future business plans. “With continued lending uneasiness, increasing competition and a dynamic regulatory environment, changes will keep challenging your operations, marketing and sales,” Klewin said. “Be aware of some of those changes that may be coming and take action that will prepare you better for the future.” The conference, in Hollywood, Fla., ended on Saturday.


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