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CFPB to discuss mortgage changes more before Congress
WASHINGTON (9/20/12)--Consumer Financial Protection Bureau (CFPB) Director Richard Cordray will appear before the House Financial Services Committee in a hearing scheduled for today, the second hearing of its kind in the past week.

The hearing, which is scheduled to begin at 10 a.m. (ET), is fittingly entitled "The Semi-Annual Report of the Consumer Financial Protection Bureau," and is the semi-annual report of Cordray on CFPB activities and issues.

On Sept. 16 in a similar hearing on the Senate side, Cordray told Sen. Richard Shelby (R-Ala.) and other members of the Senate Banking Committee that his agency "cannot ignore or re-write" the laws that Congress mandates, but indicated that where appropriate, the agency intends to use its exemption authority to potentially exempt certain smaller institutions such as community banks and credit unions from certain regulatory provisions "where they don't make sense."

Shelby was concerned that the CFPB may ignore or attempt to re-write the Dodd-Frank Act by utilizing its exemption and modification authority.

The CFPB's pending proposal on mortgage servicing will certainly be a topic of conversation during today's hearing, and Cordray in a prepared statement said these regulatory changes would "make sure consumers do not receive mortgages that they do not understand or cannot afford" and will "bring greater transparency and accountability to mortgage servicing."

Final versions of new mortgage regulations, and related disclosures that combine elements of Truth in Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA) disclosures into a single document are expected to be released in January. The Credit Union National Association (CUNA) is accepting credit union comment on several aspects of the proposal, and CUNA has also attempted to give credit unions a rough outline of which specific mortgage practices the CFPB proposals could address in a recent CompBlog post.

CUNA noted that a number of the mortgage lending rules that will be finalized in 2013 will apply to subordinate-lien mortgage loans in addition to first-lien mortgage loans. Some of the rules will also apply to home-equity lines of credit (HELOCs), CUNA added.

Ability-to-Repay (Regulation Z) changes will apply to any first-lien or subordinate-lien mortgage loan that is secured by a dwelling, including primary residences or second homes, but will not apply to HELOCs, timeshare plans, reverse mortgages, and temporary mortgage loans.

Regulations addressing appraisals for higher-risk mortgage loans, which are also part of Reg Z, will apply to any first-lien or subordinate-lien mortgage loan including loans on a dwelling or real property that includes a dwelling. Qualified mortgages and reverse mortgages will not be impacted by the regulatory changes, CUNA said.

Portions of the CFPB changes that impact Equal Credit Opportunity Act appraisals will apply to first-lien mortgage loans, and changes to portions of Reg Z impacting escrow accounts will apply to closed-end mortgage loans secured by a first-lien on real property or a dwelling, including principal dwelling and second home, mobile homes, boats and trailers used as residences, CUNA added.

Regulatory revisions related to high-cost mortgage loans will apply to most types of mortgage loans secured by the consumer's principal dwelling including first-lien home purchase mortgage loan, subordinate-lien loans including closed-end home equity loans and HELOCs, but will not apply to reverse mortgages.

All closed-end mortgage transactions, including first-lien, subordinate-lien and refinancings, will be subject to the CFPB's mortgage originator standards changes. Pending mortgage servicing changes will also impact closed-end mortgage loans, including first-lien and subordinate-lien loans, but HELOCs, construction loans and business purpose loans will not be affected, CUNA said.

The integrated TILA-RESPA mortgage disclosure forms will need to be used in most closed-end mortgage loan transactions, including first-lien and subordinate-lien mortgage transactions. However, these disclosures will not be used for reverse mortgages, mortgage loans secured by a mobile home or by a dwelling that is not attached to real property, nor HELOCs, CUNA said.

The CompBlog post also noted that the effective dates of the final rules will likely range from mid-year 2013 to early 2014. In the post, CUNA encouraged credit unions to budget for any additional personnel, staff training, data processing and software changes, and forms changes that will occur once the CFPB regulatory changes are finalized.
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