WASHINGTON (8/13/12)--The Credit Union National Association (CUNA) has some serious concerns with the possible regulatory burden and added compliance costs of the proposed regulations for mortgage servicers that the Consumer Financial Protection Bureau (CFPB) issued on Friday.
The proposed rules, which are subject to a 60-day comment period ending on Oct. 9, implement some of the provisions of the Dodd-Frank Act on subjects such as simplifying billing statements, providing additional notice of rate changes and ensuring that consumers know all of their options to prevent foreclosures.
Many of the rules are aimed at addressing provisions of the Real Estate Settlement Procedures Act and the Truth in Lending Act.
CUNA President/CEO Bill Cheney said CUNA will be working with various key committees and member contacts within the association to determine how best to address those concerns and issues.
"Mortgage lending and servicing have become important services of credit unions to their members. In developing these services, credit unions have proven themselves to be careful lenders: We did not contribute to the sub-prime meltdown or the subsequent credit market crisis. Instead, the structural and operational differences of credit unions from other institutions translated into high asset quality at credit unions during and after the crisis," Cheney stated when the CFPB announced its proposal.
He added, "As Rep. Barney Frank (D- Mass.) -- ranking member and former chairman of the House Financial Services Committee--has said, 'If mortgages were only made by credit unions, we wouldn't be in this crisis.'
"He has also pointed out that, in drafting the landmark legislation which created the Consumer Financial Protection Bureau--the Dodd-Frank Act of 2010--lawmakers aimed to take the principles that credit unions operate under and apply them to all financial institutions.
"We intend to remind the CFPB of those views as these proposals work their way through the rulemaking process."
According to a CUNA summary of the CFPB plan, servicers would have to make a "good faith'' effort to notify consumers of loss mitigation options. If a borrower is 30 days late in making a payment the servicer would have to let them know of their options verbally. Written notification is required if the borrower is 40 days late.
Servicers would have to provide periodic billing statements that clearly break down charges. This wouldn't apply to fixed-rate loans if the servicer provides a coupon book or if the servicer services 1,000 or fewer mortgages. The exemption is only for mortgages originated by the servicer or where they retain servicing rights.
Servicers must provide 210 to 240 days notice prior to the first rate adjustment and subsequent notices to consumers 60 to 120 days before a payment change adjustment. Servicers wouldn't have to continue to provide an annual notice if a rate adjustment does not result in an increase in the monthly payment.
Under the proposed rules, servicers would have to promptly credit payments from borrowers, generally on the day of receipt. If a payment is less than the full amount, the payment may be held in a suspense account.
Servicers would not be permitted to charge a borrower for force-placed insurance coverage unless the servicer has a reasonable basis to believe the borrower has failed to maintain hazard insurance.
The rules would require certain procedural requirements for responding to information requests or complaints. Errors include an allegation by the borrower that the servicer
misapplied a payment or assessed an improper fee Servicers could designate a specific phone number and address for borrowers to use.
The CFPB is scheduled to issue final rules in January.