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CUNA highlights QM resources as rules go into effect today

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WASHINGTON (1/10/14)--Today may not look a lot different than yesterday to many people, but for mortgage lending credit unions and thousands of other lenders today is the day that the Ability-to-Repay(ATR)/ Qualified Mortgage (QM) lending rules go into effect.

The rule covers consumer closed-end mortgage loans including home-purchase loans, refinances, and home equity loans secured by the borrower's dwelling. The Credit Union National Association is reminding credit unions of the many compliance resource materials that have been provided over the past year.

For borrowers, the new Consumer Financial Protection Bureau rules were written as protections and in response to abusive lending practices that helped undermine the country's housing market and economy. Credit unions largely did not engage in such lending practices and have been recognized throughout the housing crisis as being a model for responsible lending.

The rule requires credit unions and others to assess a member's ability to repay based on specific criteria such as current or reasonably expected income or assets, credit history, employment status, current debt and other related factors that credit unions routinely consider when originating a loan.

Lenders that write mortgages that meet QM criteria, such as requiring a borrower to have a DTI of no more than 43%, are intended to be able to avoid legal liability if their compliance with the ATR provisions is challenged in court. However, there is no requirement that all mortgages have to meet the QM provisions.

In fact, CFPB Director Richard Cordray and the National Credit Union Administration have made it very clear that credit unions and other lending institutions are not required to originate QMs only and may originate non-QM loans. CUNA urged the regulators to clarify that credit unions and other lenders can decide whether a mortgage they originate should confirm to the QM standards or not, as long as the ATR requirements are met.  

CUNA reminds CUs of the following support offered by CUNA or issued by federal regulators. (Use resource links to access the documents.):
  • A comprehensive CUNA.org page of CFPB mortgage rule compliance resources that provides a one-stop shop to assist credit unions;
  • A National Credit Union Administration supervisory letter to credit unions (14-CU-01) that notes agency field staff "will take into account a credit union's good-faith efforts to comply" with new QM regulations as they conduct their early-stage examinations; and
  • A CFPB page of regulatory guidance that provides quick reference charts, videos, compliance guides, supervision and examination materials and other resources.

CUs are good options in USDA rural lending program: CUNA

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WASHINGTON (1/10/14)--The Credit Union National Association strongly supports the U.S. Department of Agriculture's (USDA) efforts to establish a program directed at increasing lending in rural areas, and urged USDA to consider credit unions as a lending option as it revisits existing lending programs and develops new ones.

The CUNA statement came in the form of a comment letter on an interim rule that would establish the Single Family Housing Guaranteed Loan Program (SFHGP). CUNA Senior Assistant General Counsel Luke Martone wrote that the loan program "aims to provide low- and moderate-income persons who will live in rural areas with an opportunity to own decent, safe, and sanitary dwellings and related facilities."

"Numerous credit unions operate in rural areas and we believe this program will benefit not only credit union members in these areas but also the broader communities," the CUNA letter said.

CUNA encouraged the USDA to extend the permissible loan term to 40 years when in the best interest of the member-borrower.

The interim final rule goes into effect Sept. 14. CUNA thanked USDA for providing this lengthy compliance deadline, and for recognizing "the general need to make the program more 'user-friendly' and more compatible with existing mortgage lending practices."

CUNA encouraged the USDA to examine similar programs with an eye toward increasing usability by both lenders and borrowers. CUNA also urged USDA to provide credit unions and other lenders with much-needed information to assess whether and how to participate in the SFHGLP by making its administrative instruction handbook available as early as practical.

The USDA could also provide additional resources such as webinars and audio conferences to inform stakeholders, and CUNA and state credit union leagues would welcome the opportunity to promote and/or partner with USDA on such outreach efforts.

For the full comment letter, use the resource link.

NCUA reiterates TILA guidance in Reg Alert

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ALEXANDRIA, Va. (1/10/14)--Small servicers, those defined as servicing 5,000 or fewer mortgages, are exempt only from portions of the Consumer Financial Protection Bureau's new Truth In Lending Act (TILA) mortgage servicing rule that requires issuance of periodic statements for closed-end mortgage loans, the National Credit Union Administration reminded in a regulatory alert (14-RA-03).

The NCUA noted that the TILA mortgage servicing rule, which becomes effective today, also requires:
  • New and revised disclosures for certain adjustable-rate mortgages; and
  • Prompt crediting of mortgage payments and responding to requests for payoff amounts.
The alert addresses timing requirements for standard and adjustable-rate mortgage statements, and what information must be included in the statements.

The agency also reminded that additional mortgage servicing requirements may apply under the new Real Estate Settlement Procedures Act (RESPA) mortgage servicing rule issued by the CFPB. Those requirements will be addressed in an upcoming NCUA Regulatory Alert (14-RA-04) expected soon.

Credit unions that act as creditors, assignees, or mortgage servicers should be familiar with both of these mortgage servicing rules to determine whether these rules regulate the loans that they service, and if so, what their compliance obligations are under the rules, the NCUA added.

For the full alert, use the resource link.

GAO: Data breach policies challenge even government agencies

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WASHINGTON (1/10/14)--Merchants and financial institutions aren't the only ones with data breach headaches.  A recent U.S. Government Accountability Office study reviewed eight federal agencies and found that while they "generally" developed data security breach policies and procedures, they inconsistently implemented them.

The National Credit Union Administration was not part of the study.  However, the Federal Reserve, Federal Deposit Insurance Corp., Securities and Exchange Commission and the U.S. Treasury Department were.

The GAO summary explains that the term "data breach" generally refers to the unauthorized or unintentional exposure, disclosure, or loss of sensitive information and that such a breach can leave individuals vulnerable to identity theft or other fraudulent activity.

"Although federal agencies have taken steps to protect (personally identifiable information), breaches continue to occur on a regular basis. In fiscal year 2012, agencies reported 22,156 data breaches--an increase of 111% from incidents reported in 2009," the GAO noted.

The report was posted to the GAO website Dec. 9, 2013, coincidentally about nine days before news of the massive data breach at Target first broke.

Use the resource link to read more of GAO's findings and recommendations.