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Washington Archive

Washington

NEW: CUNA asks for CFPB clarification on small-issuer exemption

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WASHINGTON (1/18/13, UPDATED 6:15 p.m. ET)--Credit unions are asking the Credit Union National Association whether a "small servicer," as defined in a new Consumer Financial Protection Bureau rule on mortgage servicing, still qualifies for an exemption from many of the rule's provisions if  it uses a sub-servicer that is too big for the exemption. CUNA is asking the CFPB to clarify.

The CFPB's final mortgage servicing rule, issued Thursday, requires mortgage servicers to meet new periodic statement requirements, provide additional notice of rate changes to borrowers and help ensure that consumers know their options to prevent foreclosures.

The servicing rule contains a number of exemptions for credit unions and other financial institutions that meet the bureau's "small issuer" definition--that they service 5,000 or fewer loans that they or an affiliate own or originated. Servicers that own mortgage servicing rights for mortgage loans that are not owned by the servicer of affiliate, or for which the servicer or affiliate is not the entity to whom the obligation was initially payable, are not small servicers.

CUNA talked with the CFPB on this today and sought clarification. CUNA will update credit unions and leagues early next week on issues, such as:

  • How is a credit union, which qualifies as a small servicer, affected it it retains a sub-servicer that does not meet the small-servicer definition?
Under the CFPB rule, "small servicers" will be exempted from the periodic statement requirements, general servicing policies, procedures and requirements, early intervention and continuity of contact provisions with delinquent borrowers and a vast majority of the loss mitigation procedures. They will not, however, be exempted from the information request and error resolution requirements.

CUNA witness stresses CUs' difference at CFPB mortgage hearing

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ATLANTA, Ga. (1/18/13)--Credit unions did not create the mortgage market issues that the Consumer Financial Protection Bureau seeks to address through its new regulations, and therefore should be shielded from regulatory burden where possible, Credit Union National Association witness Pam Davis said at a Thursday hearing.

Click to view larger image Pam Davis of Delta Community CU, Atlanta, Ga., said new CFPB mortgage servicing regulations will benefit borrowers. She encouraged the agency to recognize the differences between credit unions and for-profit institutions as it develops regulations. (CUNA Photo)


Davis also represented the Georgia Credit Union Affiliates.

The hearing was held just after the CFPB released a final rule addressing mortgage servicing on Thursday morning. Regulatory measures addressing mortgage loan origination (MLO) and high-risk mortgage appraisals are also on the agency's docket: There is a Jan. 21 deadline for their release. The CFPB last week unveiled final rules regarding ability-to-repay requirements, escrow accounts, and "high-cost" mortgages.

Davis, who serves as vice president of real estate services at Delta Community CU, Atlanta, said CUNA and credit unions are "concerned about the regulatory burden imposed on lenders and will be reviewing the new rules from that perspective."

The CFPB's final mortgage servicing rule requires mortgage servicers to simplify billing statements, provide additional notice of rate changes to borrowers and help ensure that consumers know all of their options to prevent foreclosures.

The servicing rule contains a number of exemptions for credit unions and other small financial institutions that service 5,000 or fewer loans that they or an affiliate originated.

Those credit unions will be exempted from periodic statement requirements, general servicing policies, procedures and requirements, early intervention and continuity of contact provisions with delinquent borrowers and a vast majority of the loss mitigation procedures, CUNA Deputy General Counsel Mary Dunn noted.

They will not, however, be exempted from the information request and error resolution requirements, Dunn said.

Davis during the hearing said the CFPB's mortgage servicing regulations "do address a number of problem areas" and will be helpful for borrowers. The servicing rules will also address some of the problems associated with misaligned incentives in the servicing market. However, Davis noted, CUNA and credit unions "want to ensure that responsible lenders are not unduly burdened in the process."

Regarding the pending MLO final rules, Davis said, "There is absolutely no evidence that credit unions have engaged in abusive practices regarding mortgage loan originator compensation and additional requirements will needlessly add to the regulatory burden credit unions already face."

CUNA has advised the CFPB to eliminate the use of "proxy factors" to restrict compensation to loan originators, revise proposed restrictions on upfront points and fees, and provide credit unions with some flexibility on the use of arbitration clauses, Davis said.

NEW: Loan 'steering' banned by new CFPB reg

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WASHINGTON (1/18/13, UPDATED 3:45 P.M. ET)--The Consumer Financial Protection Bureau  announced it is issuing rules to prevent unscrupulous mortgage loan originators (MLO) from generating higher compensation for themselves by steering borrowers into risky and high-cost loans.

The CFPB's final rules will:
  • Broaden the application of prohibitions on compensation that varies with the loan terms.  For instance, an MLO should not be paid more if the consumer takes a loan with a higher interest rate, a prepayment penalty, or higher fees;
  • Prohibit "dual compensation": Under the CFPB's rules, the loan originator cannot get paid by both the consumer and another person such as the creditor; and
  • Set qualification and screening standards:  An MLO must meet character, fitness, and financial responsibility reviews, pass a criminal background check, be screened for felony convictions; and undertake training to ensure they have the knowledge about the rules governing the types of loans they originate.
The final rule also implements Dodd-Frank provisions that, for mortgage and home equity loans, generally prohibit mandatory arbitration of disputes related to mortgage loans and the practice of increasing loan amounts to cover credit insurance premiums.

One area in the proposal that concerned the Credit Union National Association was the use of proxy factors to determine whether the rules apply to compensation plans.  While the final rules have not been issued yet, based on the  agency's summary the use of such factors remains in the final rule.

The new rule, required under the Dodd-Frank Act, will be posted to the CFPB website (use the resource link) Sunday, Jan. 20. CUNA's Regulatory Advocacy team will be reviewing the final rule and providing an analysis. See Tuesday's News Now for more details.

Fed's payments survey can help CUs meet members' needs

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WASHINGTON (1/18/13)--Every three years the Federal Reserve launches a study to determine the current volume and composition of electronic and check payments in the U.S. and the agency announced Thursday it's that time again.

"This is a study credit unions should be on the lookout for. They can gain insight from the study results on payment trends and methods, as well as additional fraud information. This will help with understanding their members' payment needs," said Mary Dunn, Credit Union National Association senior vice president of regulatory affairs.

"CUNA encourages any credit union to participate if they receive the Fed's survey," Dunn added.

The 2013 Federal Reserve Payments Study will take a three-pronged approach to information collection. Collectively the data is intended to allow the Fed to estimate the annual number, dollar value, and composition of retail noncash payments.

Previous studies have revealed significant changes in the U.S. payments system over time, including a continuing decline in the use of checks and growing use of electronic payments, such as automated clearinghouse, electronic banking transactions, credit cards, debit cards and stored value cards.

The survey will be conducted through the Federal Reserve's Retail Payments Office, located at the Federal Reserve Bank in Atlanta.

CUNA and its Payments Policy Subcommittee will be reviewing the results of the study when they become available, especially trends in electronic payments and the evolving payments landscape.

To read the Fed study announcement, use the resource link below.

NCUA reminds CUs of March 1 HMDA filing deadline

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ALEXANDRIA, Va. (1/18/13)--Credit unions that were subject to Home Mortgage Disclosure Act requirements in 2012 have until March 1 to submit their 2012 Home Mortgage Disclosure Act (HMDA) loan/application register (LAR) data to the Federal Reserve Board, the National Credit Union Administration reminded Thursday in a regulatory action alert (13-RA-02).

Credit unions that do not file their LAR forms by March 1 could become subject to civil money penalty assessments, the NCUA noted.

Online and email filing options are available.

Credit unions with 25 or fewer entries on their LAR may report and submit their data in paper form, the NCUA said. Credit unions with more than 25 LAR entries are required to submit those reports in an automated, machine-readable format.

The NCUA advised credit unions to review its March regulatory alert, "Home Mortgage Disclosure Act Data Collection Requirements for Calendar Year 2012" (12-RA-02), to determine whether they are required to submit HMDA data. Credit unions with total assets of more than $41 million as of Dec. 31, 2011 were subject to HMDA filing requirements for 2012.

For the full letter, use the resource link.

The NCUA in a Jan. 24 webinar will reveal HMDA LAR preparation tips and discuss ways to avoid common errors found on those forms. The webinar, entitled "HMDA: Accuracy and Timeliness," is scheduled to begin at 2 p.m. ET. (See Jan. 3 News Now story: NCUA to offer Jan. 24 HMDA webinar)

Earlier this month, the Consumer Financial Protection Bureau announced that credit unions and other financial institutions with total assets above $42 million as of Dec. 31, 2012 are required to collect and report HMDA data this year.