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NEW: CFPB delays remittance rule effective date

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WASHINGTON (1/22/13, UPDATED 4:00 p.m. ET)--The Consumer Financial Protection Bureau is delaying the effective date of its remittance rule that was set to go into effect Feb. 7.

A new effective date will be announced later this year, the bureau announced in a blog post.

The Credit Union National Association urged the CFPB in a recent comment letter to postpone the effective date of the remittance rule and to give credit unions as much time as possible to comply.

Under the CFPB's rule, remittance transfer providers would be required to provide prepayment and receipt disclosures to the consumer sender that include the exchange rate,  fees and taxes  associated with a transfer, and the amount of money that will be received on the other end of the transfer. Remittance transfer providers will also be required to investigate disputes and correct errors.

The CFPB has provided a safe harbor exemption from the rule for remittance providers that transact 100 or fewer remittances per year.

Look to tomorrow's News Now for more detail.

Compliance: Don't relax, escrow disclosures are still coming

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WASHINGTON (1/22/13)--For those of you who have been dancing around your offices since the final escrow rule was issued by the Consumer Financial Protection Bureau because the proposed escrow disclosures were missing--your dance party will probably be short-lived, the compliance team at the Credit Union National Association warns.

As the CFPB notes several times in the "Supplementary Information" to the rule, the disclosure provisions will not be adopted "in this rule."  [Emphasis added]. 

As you may remember, last November, the CFPB published a rule that "delayed implementation of certain new mortgage disclosures".  The purpose of the delay is to give the industry extra time so that the "entire TILA-RESPA disclosure regime" can go into effect at once. The "TILA-RESPA disclosure regime" includes the proposed escrow disclosures.

So, although the final escrow rule issued last week, which takes effect June 1, only includes the amended definitions of "higher-priced mortgage loan" and "escrow accounts", expect to see the escrow disclosures show up in a final rule later this year.

CUNA asks for CFPB clarification on small-servicer exemption

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WASHINGTON (1/22/13)--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 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 ot the entity to whom the obligation was initially payable, are not small servicers.

CUNA talked with the CFPB on this Friday 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.

WOCCU-CUNA supported changes in new FATCA rules

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WASHINGTON (1/22/13)--When the U.S. Internal Revenue Service (IRS) released its final regulations last week to implement the Foreign Account Tax Compliance Act (FATCA), the final included key recommendations made by the World Credit Union Council and supported by the Credit Union National Association to reduce the burden on credit unions.

"The FATCA regulation will have a far-reaching impact on credit unions in many jurisdictions," said Brian Branch, World Council president and CEO. "In today's world, we continue to advocate for reducing regulatory burden so that credit unions can concentrate on serving their members' needs."

FATCA is designed to create a tax information reporting and withholding system for certain payments that are made to foreign financial institutions (FFIs) and other entities.

The rules target U.S. taxpayers using foreign accounts to avoid paying U.S. income taxes and they apply to non-U.S. credit unions in many jurisdictions. The FATCA final rule's "U.S. withholding agents" provisions will also apply to U.S. credit unions that make international payments.

FATCA will require most large or internationally active non-U.S. financial institutions to register with the IRS and monitor their accounts to detect U.S. taxpayers who may be hiding money overseas. The IRS's proposed regulation, however, would likely have also required smaller non-U.S. credit unions to register with the IRS because it only exempted small "banks" as defined by U.S. tax law.

WOCCU explained in a comment letter and in testimony to the IRS last year that the requirement would have placed unnecessary and inappropriate burdens on small foreign credit unions.

In the final FATCA regulation, the IRS incorporated World Council's key recommendations:

  • That credit unions and similar credit cooperatives fall within the definition of FATCA-exempt "non-registering local banks," and;
  • Non-U.S. credit unions are allowed to list U.S. dollar accounts on their websites without losing FATCA-exempt status.
Most non-U.S. credit unions with less than $175 million in assets will fall within the "non-registering local bank" exemption, and most larger non-U.S. credit unions will qualify as partially exempt "deemed compliant" foreign financial institutions.

Use the resource link to read more about the FATCA rule details.

Loan 'steering' banned by new CFPB reg

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WASHINGTON (1/22/13)--The Consumer Financial Protection Bureau issued 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:
  • 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 single premium 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. The final rules clarify that the proxy factors are ones that consistently vary over a significant number of transactions and that the loan originator has the ability to add, drop or change the factor.

The new rule, required under the Dodd-Frank Act, is available on the CFPB website (use the resource link) and was issued Sunday, Jan. 20. CUNA's Regulatory Advocacy team will be reviewing the final rule and providing an analysis.

King, Sherman, Leutkemeyer sign on as GAC keynoters

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WASHINGTON (1/22/13)--A trio of key Capitol Hill lawmakers--Reps. Peter King (R-N.Y.), Brad Sherman (D-Calif.) and Blaine Luetkemeyer (R-Mo.)--have added their names to a growing list of political luminaries that are set to speak at the Credit Union National Association's 2013 Governmental Affairs Conference (GAC).

King and Sherman were chief sponsors of CUNA-backed 2012 credit union supplemental capital legislation (H.R. 3993). They are both scheduled to speak on Feb. 27. King last year noted that their bill would provide the National Credit Union Administration with "the same authority and flexibility to adjust capital requirements in response to changes in economic conditions as Congress has provided to federal banking regulators."

Sherman is a frequent GAC guest. This will be the first time that King has spoken before the GAC.

Another first-time GAC attendee, Luetkemeyer, is also scheduled to speak on Feb. 27. Luetkemeyer, along with Rep. David Scott (D-Ga.), last year introduced a bill that eliminated a duplicative provision that required a physical notice also be posted on the ATM machine. The bill, propelled by strong support from CUNA and the credit union system, was approved by the U.S. Congress and signed into law late last year, ending a regulatory burden that created legal and financial issues for some credit unions and other financial institutions.

Reps. King, Sherman and Luetkemeyer all serve on the House Financial Services Committee. 

Speaker of the House Rep. John Boehner (R-Ohio), credit union champions Sen. Mark Udall (D-Colo.) and Ed Royce (R-Calif.), newly named House Financial Services Committee Chairman Jeb Hensarling (R-Texas), House Majority Whip Kevin McCarthy (R-Calif.) and House Financial Services Committee senior members Spencer Bachus (R-Ala.) are also scheduled to speak during the GAC.

More congressional and regulatory speakers will be added to the 2013 GAC lineup in coming weeks.

CUNA's 2013 GAC will take place Feb. 24-28 at the Washington Convention Center in Washington, D.C. This year's GAC theme, "Powerful Cause, Positive Effect," reflects the credit union commitment to the 95 million working Americans who rely on credit unions every day.

For more information, follow the @CUNAverse twitter hashtag #CUNAGAC. Use the resource link to register for the GAC.

Free appraisal reports for all borrowers under new CFPB rule

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WASHINGTON (1/22/13)--The Consumer Financial Protection Bureau adopted a new rule Friday that requires mortgage lenders to provide applicants with free copies of all appraisals and other home-value estimates.

"As a general practice, most credit unions already do this," said Luke Martone, assistant general counsel for the Credit Union National Association. "The rule, in essence, requires other creditors to adopt the same high standards generally used by credit unions."

The rule was required under the Dodd-Frank Wall Street Reform and Consumer Protection Act. It is intended to ensure that consumers can receive information prior to a loan closing about how the property's value was determined.

"Having this information available promptly makes it easier for loan applicants to make informed decisions," said CFPB Director Richard Cordray when announcing the rule's release.

The final rule also requires creditors to:
  • Inform consumers within three days of receiving an application for a loan of their right to receive copy of all appraisals; and
  • Provide the copies of appraisal reports and other written home-value estimates to consumers promptly, or three days before closing, whichever is earlier. 
The requirements go into effect in January 2014 and will apply to first-lien mortgages.

The new rule, issued under Regulation B, eliminates an exemption for federal credit unions that was included in the Federal Reserve's 1993 rule because the National Credit Union Administration had a similar rule requiring free reports be provided only when requested.

Also on Friday, the CFPB with several other federal regulatory agencies, adopted a new rule that establishes special requirements concerning appraisals for higher-priced mortgage loans. The NCUA adopted that rule last week.  Use the resource link to read more.