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First NCUA Supervisory Guidance of 2014 Centers on QM Rule

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ALEXANDRIA, Va. (1/3/14)--Credit unions that make closed-end consumer loans secured by a dwelling must comply with the Consumer Financial Protection Bureau's new Ability-to-Repay/Qualified Mortgage (ATR/QM) rule for loan applications received on or after Jan. 10, the National Credit Union Administration reminds in its first Regulatory Alert on 2014.

The rule requires credit unions to assess a member's ability to repay for virtually all closed-end residential mortgage loans secured by the member's dwelling and provides your credit union with certain protections from legal liability for compliance with the rule, the agency said in a release.

"The guidance makes it clear that credit unions are not expected to make QMs only," Credit Union National Association Deputy General Counsel Mary Dunn said.

According to the NCUA release, credit unions will be able to leverage existing policies and practices for determining a member's ability to repay a loan to comply with the ATR/QM rule. "While the ATR/QM rule mandates a broader set of underwriting criteria than those required under Part 701 of NCUA's regulations, the ATR/QM rule's requirements do not contradict Part 701's underwriting requirements. As such, compliance with the ATR requirements in Regulation Z will also meet the underwriting criteria in Part 701," the NCUA said.

"However, simply meeting the underwriting criteria in Part 701 is not sufficient for compliance with the ATR/QM rule requirements," the agency added.

The NCUA alert includes details on:
  • Which loans are covered by the rule;
  • Basic ability-to-repay requirements;
  • How QMs provide a safe harbor;
  • The different types of QMs;
  • Caps on QM points and fees;
  • How QMs protect against liability;
  • What makes a QM loan higher priced;
  • When prepayment penalties are allowed for QM loans; and
  • What other guidance has been made available.
A supervisory letter with compliance guidance for credit unions and instructions for agency examiners will be released soon, the agency added.

Gail Laster, director of the NCUA's Office of Consumer Protection, last month said the NCUA and other agencies are not expecting QM rule compliance perfection right away. Examiners will be looking for good-faith compliance efforts first, and then "substantial compliance" in due time, Laster said. CFPB Director Richard Cordray has made similar comments in recent weeks.

CUNA has encouraged the NCUA to emphasize this compliance leeway in its upcoming supervisory letter.

2014 NMLS Registration Period Ended: What If Your CU Missed It?

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WASHINGTON (1/3/14)--With the 2014 Nationwide Mortgage Licensing System & Registry (NMLS) renewal period ending on Dec. 31, credit unions that have not yet registered their mortgage loan originators (MLOs) must now reactivate their registration status.

If the renewal process for the upcoming year was not completed prior to Dec. 31, the MLO will have an "inactive" registration status both in NMLS and on NMLS Consumer Access. Inactive registrations must be reactivated in order to have an "Active" registration status.

For the NMLS reactivation page, use the resource link.

The Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act) requires credit union MLOs and their employing institutions to register with the NMLS and to renew those registrations on an annual basis. The NMLS registry is intended to increase consumer protection and to help financial regulators coordinate and share mortgage originator information.
 
Credit unions and other MLOs are required to ensure that their mortgage loan originators are properly registered and prohibit any employees who are not registered from performing any residential mortgage loan origination duties.
 
Registered MLOs are given a "unique identifier," which is the identification number associated with the MLO within the NMLS. The unique identifier remains the same, even when the MLO changes employment, moves, or changes his or her name, and the identifier tracks the MLO and facilitates public access to the employment history and any disciplinary or enforcement actions that have been initiated against the individual.
 
MLOs that are not registered on the NMLS are prohibited from originating residential mortgage loans. Further, institutions that fail to renew will be listed on NMLS as ineligible to originate mortgages.

Senators Push for Consumer Data Security Hearing

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WASHINGTON (1/3/14)--Senate Banking Committee members Mark Warner (D-Va.) and Robert Menendez (D-N.J.) are looking to add a hearing on consumer data security to the early-2014 committee agenda.

The senators this week wrote to committee chairman Tim Johnson (D-S.D.) and ranking member Mike Crapo (R-Idaho) requesting an examination of "whether market participants are taking all appropriate actions to safeguard consumer data and protect against fraud, identity theft, and other harmful consequences, and whether we need stronger industry-wide cybersecurity standards."

"We also believe it would be helpful for the Committee to hear from our financial regulators as to whether they have the necessary tools, information, and authority to ensure that financial companies and service providers are doing enough to protect consumer data, and, in the event that a breach does occur, to minimize the harm to affected parties and take appropriate enforcement actions...When it comes to data security, consumers' interests must come first," the senators wrote.

The letter noted the recent Target data breach, which compromised 40 million debit and credit cards and included stolen encrypted PIN data.

Credit unions and other financial institutions have had to reissue millions of debit and credit cards to consumers impacted by the breach. Security and payments industry experts are debating the implications of the breach on payment systems, discussing whether debit cards will suffer from a drop in consumer confidence, and whether having the EuroPay MasterCard Visa (EMV) chip-standard technology in place would have helped protect consumer data. (See Jan. 2 News Now story: Target Breach Effect on Payment Systems Under Debate.)

The Credit Union National Association is urging credit unions whose members' accounts were compromised to collect data about the costs they incur in replacing cards and assisting members. CUNA is also developing a website to assist in the efforts to track the costs imposed by the breach.

The House and Senate are scheduled to return to Washington on Jan. 6. For now, a Jan. 8 hearing on the U.S. Government Accountability Office's report on government support for bank holding companies is the lone item on the early Senate Banking Committee agenda. The House Financial Services Committee has also announced four early-2014 hearings. (See News Now: Fed, Dodd-Frank on Early House Financial Services Hearing Agenda.)

Fed, Dodd-Frank Hearings on Early House Financial Services Agenda

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WASHINGTON (1/3/13)--The Federal Reserve's current Quantitative Easing program, the Dodd-Frank Act's Qualified Mortgage (QM) rule and the Volckler rule are among the items on the early-year House Financial Services Committee agenda.
 
Quantitative easing's impact on international finance will be discussed at a Jan. 9 House Financial Services monetary policy and trade subcommittee hearing. Other hearings announced Thursday include:
  • A Jan. 14 House Financial Services subcommittee on financial institutions and consumer credit hearing on how new QM rules could impact homebuyers;
  • A Jan. 15 full Financial Services Committee hearing on the unintended consequences and impact of the Volcker Rule; and
  • A Jan. 28 Financial Services Committee update from Consumer Financial Protection Bureau Director Richard Cordray.
The hearing schedule is tentative. All hearings are scheduled to be held in Room 2128 of the Rayburn House Office Building.

The Senate Banking Committee has also set a Jan. 8 hearing, and committeee members are asking leadership to hold a hearing on data security issues. (See News Now story: Senators Push for Consumer Data Security Hearing.)