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RESPA coverage questions CUNA answers

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WASHINGTON (12/30/09)--As the Credit Union National Association (CUNA) reminded credit unions in yesterday’s News Now, the changes to the U.S. Department of Housing and Urban Development’s (HUD’s) implementing rules for the Real Estate Settlement Procedures Act (RESPA) go into effect Friday, Jan. 1. “CUNA would like to clarify compliance requirements regarding home equity lines of credit (HELOCs) that have not changed in RESPA,” said Kathy Thompson, CUNA’s senior vice president for compliance. Addressing questions recently posed to CUNA, Thompson offered the following guidance:
* Have the RESPA rules changed on when credit unions need to supply HUD’s “Shopping for Your Home Loan: HUD’s Settlement Cost Booklet”?
Answer: No. As we reported yesterday, HUD has updated its settlement cost booklet that has to be provided to consumers within three days of applying for certain mortgage loans. HUD has not made any changes to the section of the RESPA regulations that dictate when the booklet must be given (Section 3500.6). Therefore, for a HELOC, credit unions should continue to provide the Federal Reserve Board’s “When Your Home Is On the Line: What You Should Know About Home Equity Lines of Credit” to be in compliance with the RESPA rules. And the exceptions to providing the booklet for refinancings, closed-end subordinated loans and reverse mortgages continue to apply. While HUD's booklet makes mention of home equity loans and refinancings--and cautions consumers about taking out such loans--the booklet is clearly oriented to a person buying a house, and it would undoubtedly be confusing to give the booklet out for all types of mortgage loans.
* Do the RESPA amended rules now require the use of any new HUD forms for home equity lines of credit (HELOCs)?
No. While HELOC loans are “covered” under the general RESPA definitions, there are specific exceptions that HUD did not change when it revised its RESPA rules in November 2008. HUD did not change the language of current Section 3500.7(f) [but did re-designate (f) as a new (h)], which states that if a lender provides the disclosures required by the Truth in Lending Act’s Regulation Z at the time the person applies for a home equity line of credit, then the lender isn’t subject to the general rule of providing a Good Faith Estimate (GFE). Moreover, the revised Section 3500.8 on settlement statements continues to state: “The use of the HUD-1 or HUD-1A is exempted for open-end lines of credit (home equity plans) covered by the Truth in Lending Act and Regulation Z.”
Thompson said therefore, at this point credit unions do not have to change their compliance procedures for closing HELOCs. She admonished, however, “Remember that the Fed has under consideration changes to its Regulation Z’s rules on both closed-end mortgage loans and HELOCs (the comment periods for both proposals closed on Dec. 24), and it has indicated its interest in trying to better coordinate disclosures under Truth and Lending and RESPA. So we will have to see what 2010 holds in store for further changes in lending disclosures.”

Inside Washington (12/29/2009)

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* WASHINGTON (12/30/09)--On Monday, the Federal Reserve Board issued a proposal indicating that it is moving ahead with efforts to scale back the aid it infused into the economy during the peak of the financial crisis. The proposal would allow banks to place their reserves in the Fed. Fed officials worry that if banks have too much cash tied in their reserves, there might be a credit boom and inflation. However, Fed Chairman Ben Bernanke said inflation is not a near-term concern (Associated Press Dec. 28). Industry observers expect the investments to have a maturity of one to six months, with an interest rate set through auctions. Banks would not be able to withdraw the funds until the deposits mature ... * WASHINGTON (12/30/09)--Community banks are lobbying the Federal Reserve Board to exempt them from new compensation guidance designed to help financial institutions establish appropriate pay practices. The Fed’s guidance would subject the nation’s 28 largest banks to a “horizontal review” where their pay packages would be compared with those of other firms. Large banks whose compensation practices differ from the norm would be closely analyzed. However, community banks’ compensation would be reviewed as a part of the institutions’ exam processes. Community banks argue that the guidance goes too far because they did not contribute to the current financial crisis. Smaller banks are already exempt from a regulatory reform bill that passed the House in December. Banks with less than $10 million in assets would not be supervised from the proposed Consumer Financial Protection Agency ...

FOM chartering comments due March 1

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WASHINGTON (12/30/09) — March 1 is the due date for comments on recently proposed changes to the National Credit Union Administration’s (NCUA’s) chartering and field-of-membership rules, according to the Tuesday issue of the Federal Register. At its Dec. 17 open meeting, the NCUA proposed revisions designed to make the application and review process involving new community charters or expansions faster, simpler, less labor intensive, and more objective for both credit unions and NCUA. If approved, the new rule would set objective and quantifiable criteria to determine the existence of a well-defined local community (WDLC) for areas that encompass multiple group areas. Single political jurisdictions, such as a county, could continue to be the basis for a community charter or addition without having to meet further statistical standards. A new, objective definition for rural districts is also proposed. In addition, the NCUA is seeking comments on whether underserved areas should have to continue to qualify as well-defined local communities as the current rule requires. The NCUA also plans to eliminate a required narrative statement, a change that could potentially save credit unions significant consultant fees in assembling field-of-membership applications. The chartering and FOM proposal, which supersedes one issued in 2007, also would allow a credit union to contact its regional office and find out during that call whether an area being requested would meet the definition of a “community” under the agency’s rule. The Credit Union National Association (CUNA) is seeking credit union comment on the NCUA proposal by Feb. 10. CUNA's Community Credit Union Committee and Federal Credit Union Subcommittee will help develop CUNA's comment letter to the agency. For NCUA’s full proposal, use the resource link.

CUNA letter to iWash Posti Let CUs lend lead

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WASHINGTON (12/30/09)—“Give credit unions a chance to lend and lead,” the Credit Union National Association wrote in a letter to the Washington Post editor published yesterday. In the letter, CUNA President/CEO Dan Mica urged the U.S. Congress to pass legislation to increase credit union member business lending (MBL) authority. In the letter, Mica noted recent news reports that the Obama administration has taken a “loan plea to small banks.” It has been reported that the U.S. Treasury Department plans to offer community banks $30 billion to make more loans to small businesses to spur economic growth and create jobs. “Credit unions could advance these goals at no cost to the U.S. government under legislation that Sen. Mark Udall (D-Colo.) introduced Dec. 21 with bipartisan support,” Mica pointed out. The Udall bill would raise the cap on credit unions' small-business loans up to 25% of assets, up from the current statutory limit of 12.25%. It would exempt from that cap loans under $250,000—up from a current ceiling of $50,000. Mica went on to note that community bankers were quoted in a recent news story as saying the reason for their lackluster lending performance is a lack of demand for credit. Mica questioned that assertion, saying, “That has not been the credit unions' experience.” For the 12 months ending June 30, small business loans from credit unions rose 14% (according to CUNA figures)…while declining 8% percent at banks (according to the Federal Deposit Insurance Corp.).” Mica urged the U.S. Congress and the Obama administration to back legislation to increase credit union MBL powers as a way credit unions could do more to help solve the small-business credit crunch without adding to the federal debt. The increased authority would enable credit unions to generate $10 billion in new lending in the first year, and that in turn could boost job creation by about 108,000 new positions. There is a companion bill in the House to the Udall bill, introduced by Reps. Paul E. Kanjorski (D-Pa.) and Ed Royce (R-Calif.). The chairman of the National Credit Union Administration supports legislation to raise the cap.