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Problems with NMLS renewal activity report

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WASHINGTON (7/10/12)--Every July 1, the Nationwide Mortgage Licensing System and Registry (NMLS) updates its online Renewal Activity Report to help institutions to prepare for upcoming registration renewal season.  However, this year the NMLS has warned that its renewal report carries some incorrect information on the renewal status of certain mortgage loan originators (MLOs) as "exempt" when, in fact, the renewal status was "eligible for renewal."

"Until this issue is resolved, institutions should not rely on this report to determine who is required to renew to maintain an active registration for 2013," the NMLS says on its website.

The NMLS is working to resolve the issue and said it will provide updates as appropriate on its Resource Center website (use the resource link below).

Title V of the 2008 Housing and Economic Recovery Act brought about the licensing and registration requirements for mortgage originators, and was the result of problems with mortgage lending, especially with subprime mortgage loans. Now, any individual who originates residential mortgages must annually register with the NMLS as a "registered loan originator."

MLOs have to renew their registration annually between Nov. 1 and Dec. 31 unless initial registration occurred less than six months prior to the end of the renewal period. In addition, credit unions' NMLS institution accounts must be renewed on an annual basis, regardless of when the institution's account was created.

Congress this week Marking second Dodd-Frank anniversary

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WASHINGTON (7/10/12)--With this month marking the second anniversary of the Dodd-Frank Wall Street reform package, the House Financial Services Committee will be taking a look at the impact of that law.

The House Financial Services subcommittee on capital markets and government-sponsored enterprises will hold the first in the series of hearings today with a session to examine the effect that the act has had on U.S. capital markets, businesses, investors, and consumers. The hearing is expected to have a particular focus on derivatives regulation; the so-called Volcker Rule, intended to ban banks from making certain speculative investments; risk retention; and single counter-party credit limits.

The House Judiciary subcommittee on intellectual property, competition and the Internet has scheduled a hearing for today titled, "Impact of Dodd-Frank Act: Financial Services Competition."

On Wednesday, the House Financial Services subcommittee on financial institutions and consumer credit will hold a hearing titled, "Impact of Dodd-Frank Act: Mortgage Banking."

The House was expected to vote last night on a Credit Union National Association–supported ATM disclosure bill. (See related story: CUNA encourages 'yes' vote on ATM bill.)

CFPB unveils proposed mortgage disclosure forms

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WASHINGTON (7/10/12)--Taking what it might consider to be a one-two punch against the confusion that can surround consumers during the mortgage origination process, the Consumer Financial Protection Bureau (CFPB) Monday proposed a new, simplified mortgage disclosure form and also proposed to expand protections afforded consumers who take out mortgages that are considered "high cost."

Credit Union National Association (CUNA) Deputy General Counsel Mary Dunn said CUNA will provide a summary of the extensive CFPB documents this week.

The CFPB's revised disclosure form combines the lengthy, duplicative, and, many say, confusing disclosure requirements under the Real Estate Settlement Procedures Act and the Truth in Lending Act into a single, more readable document.

"When making what is likely the biggest purchase of their life, consumers should be looking at paperwork that clearly lays out the terms of the deal," said CFPB Director Richard Cordray in a release.

"Our proposed redesign of the federal mortgage forms provides much-needed transparency in the mortgage market and gives consumers greater power over the exciting and daunting process of buying a home."

The proposed forms, which consumers will receive after applying for a loan and before closing, are part of the CFPB's Know Before You Owe mortgage project. Regulators spent more than a year researching the changes, as well as testing,  writing, and reviewing the proposal before its public unveiling.

The agency lists the following as the key improvements of the revised form:

  • Simpler than the old forms. Consumers can understand and compare different mortgages more effectively, and examine their estimated and final terms and costs more easily, helping them make the right decisions for themselves and their families.
  • Highlights information consumers need. Interest rates, monthly payments, the loan amount, and closing costs are all right there on the first page of the CFPB proposed form. Also, the first page explains how the interest rates, payments, and loan amount might change over the life of the loan, including the highest they can go. In addition, the forms offer more information about taxes, insurance, and other property costs so consumers can better understand the total cost.
  • Easier to look out for risks. The forms provide clear warnings about features some consumers may want to avoid, such as prepayment penalties and an increase in the loan balance (negative amortization). The proposed rule also contains provisions to make estimates more reliable. And because the proposed rule requires lenders to keep electronic copies of the forms they give to consumers, industry and regulators will be able to address compliance questions more easily.
  •  More time to consider choices. Lenders must give the Loan Estimate to consumers within three business days of applying for a loan and consumers must receive the Closing Disclosure at least three business days before closing on a loan. This will allow consumers to decide whether to go ahead with the loan and whether they are getting what they expected.
  • Limits on closing cost increases. The proposed rule would restrict circumstances in which consumers can be required to pay more for settlement services than the amount stated on their Loan Estimate.
Regarding consumer protections for high-cost mortgages, the CFPB proposed to extend protections under the Home Ownership and Equity Protection Act, as mandated by the Dodd-Frank Act.

The CFPB's proposal would:

  • Ban potentially risky features. For mortgages that qualify as high-cost based on their interest rates, points and fees, or prepayment penalties, the proposed rule would generally ban balloon payments (a large, lump sum payment usually due at the end of the loan), and would completely ban prepayment penalties.
  • Ban and limit certain fees. The CFPB's proposed rule would ban fees for modifying loans, cap late fees, and restrict the charging of fees when consumers ask for a payoff statement (a document that tells borrowers how much they need to pay off the loan).
  • Require housing counseling for high-cost mortgages. The proposed rule would require consumers to receive housing counseling before taking out a high-cost mortgage. In addition, the CFPB's proposal would implement TILA counseling requirements for first-time borrowers taking out certain mortgage loans that permit negative amortization. The proposal would also implement an amendment to RESPA to generally require that a list of housing counselors or counseling organizations be provided to all mortgage applicants.
Comments will be accepted by the CFPB on its high-cost loan proposal until Sept. 7.  That is also the comment deadline for sections 1026.1 (c) and 1026.4 of the TILA-RESPA disclosure plan.  For the rest of that proposal, CFPB will accept comments until Nov. 6.

CUNA, with its Consumer Protection Subcommittee and Housing Finance Reform Task Force, will be analyzing both CFPB proposals and drafting CUNA comment letters.

Inside Washington (07/09/2012)

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  • WASHINGTON (7/10/12)--Acting Federal Deposit Insurance Corp. (FDIC) Chairman Martin Gruenberg said it is difficult to weigh the possible effects of expiration of the Transaction Account Guarantee (TAG) program because of a shaky economy. The TAG program has helped stabilize banks and the economy, Gruenberg wrote in a letter to Congress, dated June 29 (American Banker July 9). FDIC initiated TAG as a voluntary program in 2008 during the financial crisis to address concerns that a large number of account holders might withdraw their uninsured account balances from financial institutions due to economic uncertainties. West Virginia Rep. Shelley Moore Capito (R-W. Va.) has asked the FDIC to assess the cost of a program that allows banks to offer its customers unlimited deposit insurance on noninterest-bearing transaction accounts (News Now June 11) …
  • WASHINGTON (7/10/12)--Eighteen trade groups have called into question the legality of a plan by a venture capital firm and three California municipalities to use eminent domain powers to seize mortgage loans from private investors. California's San Bernardino County and two of its city governments, Fontana and Ontario, would restructure the mortgages to help troubled borrowers stay in their homes. "We believe that the contemplated use of eminent domain raises very serious legal and constitutional issues," said the letter, signed by organizations, including the Securities Industry and Financial Markets Association and the American Bankers Association. "It would also be immensely destructive to U.S. mortgage markets by undermining the sanctity of the contractual relationship between a borrower and creditor, and similarly undermining existing securitization transactions." But when the program was featured in a Wall Street Journal article, a spokesman said the county is not committed to the idea

NEW CFPB unveils proposed mortgage disclosure forms

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WASHINGTON (UPDATE 7/9/12 3:45 p.m. ET)--Taking what it might consider to be a one-two punch against the confusion that can surround consumers during the mortgage origination process, the Consumer Financial Protection Bureau (CFPB) Monday proposed a new, simplified mortgage disclosure form and also proposed to expand protections afforded consumers who take out mortgages that are considered "high cost."

Credit Union National Association (CUNA) Deputy General Counsel said CUNA will provide a summary of the extensive CFPB documents this week.

The CFPB's revised disclosure form combines the lengthy, duplicative, and, many say, confusing disclosure requirements under the Real Estate Settlement Procedures Act and the Truth in Lending Act into a single, more readable document.

"When making what is likely the biggest purchase of their life, consumers should be looking at paperwork that clearly lays out the terms of the deal," said CFPB Director Richard Cordray in a release.

"Our proposed redesign of the federal mortgage forms provides much-needed transparency in the mortgage market and gives consumers greater power over the exciting and daunting process of buying a home."

The proposed forms, which consumers will receive after applying for a loan and before closing, are part of the CFPB's Know Before You Owe mortgage project. Regulators spent more than a year researching the changes, as well as testing,  writing, and reviewing the proposal before its public unveiling.

The agency lists the following as the key improvements of the revised form:

  • Simpler than the old forms. Consumers can understand and compare different mortgages more effectively, and examine their estimated and final terms and costs more easily, helping them make the right decisions for themselves and their families.
  • Highlights information consumers need. Interest rates, monthly payments, the loan amount, and closing costs are all right there on the first page of the CFPB proposed form. Also, the first page explains how the interest rates, payments, and loan amount might change over the life of the loan, including the highest they can go. In addition, the forms offer more information about taxes, insurance, and other property costs so consumers can better understand the total cost.
  • Easier to look out for risks. The forms provide clear warnings about features some consumers may want to avoid, such as prepayment penalties and an increase in the loan balance (negative amortization). The proposed rule also contains provisions to make estimates more reliable. And because the proposed rule requires lenders to keep electronic copies of the forms they give to consumers, industry and regulators will be able to address compliance questions more easily.
  • More time to consider choices. Lenders must give the Loan Estimate to consumers within three business days of applying for a loan and consumers must receive the Closing Disclosure at least three business days before closing on a loan. This will allow consumers to decide whether to go ahead with the loan and whether they are getting what they expected.
  • Limits on closing cost increases. The proposed rule would restrict circumstances in which consumers can be required to pay more for settlement services than the amount stated on their Loan Estimate.
Regarding consumer protections for high-cost mortgages, the CFPB proposed to extend protections under the Home Ownership and Equity Protection Act, as mandated by the Dodd-Frank Act.

The CFPB's proposal would:

  • Ban potentially risky features. For mortgages that qualify as high-cost based on their interest rates, points and fees, or prepayment penalties, the proposed rule would generally ban balloon payments (a large, lump sum payment usually due at the end of the loan), and would completely ban prepayment penalties.
  • Ban and limit certain fees. The CFPB's proposed rule would ban fees for modifying loans, cap late fees, and restrict the charging of fees when consumers ask for a payoff statement (a document that tells borrowers how much they need to pay off the loan).
  • Require housing counseling for high-cost mortgages. The proposed rule would require consumers to receive housing counseling before taking out a high-cost mortgage. In addition, the CFPB's proposal would implement TILA counseling requirements for first-time borrowers taking out certain mortgage loans that permit negative amortization. The proposal would also implement an amendment to RESPA to generally require that a list of housing counselors or counseling organizations be provided to all mortgage applicants.
Comments will be accepted by the CFPR on its high-cost loan proposal until Sept. 7.  That is also the comment deadline for sections 1026.1 (c) and 1026.4 of the TILA-RESPA disclosure plan.  For the rest of that proposal, CFPB will accept comments until Nov. 6.

CUNA, with its Consumer Protection Subcommittee and Housing Finance Reform Task Force, will be analyzing both CFPB proposals and drafting CUNA comment letters.

Western Bridge story comes to an end

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ALEXANDRIA, Va. (7/10/12)--Catalyst Corporate FCU of Plano, Texas, completed the migration of Western Bridge Corporate FCU's 326 capitalizing members and services last week, and the National Credit Union Administration (NCUA) announced the subsequent liquidation of Western Bridge late Friday.

The Western Bridge story has been unfolding since 2009, when the NCUA conserved Western Corporate and created Western Bridge. In 2011, the members of Western Bridge initially sought but failed to capitalize a new corporate credit union, United Resources Corporate FCU.

As conservator of Western Bridge, NCUA sought an acquisition partner with a goal to minimize service disruption to the consumer credit union members of Western Bridge and to ensure the "best financial outcome" for the Temporary Corporate Credit Union Stabilization Fund.

After a competitive bidding process in December, the regulator awarded Catalyst the exclusive right to acquire Western Bridge.

"The closing of Western Bridge's doors is an important milestone for the entire credit union system," said NCUA Chairman Debbie Matz, in announcing the agency's move. "Consistent with NCUA's Corporate Resolution Plan, we have smoothly transferred the former corporate's members and services to Catalyst while minimizing costs for all credit unions."

With the transfer of Western Bridge's members, Catalyst Corporate now has 1,232 members and $147 million in capital. Western Bridge is the first federally insured corporate credit union liquidated in 2012.

CUNA encourages yes vote on ATM bill

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WASHINGTON (7/10/12)--In anticipation of a House vote last night on a bill that would eliminate a dual-disclosure requirement on ATMs, the Credit Union National Association (CUNA) encouraged House lawmakers to approve the "common sense" bill.

In a letter to House leadership, CUNA noted the bi-partisan support enjoyed by the bill and reiterated the group's strong support for the legislation that it says eliminates an unnecessary regulatory burden on credit unions and other financial institutions.

The bill (H.R. 4367), which was unanimously approved in a House Financial Services Committee mark up on June 27,  would eliminate portions of Regulation E that require financial institutions that provide ATM services to display a physical notice on an ATM that a fee will be charged. They are also required to display the fee disclosures on their screen.

Under the legislation, ATMs would only be required to display the ATM disclosures on their screens, and give ATM users the choice of opting in to such a fee.

In addition to being an unnecessary regulatory burden for credit unions, CUNA has argued the external ATM disclosure requirement is creating issues for credit unions and other financial institutions that continue to be subject to frivolous lawsuits.

The CUNA letter noted the external disclosure requirement "has led unscrupulous individuals to remove the physical placard and sue the ATM operator for noncompliance, costing financial institutions hundreds of thousands of dollars."

"The threat of lawsuits has caused many credit unions to go to extraordinary steps to document compliance, increasing the cost of operating ATMs to the detriment of credit unions' member-owners," wrote CUNA President/CEO Bill Cheney.

"H.R. 4367 is a common sense piece of legislation that will reduce regulatory burden without harming ATM users," Cheney concluded his letter.  Use the resource link to access the CUNA letter.

(EDITOR'S NOTE: The House unanimously passed the bill last night, 371-0.)