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CUNA has concerns about mortgage servicer proposal

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WASHINGTON (8/13/12)--The Credit Union National Association (CUNA) has some serious concerns with the possible regulatory burden and added compliance costs of the proposed regulations for mortgage servicers that the Consumer Financial Protection Bureau (CFPB) issued on Friday.

The proposed rules, which are subject to a 60-day comment period ending on Oct. 9, implement some of the provisions of the Dodd-Frank Act on subjects such as simplifying billing statements, providing additional notice of rate changes and ensuring that consumers know all of their options to prevent foreclosures.

Many of the rules are aimed at addressing provisions of the Real Estate Settlement Procedures Act and the Truth in Lending Act.

CUNA President/CEO Bill Cheney said CUNA will be working with various key committees and member contacts within the association to determine how best to address those concerns and issues.

"Mortgage lending and servicing have become important services of credit unions to their members. In developing these services, credit unions have proven themselves to be careful lenders: We did not contribute to the sub-prime meltdown or the subsequent credit market crisis. Instead, the structural and operational differences of credit unions from other institutions translated into high asset quality at credit unions during and after the crisis," Cheney stated when the CFPB announced its proposal.

He added, "As Rep. Barney Frank (D- Mass.) -- ranking member and former chairman of the House Financial Services Committee--has said, 'If mortgages were only made by credit unions, we wouldn't be in this crisis.'

"He has also pointed out that, in drafting the landmark legislation which created the Consumer Financial Protection Bureau--the Dodd-Frank Act of 2010--lawmakers aimed to take the principles that credit unions operate under and apply them to all financial institutions.

"We intend to remind the CFPB of those views as these proposals work their way through the rulemaking process."

According to a CUNA summary of the CFPB plan, servicers would have to make a "good faith'' effort to notify consumers of loss mitigation options. If a borrower is 30 days late in making a payment the servicer would have to let them know of their options verbally. Written notification is required if the borrower is 40 days late.

Servicers would have to provide periodic billing statements that clearly break down charges. This wouldn't apply to fixed-rate loans if the servicer provides a coupon book or if the servicer services 1,000 or fewer mortgages. The exemption is only for mortgages originated by the servicer or where they retain servicing rights.

Servicers must provide 210 to 240 days notice prior to the first rate adjustment and subsequent notices to consumers 60 to 120 days before a payment change adjustment. Servicers wouldn't have to continue to provide an annual notice if a rate adjustment does not result in an increase in the monthly payment.

Under the proposed rules, servicers would have to promptly credit payments from borrowers, generally on the day of receipt. If a payment is less than the full amount, the payment may be held in a suspense account.

Servicers would not be permitted to charge a borrower for force-placed insurance coverage unless the servicer has a reasonable basis to believe the borrower has failed to maintain hazard insurance.

The rules would require certain procedural requirements for responding to information requests or complaints. Errors include an allegation by the borrower that the servicer

misapplied a payment or assessed an improper fee Servicers could designate a specific phone number and address for borrowers to use.

The CFPB is scheduled to issue final rules in January.

Inside Washington (08/10/2012)

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  • WASHINGTON (8/13/12)—The Federal Housing Administration (FHA) is working hard to paint itself as a turnaround story, but its critics say that picture is deceptive. FHA has $3 billion surplus, an improving credit profile and will not require a government bailout this year, but the agency has attempted to raise capital through settlements with major banks, sales of severely delinquent loans and higher insurance premiums for new borrowers (American Banker Aug. 10). The agency's reserves are in decline, delinquencies are on the rise and only foreclosure delays by large mortgage servicers have helped it avoid paying out new claims, according to FHA data. A billion-dollar settlement with large banks over bad loans was the primary reason FHA avoided a government bailout this year, said Isaac Boltansky, a policy analyst at Compass Point Research & Trading …
  • WASHINGTON (8/13/12)--The Federal Deposit Insurance Corp. (FDIC) in July used authority found under the Financial Institutions, Reform, Recovery and Enforcement Act of 1989 to recoup losses--and help replenish the Deposit Insurance Fund--by going after affiliated institutions (American Banker Aug. 10). The FDIC last month announced the terms of an agreement with $456 million asset Union Bank in Kansas City, Mo. Under the agreement, Union Bank will pay FDIC 85% of the proceeds of the bank's sale to Arvest Bank in Fayetteville, Ark. The agreement serves as a warning that banks should confirm with the Federal Reserve whether they have less than a majority position, says James J. McAlpin Jr., a partner at Bryan Cave in Atlanta. Banks can take advance steps to release themselves from a controlling position, McAlpin said …
  • WASHINGTON (8/13/12)--Force-placed insurance allows insurers to collect premiums and banks to earn lucrative fees even though the loss rates on such coverage tend to be lower than standard homeowners coverage, consumer advocates said at a hearing held by the National Association of Insurance Commissioners Thursday. Force-placed insurance is a type of property insurance policy that banks purchase when mortgage borrowers stop paying for homeowners insurance (American Banker Aug. 10). Banks receive a portion of the premiums through commissions, reinsurance deals and other payments from the specialty carriers that offer it. The inflated fees of force-placed insurance don't justify the risks, testified Peter Kochenberger, executive director of the Insurance Law Center at the University of Connecticut Law School. If the fees were so lucrative, more companies would offer the insurance, said Kevin McKechnie, the executive director of the American Bankers Insurance Association. Only two major specialty insurers--Assurant and QBE--offer force-placed insurance …
  • WASHINGTON (8/13/12)--Liberal groups Thursday pressured the Obama administration to replace Edward DeMarco as acting head of the Federal Housing Finance Agency (FHFA). Housing activists and consumer groups also requested that the Justice Department further investigate the origins of the housing crisis. Criticism of DeMarco has increased since he announced that the FHFA will not allow principal write-downs on Fannie Mae and Freddie Mac mortgages (American Banker Aug. 10). Observers believe the president is unlikely to replace Demarco because he leads an independent agency and Senate Republicans would block any nominee to replace him. Activists said Demarco's replacement could be filled through a recess appointment. There has been little progress made in investigating the fraud and abuse that led to the 2008 housing crisis, activists said. A complete investigation is among the obstacles standing in the way of a robust economic recovery, said Brian Kettenring of the Campaign for a Fair Settlement …

CUNA concerned about new mortgage servicer rules

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WASHINGTON (8/13/12)--The Credit Union National Association (CUNA) has some serious concerns with the possible regulatory burden and added compliance costs of the proposed regulations for mortgage servicers that the Consumer Financial Protection Bureau (CFPB) issued on Friday.

The proposed rules, which are subject to a 60-day comment period ending on Oct. 9, implement some of the provisions of the Dodd-Frank Act on subjects such as simplifying billing statements, providing additional notice of rate changes and ensuring that consumers know all of their options to prevent foreclosures.

Many of the rules are aimed at addressing provisions of the Real Estate Settlement Procedures Act and the Truth in Lending Act.

CUNA President/CEO Bill Cheney said CUNA will be working with various key committees and member contacts within the association to determine how best to address those concerns and issues.

"Mortgage lending and servicing have become important services of credit unions to their members. In developing these services, credit unions have proven themselves to be careful lenders: We did not contribute to the sub-prime meltdown or the subsequent credit market crisis. Instead, the structural and operational differences of credit unions from other institutions translated into high asset quality at credit unions during and after the crisis," Cheney stated when the CFPB announced its proposal.

He added, "As Rep. Barney Frank (D- Mass.) -- ranking member and former chairman of the House Financial Services Committee--has said, 'If mortgages were only made by credit unions, we wouldn't be in this crisis.'

"He has also pointed out that, in drafting the landmark legislation which created the Consumer Financial Protection Bureau--the Dodd-Frank Act of 2010--lawmakers aimed to take the principles that credit unions operate under and apply them to all financial institutions.

"We intend to remind the CFPB of those views as these proposals work their way through the rulemaking process."

According to a CUNA summary of the CFPB plan, servicers would have to make a "good faith'' effort to notify consumers of loss mitigation options. If a borrower is 30 days late in making a payment the servicer would have to let them know of their options verbally. Written notification is required if the borrower is 40 days late.

Servicers would have to provide periodic billing statements that clearly break down charges. This wouldn't apply to fixed-rate loans if the servicer provides a coupon book or if the servicer services 1,000 or fewer mortgages. The exemption is only for mortgages originated by the servicer or where they retain servicing rights.

Servicers must provide 210 to 240 days notice prior to the first rate adjustment   and subsequent notices to consumers 60 to 120 days before a payment change adjustment.  Servicers wouldn't have to continue to provide an annual notice if a rate adjustment does not result in an increase in the monthly payment. 

Under the proposed rules, servicers would have to promptly credit payments from borrowers, generally on the day of receipt.  If a payment is less than the full amount, the payment may be held in a suspense account.  

Servicers would not be permitted to charge a borrower for force-placed insurance coverage unless the servicer has a reasonable basis to believe the borrower has failed to maintain hazard insurance.

The rules would require certain procedural requirements for responding to information requests or complaints. Errors include an allegation by the borrower that the servicer

misapplied a payment or assessed an improper fee Servicers could designate a specific phone number and address for borrowers to use. 

The CFPB is scheduled to issue final rules in January.

CFPB advisory sparked by bank UDAP fine

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WASHINGTON (8/13/11)--Students who receive loan money transferred to debit cards should be aware of certain rights and options they have, according to an advisory issued by the Consumer Financial Protection Bureau.

Among its key points, the advisory:

  • Notes that students cannot be required to use a specific bank or card and all federal loans must come with a paper check or cash option;
  • Recommends that a student choose a financial institution before arriving at school; and
  • Recommends a student sign up for direct deposit if offered.
The advisory was issued on Friday, two days after the Federal Deposit Insurance Corp.'s announcement that Higher One Holdings Inc. agreed to return about $11 million to college students for overcharging them for fees on its debit cards.

The bank is also paying a $110,000 civil fine and Bancorp Bank, which issued the OneAccount debit card administered by Higher One, is paying a $172,000 fine.

To see the advisory, use the resource link.

NCUA adds LICU issues to Aug. 14 webinar topics

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ALEXANDRIA, Va. (8/13/12)--The National Credit Union Administration (NCUA) is adding Low-Income Credit Union (LICU) issues to the agenda of its already announced Aug. 14 webinar on pending Central Liquidity Facility (CLF) changes and the agency's new proposed rule on credit union access to emergency liquidity.

The agency last week sent letters to more than 1,000 credit unions indicating they are eligible for low-income designation.  While the letter confers no new abilities, it does streamline the process of becoming LICU-designated. That designation brings benefits that include the ability to accept supplemental capital and an exemption from the small business lending cap under certain circumstances.

Credit unions receiving letters may now opt-in with a simple reply that agrees to the LICU designation.

Tomorrow's webinar is scheduled to begin at 2 p.m. (ET) and will be hosted by NCUA Division of Capital Markets Director and CLF President Owen Cole. And Office of Small Credit Union Initiatives Director William Myers will discuss the recent LICU announcement.

The NCUA suggested that webinar participants review background information on the CLF before the webinar. Information on the CLF will be released to credit unions in an upcoming letter, the NCUA said.

As background on the CLF and liquidity portions of the webinar, more than 6,000 natural person credit unions will lose access to the CLF, which serves as a liquidity lender to credit unions in need of emergency funding, when U.S. Central Bridge Corporate CU closes in late October. In anticipation of this closing, the NCUA last month proposed a new emergency liquidity access rule.

Webinar participants may submit their questions for NCUA staff to WebinarQuestions@ncua.gov. The subject line should read "CLF and Your Credit Union's Contingent Liquidity," the agency has said.

To register for the webinar, use the resource link.

NEW CFPB proposes more rules on mortgage servicers

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WASHINGTON (UPDATE 8/10/11, 11:32 a.m. ET)--Credit unions and other mortgage servicers would have to provide clearer monthly statements and would have to take additional steps before foreclosing on a property, under proposed regulations unveiled today by the Consumer Financial Protection Bureau (CFPB).

Under the rules, which are open for comment through Oct.  9, servicers couldn't foreclose on a home until a homeowner is given the chance to apply for alternative ways to keep their homes.

In addition, the servicers must provide statements which break down payments by principal, interest, fees, and escrow; the amount of and due date of the next payment; recent transaction activity; and warnings about fees. Also, servicers would have to provide earlier warnings before any changes to adjustable rate mortgages.

"These proposed rules would offer consumers basic protections and put the 'service' back into mortgage servicing. The goal is to prevent mortgage servicers from giving their customers unwelcome surprises and runarounds,'' CFPB Director Richard Cordray said in a statement.

Credit Union National Association officials have met regularly with agency officials to make the regulations less onerous and will continue to do so until the final regulations are issued in January.

Read the Monday issue of CUNA's News Now for more.