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.