CUNA Regulatory Advocacy Report

Regulatory Advocacy Report: March 2, 2012

Good afternoon. Here is the CUNA Regulatory Advocacy Report for the week of March 2, 2012.

  • CUNA Meets with Top White House Advisor
  • CUNA Comments on NCUA’s Proposal on TDRs and Loan Workouts
  • CUNA Comments on NCUA’s RegFlex Proposal
  • CUNA Meets with FHFA Regarding Foreclosure Attorney Network Practices
  • NCUA’s First Roundtable Discussion with Credit Unions Regarding Implementing Section 342 of the Dodd-Frank Act
  • Insight into the CFPB’s TILA/RESPA Know Before You Owe Mortgage Disclosure Combination Project
  • Preview of CUNA Comments to CFPB on Regulatory Streamlining
  • FinCEN Consumer Due Diligence Proposal
  • CUNA-League Call to Discuss Current Proposals
  • Archive: Joint CFPB/NCUA Town Hall Meeting held on February 8

CUNA Meets with Top White House Advisor

As part of our ongoing legislative and regulatory efforts, I met with White House Deputy Chief of Staff for Policy Nancy-Ann DeParle Wednesday. I feel it is critical that CUNA pursue support for credit unions at the highest levels of the government, including with the Obama Administration.
The discussion focused on reaffirming the importance of credit unions’ tax-exempt status, the need for regulatory relief for credit unions, and enhancing the Administration’s support for credit union initiatives, such as member business lending.

I was pleasantly surprised to learn she is a credit union member and that she was well aware of our issues, given all the matters that she must deal with on a daily basis. I felt the meeting was very productive, and she was receptive to hearing about our concerns. John Magill, Eric Richard, Mary Dunn, and Ryan Donovan went with me, and other White House staff attended as well.

I know we are all somewhat nervous about credit unions’ tax exemption, since policy makers are scrutinizing every aspect of the tax code for revenue. However, we felt reassured the credit union tax exemption is not a target in the President’s package.

We also emphasized the importance of the nation’s 7,300 credit unions to their more than 94 million members, consumers, and small businesses alike and how the tax exemption for credit unions benefits credit union members, their communities, and the nation’s economy.

In addition, we took the opportunity to highlight credit unions’ anxieties about regulatory burdens and, as requested, will be following up with White House staff on these concerns.

I also urged that the Administration be more proactive in supporting credit unions’ role in meeting their members’ financial needs and the legislation endorsed by the U.S. Treasury Department to raise the member business lending cap to 27.5% of assets, up from the current 12.25% restriction. We estimate the increase would create the availability of $13 billion of new credit for small businesses and create as many as 140,000 new jobs—all at no cost to the U.S. taxpayer and all within the first year of enactment.

We will continue to follow up with key policymakers on credit union interests and concerns.

CUNA Comments on NCUA’s Proposal on TDRs and Loan Workouts

Today, we filed a comment letter with the NCUA in response to its proposed rule on TDRs, entitled Loan Workouts and Nonaccrual Policy, and Regulatory Reporting of Troubled Debt Restructured Loans. The comment letter was developed under the auspices of and with significant input from the CUNA Accounting Subcommittee, chaired by Scott Waite of Patelco Credit Union, and the CUNA Examination and Supervision Subcommittee, chaired by Paul Mercer of the Ohio Credit Union League.

As noted in our letter, we commend Chairman Matz, the other Board members, and NCUA senior staff, especially Larry Fazio, for recognizing the insistence of CUNA and several Leagues and moving forward on these issues. We believe the proposal is an important step in the right direction in terms of initial guidance and reporting requirements for TDRs, and would provide regulatory relief on TDRs generally. However, there are some important issues that must be addressed in the final rule, which are described in detail in our letter.

CUNA Comments on NCUA’s RegFlex Proposal

Earlier this week, we filed a comment letter with NCUA opposing its proposal that would effectively eliminate the agency’s Regulatory Flexibility Program. Despite laudable objectives, the Program has been curtailed over the years and under the current proposal, the remnants of RegFlex would generally be added to regulations that had been addressed under the program: eligible obligations, nonmember deposits, fixed assets, and investments to continue some flexibility in those areas. The limits on charitable contributions would be removed—an approach we feel is also appropriate for other NCUA requirements.

While some aspects of the proposal could have a positive impact in certain areas, as discussed in our letter, the capacity of the proposal to actually help credit unions achieve real regulatory relief will be limited at best. Instead of eliminating RegFlex NCUA should work with the credit union system to enhance it for all federally insured credit unions.

CUNA Meets with FHFA Regarding Foreclosure Attorney Network Practices

CUNA’s Senior Vice President and Deputy General Counsel, Mary Dunn, and Counsel for Special Projects, Kristina Del Vecchio, met this week with Kyle Roberts, the Executive Advisor of the Office of the Director at FHFA. Mr. Roberts currently works primarily on issues relating to the Fannie Mae and Freddie Mac foreclosure attorney network and servicing compensation.

Some of our credit union members have expressed concerns related to the manner in which Fannie Mae and Freddie Mac assess compensatory fees on servicers during the foreclosure process. We discussed this issue with Mr. Roberts, specifically as it relates to compensatory fees being assessed on servicers due to delays beyond their control in the foreclosure process, as a result of Fannie Mae’s and Freddie Mac’s practice of pulling and reassigning cases between attorneys. Mr. Roberts found our meeting useful and timely, particularly since FHFA is currently assessing the possibility of allowing servicers to exercise their own judgment and hire attorneys outside of Fannie and Freddie’s networks provided they meet certain guidelines that FHFA would propose. He was also pleased we came forward to him with this issue since it encompasses some of the key issues FHFA plans to deal with going forward, in terms of focusing on improving the integrity of the foreclosure process and ensuring fees are assessed on the appropriate parties where necessary. Mr. Roberts also noted that many servicers are not aware of the appeals process, and therefore do not take advantage of it.

We will continue to work with FHFA with respect to FHFA’s plans to modify its foreclosure attorney network processes and alter the future servicing compensation structure.

NCUA’s First Roundtable Discussion with Credit Unions Regarding Implementing

Section 342 of the Dodd-Frank Act

Earlier this week, NCUA’s Office of Minority and Women Inclusion (OMWI) held its first roundtable discussion with credit unions seeking input on how to effectively implement Section 342 of the Dodd-Frank Act. The roundtable discussion was limited to CUNA member credit unions and League representatives. By way of background, Section 342 requires the directors of each federal financial agency, including NCUA, to “develop standards for assessing the diversity policies and practices of entities regulated by the agency.” However, Section 342 explicitly prohibits the agencies from requiring “any specific action” based on the findings of these assessments. The assessments that NCUA and other agencies will carry out under Section 342 will be based solely on how regulated entities consider diversity in employment, procurement, and contracting practices—lending practices and diversity of membership will not be reviewed or affected. NCUA’s OMWI was developed to oversee implementation of Section 342.

We believe it was positive that NCUA invited our members to participate in this roundtable discussion, and that a number of representatives from credit unions and Leagues participated in the call. This enabled a number of concerns and issues to be raised.
The discussion centered on the challenges OMWI faces in implementing the statute, particularly with regard to how NCUA could collect information about diversity practices in procurement and contracting practices. Our members and League representatives brought to NCUA’s attention the many challenges involved in manually gathering diversity-related data, especially for credit unions that do not already report to EEOC, and the difficulties involved for all credit unions, in possibly gathering data related to contracting and procurement practices. Our participants also expressed concerns with any requirements implemented under Section 342 becoming a “slippery slope” where NCUA would eventually require credit unions to implement specific diversity policies or add an examination under Section 342 to the examination and supervision process.

However, OMWI representatives stated that they do recognize that NCUA does not have enforcement capabilities under Section 342. OMWI representatives stated that they are currently working with the EEOC to view their data from credit unions, and they are considering limiting the assessments required under Section 342 to credit unions that are subject to EEOC reporting. But NCUA noted that since EEOC data only includes employment data, not procurement and contracting data, they are trying to determine how to gather such information, with the understanding that doing so may be difficult. According to the OMWI office, over 500 credit unions currently report to the EEOC, but this represents only about 8% of all credit union membership. The OMWI office said that the EEOC data they have gathered thus far is promising, showing that credit unions overall are fairly diverse. NCUA’s OMWI office must submit a report to Congress by March 31, 2012 setting forth its progress in implementing Section 342, and NCUA hopes to release an Interpretive Ruling and Policy Statement by June 2012, with a comment period. CUNA will continue to work closely with NCUA’s OMWI office on its implementation of Section 342. If you have any comments or questions about this, please contact CUNA’s Counsel for Special Projects Kristina Del Vecchio or Senior Vice President and Deputy General Counsel Mary Dunn.

CUNA thanks the following CUNA members and League representatives for their participation in the roundtable discussion: Dan McCue, Senior Vice President of Corporate Administration of Alaska USA FCU; Ayn Talley, President and CEO of Houston Police FCU; Debie Keesee, President and CEO of Spoke Media FCU; John Graham, President and CEO of Kentucky Employees FCU; Eunice Rogers, CEO and Treasurer of NRS Community Development FCU; Mary Ann Clancy, Senior Vice President and General Counsel of the Credit Union Association of Rhode Island; Chris Collver, Senior Legislative and Regulatory Analyst, and Rita Fillingane, Director of Research and Information, of the California and Nevada Credit Union Leagues.

Insight into the CFPB’s TILA/RESPA Know Before You Owe Mortgage Disclosure

Combination Project

Last week, the CFPB released some materials relating to the Small Business Regulatory Enforcement Fairness Act (SBREFA) Panel that the agency will be convening surrounding the Truth in Lending Act (TILA) / Real Estate Settlement Procedures Act (RESPA) integration rulemaking. In these materials, we can get a good idea of where the CFPB may be headed in terms of its rulemaking efforts surrounding the forms we are using today: The “early TIL,” the Good Faith Estimate (GFE), the “final TIL,” and the HUD-1 settlement statement. Aside from combining the early TIL and the GFE into a new disclosure to be given shortly after application (currently being referred to as the “Loan Estimate” by the CFPB), and combining the final TIL and the HUD-1 settlement statement disclosures at or before closing (the CFPB calls this the “Settlement Disclosure”), the document link above sheds new light into some potential changes to the TILA and RESPA rules being discussed that may be extremely important down the road for credit union mortgage lending departments. I would urge you to have your mortgage lending staff review these quick highlights, as well as the materials linked above.

Potential GFE Tolerance Changes: The CFPB is considering applying RESPA’s zero-percent tolerance to the estimated charges of service providers that are affiliated with the lender and the estimated charges of service providers selected by the lender (including a provider chosen by the consumer in instances where the consumer must select from a list provided by the lender). Currently, there is no rule for the estimates of charges for service providers that are affiliates of the lender, as these charges are subject to the 10-percent tolerance if the providers are selected by the lender, or are identified by the lender and voluntarily selected by the consumer.

Re-Issued GFEs: Currently, a lender must issue a revised GFE within three business days of learning of a changed circumstance in order to increase an estimated fee or fees that are subject to the 10-percent tolerance limit based on the change. The proposals that the CFPB is considering would not require a lender to reissue a GFE with every cost increase, and the lender could wait to issue a new GFE unless and until the costs subject to the 10% limitation increase based on valid changes in circumstance by more than 10% in total.

Potential Settlement Statement Responsibility and Delivery Changes: The CFPB is considering two separate alternatives for the delivery of the new settlement disclosure: (A) the lender would be solely responsible for delivering the settlement disclosure to the consumer, and (B) the lender would be responsible for preparing the TILA-required information on the settlement disclosure, while the settlement agent would be responsible for preparing the RESPA-required information. Under this alternative, both the lender and the settlement agent would be jointly responsible for providing the consumer with an integrated settlement disclosure three business days before closing (yes, you read that right). In addition to this new three business day delivery issue, the CFPB is also considering requiring that a settlement disclosure be reissued, along with another three-day waiting period, in instances where the APR increases more than 1/8 of a percent, the loan has features added such as an ARM feature, prepayment penalty, negative amortization, interest-only, balloon payment or demand feature, or if the amount needed to close increases beyond a specific tolerance, which has yet to be determined, according to the CFPB.

Potential New Recordkeeping Requirements: The CFPB is considering requiring lenders to maintain standardized, machine-readable, electronic versions of the Loan Estimates and Settlement Disclosures they deliver to a consumer and the reasons for any changes to the information provided in those disclosures. A proposed retention period has yet to be determined. The CFPB is also considering proposing an exemption for small entities from these new electronic data requirements.

Potential Expansion of Finance Charge Definition: As proposed by the Federal Reserve Board in August of 2009, the CFPB is considering removing many of the exclusions of fees from the finance charge and the corresponding APR.

Potential New “Application” Definition (For Purposes of Determining When a GFE Must Be Issued): The CFPB is concerned that the final item of the definition of an “application” under RESPA—“any other information deemed necessary by the lender”—allows a lender to delay providing a GFE while it gathers additional information about the property or the consumer’s assets and liabilities. Therefore, the CFPB is considering removing this prong from the definition.

While the points I have addressed above are not yet included in any proposed rule, it is possible that they could be included in the CFPB’s proposed rule later this summer. CUNA is working closely with the CFPB to ensure that any such changes are held to a bare minimum for credit unions and do not catch credit unions by surprise. We continue to seek a reduction of the overall regulatory burden for all credit unions with the CFPB in all of its activities. 

Preview of CUNA Comments to CFPB on Regulatory Streamlining

The CFPB is accepting comments until March 5 on how it can streamline the regulations it has promulgated under the Dodd-Frank Act, as well as those regulations inherited from other federal agencies. CUNA pressed the CFPB to undertake an effort to provide regulatory relief, and our letter will commend the agency for issuing the request for comments. However, as was suggested on the League call earlier this week, we will urge the CFPB to recognize that subsequent requests for comments should not be as broad in scope as this one was.

Our comment letter to the CFPB will emphasize that the number one concern most credit unions have about the government is their regulatory burden. Credit unions remain concerned that the CFPB will impose a range of new requirements and data collection responsibilities on them. We believe this is unjustified when it comes to credit unions and plan to be very vigilant in monitoring rulemakings and other endeavors form the agency.

Click here for the complete draft list of the points and issues we plan to include in our comment letter.

FinCEN Consumer Due Diligence Proposal

On Wednesday, the Financial Crimes Enforcement Network (FinCEN) issued an advance notice of proposed rulemaking (ANPR) to obtain feedback on a potential customer due diligence regulation that would consolidate and strengthen regulatory and supervisory requirements, specify a categorical requirement for financial institutions to identify beneficial ownership of their accountholders subject to risk-based verification, and provide an alternative definition of beneficial ownership. In March 2010, NCUA and financial regulators issued the Beneficial Ownership Guidance regarding regulatory expectations for obtaining beneficial ownership information for certain accounts and customer relationships.

Comments are due to FinCEN within 60 days after publication in the Federal Register. CUNA will be posting a Regulatory Comment Call in the near future, and we will work with credit unions and our Payments Policy Subcommittee to obtain comments and identify concerns with the ANPR.

CUNA-League Call to Discuss Current Proposals

On Wednesday, CUNA Regulatory Advocacy, joined by staff from Compliance and AACUL, held a call that was open to all League Regulatory Advocacy and other League staff to discuss the CFPB’s request for comments on regulatory streamlining and NCUA’s proposed rule on troubled debt restructurings (TDRs) (which is described above). The call provided an opportunity for CUNA to discuss the positions we are taking in our comment letters to NCUA on the TDR proposal and to the CFPB on streamlining regulatory requirements. In addition, the call was intended to facilitate Leagues’ input to CUNA as well as communication among Leagues and credit unions. We hope to hold calls in the future to discuss other requests for comments, as the need arises. Thank you to all who participated on the call.

Archive: Joint CFPB/NCUA Town Hall Meeting held on February 8

As I mentioned in a previous Regulatory Advocacy Report, on February 8, NCUA and the CFPB held a joint Town Hall Meeting. NCUA has made an archive of the webcast event available here. The free 90-minute Town Hall featured updates on current topics including the Regulatory Modernization Initiative, corporate credit union resolution, and the CFPB.


With all these issues, we will pursue credit unions’ regulatory interests to the greatest extent possible. In the meantime, if you have any questions or comments about this report, please feel free to contact Mary Dunn, Bill Hampel, or me.

Best regards,

Bill Cheney

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