CUNA Regulatory Advocacy Report

Good afternoon.  This is our latest report on Regulatory Advocacy issues we have worked on for credit unions this week. 

  • CFPB Director Cordray Featured on CUNA Webinar Next Week
  • Short Sales Requirements Effective November 1 
  • CFPB’s TILA/RESPA Proposed Rule – New Comment Call Posted 
  • FASB Proposal on Liquidity Risk and Interest Rate Risk Disclosures 
  • CUNA Comments to FDIC on Proposed Definition of “Predominantly Engaged In Activities That Are Financial In Nature” Under Title II of the Dodd-Frank Act
  • Updated CFPB Rulemaking Chart

CFPB Director Richard Cordray Featured on CUNA Webinar Next Week

We know you have many questions and worries about the Consumer Financial Protection Bureau (CFPB) and the new rules and proposals the agency has been issuing this year.  That is why CUNA has scheduled an upcoming webinar that will give you the opportunity to hear from CFPB Director Richard Cordray.  He will address issues of primary concern to credit unions and take questions.  I will host the webinar, which is the first in a two-part series on CFPB issues.

I know you won’t want to miss this informative event, which will be Thursday, August 30, at 2:00 PM ET and last until 3:30 PM.  Click here to register.

Short Sales Requirements Effective November 1

Pending mortgage-servicing requirements that will consolidate and coordinate existing short sale programs into a single standard program could be beneficial to consumers and mortgage lenders but raise important questions, including for credit unions. The Federal Housing Finance Agency (FHFA) directives that will be included in Fannie Mae and Freddie Mac requirements are scheduled to take effect on Nov. 1. 

One area of concern is the impact on second lienholders.  Under the directives, payments to subordinate lienholders would be paid from the sale proceeds at closing and there would be a full release of liability for the borrower.  Allowable payments for all subordinate lienholders involving a particular loan would not exceed $6,000.  The servicer would have discretion to divide the subordinate lien payments among the subordinate lienholders.  According to the directives, no exceptions will be made to the $6,000 cap.  Also, subordinate lienholders may not require contributions from the real estate agent(s) or borrower as a condition for releasing the lien and the borrower from personal liability.

Homeowners with Fannie- or Freddie-held mortgages that are current on their mortgage payments could sell their homes through the short sale process, provided they have an “eligible hardship.”  These hardships are listed on “Uniform Borrower Assistance Form” (Form 710) or the “Hardship Documentation Requirements for Foreclosure Prevention Alternatives,” both of which are available at www.eFannieMae.com

The FHFA release said mortgage servicers may expedite the short sale process for mortgage holders whose spouse or home co-owner has died.  Divorce, disability, and job relocations of 50 miles or more will also be considered eligible hardships.  Additional approval from Fannie Mae or Freddie Mac will not be needed in these cases.  Military personnel who are being relocated due to Permanent Change of Station orders would also be automatically eligible for short sales, and would not be obligated to contribute funds to cover the shortfall between the outstanding loan balance and the sales price on their homes, under the new guidelines, the FHFA said.
The directives also streamline the short sale process for homeowners that have missed several mortgage payments or have low credit scores.  In addition, the directives will clarify when applications and sales offers must be submitted for a home sale to be considered a short sale.
CUNA plans to follow up with the FHFA and review the requirements with the CUNA Housing Finance Reform Task Force, the CUNA Lending Council, and other CUNA groups.  The short sale changes are part of the FHFA’s Servicing Alignment Initiative, which seeks to aid troubled homeowners by streamlining Fannie Mae and Freddie Mac short sale and foreclosure alternative programs. 

CFPB’s TILA/RESPA Proposed Rule – New Comment Call Posted

As I discussed in our July 13 Regulatory Advocacy Report, the CFPB has issued its proposed rule to formally combine certain disclosures required under both the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA), as required under the Dodd-Frank Wall Street Reform and Consumer Protection Act.  CUNA’s Regulatory Advocacy staff have developed two separate Comment Calls relating to the proposed rule, the first of which can be accessed here.  This first CUNA Comment Call discusses, among other items, proposed changes to the definition of “finance charge” and the associated Annual Percentage Rate (APR), for which comments are due to the CFPB by September 7. 

Today, we are posting our second CUNA Comment Call relating to the remainder of the proposed rule, which was just published in the Federal Register yesterday.  We have designed this document to give credit unions an in-depth and practical view of the contents of the 1099-page proposed rule and have attempted to highlight some of the more technical proposed details as they relate to the newly proposed Loan Estimate and Closing Disclosure forms.  Comments on the remainder of the proposed rule, which our second Comment Call covers, are due to the CFPB by November 6.  Outside of the proposed new disclosures, our second Comment Call addresses some important proposed changes to the definitions of “application” for purposes of delivering the Loan Estimate, and also to the term “Business Day,” which has caused confusion in credit unions over the past several years as Regulation Z has been amended multiple times. 

At the end of our Comment Call, we have listed multiple questions for which we are seeking input from credit unions.  Due to the magnitude and impact of these proposed changes and the potential effects on mortgage lending going forward, it is extremely important that we hear from as many credit unions and leagues as possible on this and other proposed rules being issued by the CFPB, so that we may voice our collective concerns to the CFPB prior to these rules being finalized.  If you have suggestions, comments or additional questions concerning the proposed rule, please contact Mary Dunn or Jared Ihrig.

FASB Proposal on Liquidity Risk and Interest Rate Risk Disclosures

As I reported previously, FASB has issued a proposed standard that is intended to help financial statement users better understand organizations’ exposure to liquidity risk and interest rate risk.  The proposed liquidity risk disclosures would provide information about the risk encountered by the reporting organization when meeting its financial obligations, and would apply to all private, public, and not-for-profit organizations, including credit unions.  The proposed interest rate risk disclosures would provide information about the exposure of financial assets and liabilities to market interest rate fluctuations.

As usual, we will be filing a comment letter on the proposal based on comments received through our Comment Call.  In addition to working with our Accounting Subcommittee on this issue, next week Regulatory Advocacy staff Mary Dunn and Luke Martone will be meeting with the Financial Accounting Foundation, which oversee the Financial Accounting Standards Board and will participate on a roundtable discussion on the topic sponsored by the CUNA Councils.

FASB is accepting comments through September 25; please share your comments with CUNA by September 14.

CUNA Comments to FDIC on Proposed Definition of “Predominantly Engaged In Activities That Are Financial In Nature” Under Title II of the Dodd-Frank Act 

CUNA is seeking clarification in a comment letter to the Federal Deposit Insurance Corporation (FDIC) that credit unions should not be covered under a new proposal the FDIC has issued regarding liquidation authority over entities engaging in financial activities.  The proposal was developed under Title II of the Dodd-Frank Act.  In our comment letter, we emphasize that credit unions should not be considered entities subject to the proposed definition of “predominantly engaged in activities that are financial in nature or incidental thereto” because Congress did not intend for the FDIC to exercise liquidating authority over credit unions.  The “Ordinary Liquidating Authority” under Title II should only apply to “systemically risky” entities that did not previously have federal resolution authority, we noted in our letter.  While the FDIC proposal does not reference credit unions, we felt it was important to comment to raise our concerns that the statute not be interpreted too broadly. 

Updated CFPB Rulemaking Chart

CUNA’s Regulatory Advocacy Department has developed a chart for credit unions and leagues to use which highlights various rulemaking projects that are being undertaken by the CFPB, as required by the Dodd-Frank Act.  With all the developments from the CFPB, we hope the chart will be a useful tool.  We plan to update the chart on a weekly basis and will include the latest chart in each Regulatory Advocacy Report.

Conclusion

Next week will be another busy one for CUNA’s Regulatory Advocacy group, and we will be renewing our efforts come Monday to minimize regulatory burdens on credit unions.  In the meantime, if you have any questions or comments about this week’s report, please feel free to contact Mary Dunn, Bill Hampel, or me.  

Best regards, 

Bill Cheney

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