CUNA Regulatory Advocacy Report

CUNA Regulatory Advocacy Report: November 30, 2012

Good afternoon. Here is an update on the issues that CUNA’s Regulatory Advocacy group has been pursuing in recent days.

  • CFPB to Issue New Remittance Transfers Proposal And Extends Effective Date
  • Mortgage Issues Meeting with CFPB Director Cordray
  • NCUA Reports to CUNA on Agency’s Budget
  • NCUA Pulls Proposed Call Report Questions
  • December NCUA Board Meeting Agenda Released
  • IRS Will Begin Accepting Electronically-Signed Tax Transcript Requests Used for Mortgage Lending
  • CUNA Opposes FHFA’s Proposed Adjustment to G-Fees
  • Bank Secrecy Act “Funds Transfers” Definition Proposed Rule
  • CUNA Chart of Current Rulemakings: Updated 11/30/12

CFPB to Issue New Remittance Transfers Proposal And Extends Effective Date

We are very pleased that following our meetings and discussions with Consumer Financial Protection Bureau (CFPB) Director Richard Cordray that the agency has issued some proposed changes to improve the final rule on international remittance transfers. When Director Cordray phoned me earlier this week to let us know about the proposed changes, he specifically asked for credit unions’ reaction, and I encourage all of your who offer international remittances to weigh in with us and the CFPB on this proposal. Even though the proposal has not been formally issued yet, we have developed an initial CUNA Comment Call which is posted here and we are developing a survey to credit unions on the proposal that we will include with our next Regulatory Advocacy Report.

Specifically, the proposal will address three areas:

Errors resulting from incorrect account numbers provided by consumer senders of remittance transfers– The agency intends to propose that where the provider can demonstrate that the consumer provided the incorrect information, the provider would be required to attempt to recover the funds but would not be liable for the funds if those efforts are unsuccessful;

  1. Disclosure of certain foreign taxes and third-party fees- The agency intends to propose additional flexibility regarding these requirements, including by permitting providers to base fee disclosures on published bank fee schedules and by providing further guidance on foreign tax disclosures where certain variables may affect tax rates;
  1. Disclosure of regional and local taxes- The agency intends to propose that the obligation for providers to disclose foreign taxes imposed on remittance transfers is limited to taxes imposed at the national level, and does not include taxes that may be imposed by foreign, sub-national jurisdictions.

Most significant, the CFPB will extend the effective date of the final rule until 90 days after the agency finalizes the new proposal; the new effective date is expected sometime during the spring of 2013.

We remain very concerned that the new proposal does not reconsider the exemption level, which remains at 100 remittance transfers per year. However, we will continue to advocate for a higher exemption as well as forand additional regulatory relief for credit unions under the proposal. We will continue to coordinate advocacy efforts with Leagues, CUNA Committee and Council members, credit unions, and others.

Mortgage Issues Meeting with CFPB Director Cordray

I joined several credit union executives and other CUNA staff this week for a meeting with Consumer Financial Protection Bureau Director Richard Cordray regarding pending mortgage-related rules including the Truth-in-Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA) rule, the Ability-to-Repay rule involving qualified mortgages, the proposals to amend Regulation Z and Regulation X in connection with the mortgage servicing rules, the mortgage loan originator and compensation rule.

While our meeting focused primarily on mortgage issues, the group did take an opportunity to urge the Bureau to be more flexible with the recently finalized international remittances regulation, and commended the Director for delaying the rule and re-opening the comment process for certain portions of the rule. CUNA continues to advocate flexibility for credit unions under that rule with the Bureau and Director Cordray.

On the mortgage front, several credit union executives discussed their concerns over the proposed more-inclusive definition of “finance charge” and the associated elevation of the Annual Percentage Rate (APR), and urged the Bureau to not move forward with this aspect of the proposed TILA-RESPA rule. CUNA has repeatedly urged the Bureau to not promulgate new regulations in areas where the law does not require such rules, and the finance charge aspect of the TILA-RESPA proposed rule is one of the changes being considered by the CFPB that is not required by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). CUNA and credit union representatives in attendance reiterated the fact that the APR and finance charge remain extremely confusing to consumers, as well.

CUNA and credit union attendees also discussed with Director Cordray and staff the importance of a safe harbor approach to the qualified mortgage definition contained within the Ability-to-Repay rule, which is required by the Dodd-Frank Act to be finalized not later than January 21, 2013. Under a safe harbor, lenders would have more protection from liability to consumers, but the Bureau is also considering providing a rebuttable presumption of compliance, which would lead to increased legal exposure, in CUNA’s estimation. Director Cordray indicated that the agency is aware of the importance of getting this rule “right,” and also shared that it is likely that the rule will provide for an implementation period of twelve months, once finalized.

Other issues discussed during the meeting involved multiple concerns with the agency’s proposed rules to amend Regulation Z and Regulation X as they relate to mortgage servicing. These rules are also required to be finalized by January 21, 2013.

CUNA will continue to engage the CFPB on these and many other concerns credit unions have with the proposed mortgage regulations, and we will keep you apprised of further developments in each of these areas.

NCUA Reports to CUNA on Agency’s Budget

Recently, I sent another letter to the NCUA Board members urging them to hold the line on the agency’s expenses and provide greater transparency and accountability to credit unions regarding resource allocations.

While we are very concerned about the 6.1% increase in the 2013 budget, NCUA Chairman Matz has responded to my letter with more information about the budget. We will post the letter shortly.

I had urged the agency to set up a website on its budget and Chairman Matz’s letter confirms that the agency has done just that. According to the letter, “among the new documents now available on line are:

  • More detailed NCUA budget narratives explaining increases and decreases in each major budget category;
  • Breakdowns of each line item for pay and benefits to display the budgeted funds that NCUA would return if Congress does not pass a pay increase for federal employees;
  • Graphics com paring historical trends in NCUA budgets and employee levels relative to credit union deposits and assets;
  • Tables contrasting changes in operating fees for federal credit unions in several asset ranges compared to their net income.”

She also said “additional budget information” will be posted on the budget website “in the near future.”

These are positive steps but do not change the fact that the budget should not have been increased and moreover, should have been decreased in light of the health of the credit union system and declining numbers of credit unions. We will continue to press the agency to contain its expenses and pursue our concerns with other policymakers.

NCUA Pulls Proposed Call Report Questions

Following inquiries from CUNA and others, the agency is not going forward with proposed 5300 Call Report questions that would have required credit unions to provide information to NCUA on when board members first took office. NCUA initially said it needed the information to “assess” the longevity of board members. However, without further explanation from NCUA on how it would use the information,it was far from clear why the information was necessary. Credit unions could easily be concerned that NCUA was moving into term limits so it is positive that the questions were pulled, a move CUNA supported. There will be revisions to the call report to collect more data on troubled debt restructurings effective December 2012.

December NCUA Board Meeting Agenda Released

The NCUA Board will convene for its last meeting of 2012 on December 6 and no major rulemakings are expected. The Board will consider a final rule regarding alternatives to credit ratings, as required under the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Board will also consider a final rule regarding fidelity bond coverage for Federal credit unions. Additional actions expected involve two requests from Federal credit unions to convert to community charters and approval of the budget for the Temporary Corporate Credit Union Stabilization Fund. CUNA will provide a summary of the meeting shortly after it concludes.

IRS Will Begin Accepting Electronically-Signed Tax Transcript Requests Used for Mortgage Lending

Effective January 7, 2013, the IRS will begin accepting electronically-signed 4506-T and 4506-EZ documents, which are the income verification forms that are part of the processing of most all mortgages and loan modifications. Currently, signatures on these “request for transcript of tax return” forms are required to be original wet-ink signatures. Because of this existing requirement, mortgage lenders and consumers have traditionally experienced delays in the mortgage loan process as a lengthy period of time elapsed between the request for transcripts being submitted to the IRS and the lender’s actual receipt of the transcripts, which are used to vet a borrower’s ability to pay off a loan, as well as to protect from fraud.

In order to take advantage of this new methodology, lenders must be current participants of, or may register to participate in the IRS’s Income Verification Express Service (IVES). Through this service, the IRS charges $2 per transcript, and lenders often hire third-party vendors to handle the IVES income verification process. The new IRS rule won’t necessarily lead to the development of new technology, but will allow existing electronic signature technology to be used to execute income verification, and will open the door to broader use of electronic signatures to transmit documents between borrowers and lenders, which can speed processing since the parties don’t have to be in the same location to sign documents. Broader use of electronic images can save closing time, and may also improve accuracy, since all parties typically will access the documents from the same centralized location online for viewing and for electronic signatures. For more information on the electronic signature requirements, please click here.

CUNA Opposes FHFA’s Proposed Adjustment to G-Fees

Earlier this week, we filed a comment letter with the Federal Housing Finance Agency (FHFA) in response to its proposal to adjust the guarantee fees (g-fees) that Fannie Mae and Freddie Mac (the GSEs) charge for single-family mortgages in certain states. Specifically, the adjustment would increase the g-fees for single-family mortgages in states where costs related to state foreclosure practices are higher than the national average; these states are Connecticut, Florida, Illinois, New Jersey, and New York.

The FHFA’s methodology to determine the cost of foreclosure is based on the expected number of days it takes the GSEs to foreclose on a property in a particular state and the average per-day carrying cost to the GSEs for that time period. As stated in our letter, we are concerned that other factors should be considered, such as the number of foreclosures over a set period of time, and how factors beyond the control of lenders or consumers, such as state law provisions on foreclosures or judicial review of foreclosure proceedings, affect the processing of foreclosures. While some of these other factors may be reflected in the expected number of days it takes a GSE to foreclose on a home in a particular state, the proposal appears to be an exceedingly crude reflection of such factors. Each such factor requires its own identification and analysis to determine what the effect of the FHFA’s proposal might be on the concerns and policies underlying it. For instance, before concluding that higher g-fees should be charged in states with strong consumer protection provisions in their statutes, FHFA should analyze what the effect would be on lenders and consumers if such protections are discouraged.

Bank Secrecy Act “Funds Transfers” Definition Proposed Rule

The Financial Crimes Enforcement Network (FinCEN) and the Federal Reserve Board has proposed amendments to the regulatory definitions of “funds transfer” and “transmittal of funds” under the Bank Secrecy Act (BSA) regulations. The proposed changes are intended to maintain the current scope of the BSA definitions to address changes to the Electronic Fund Transfer Act on remittance transfers from Section 1073 of the Dodd-Frank Act. Comments on the proposed rule are due to the agencies by January 25, 2013. We will be providing a Regulatory Comment Call on this proposal shortly, and will review the proposal with the CUNA Payments Policy Subcommittee.

Conclusion

As always, we appreciate the positive comments we continue to receive about this report and suggestions for items you would like us to cover are always welcome. For any questions about this week’s report please feel free to contact Mary Dunn, Bill Hampel, or me.

Best regards,
Bill Cheney

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