CUNA Regulatory Advocacy Report

CUNA Regulatory Advocacy Report: January 18, 2013

Good afternoon. Here is this week’s CUNA Regulatory Advocacy report.

  • CFPB Finalizes Mortgage Servicing Rules
  • CFPB Adopts Reg B Changes on Appraisals
  • Mortgage Loan Originator Compensation Rules to Be Issued January 20,
  • CUNA Posts New Comment Call on CFPB’s Proposal on QMs Final Rule
  • Summaries of NCUA Final Rules Posted
  • CUNA Urges CFPB to Delay Remittance Rule
  • CUNA Updates CUs on NCUA’s “Rural District” Field of Membership Proposal
  • U.S. Treasury Bank Secrecy Act Advisory Group
  • CUNA Chart of Current CFPB Rulemakings: Current as of 1/18/2013

CFPB Finalizes Mortgage Servicing Rules

As expected, the CFPB on Thursday of this week issued its mortgage servicing rules amending Regulation X (RESPA) and Regulation Z (Truth in Lending).  The final rules become effective on January 10, 2014. 

CUNA, the leagues and credit unions have worked tirelessly over the last several months with the Bureau in an attempt to minimize the regulatory burden that would be placed on credit unions from the requirements of these rules.  While the Bureau did not incorporate all of our recommendations, the final rules do reflect a significant number of exemptions that CUNA urged for small servicers.  Of note, small servicers will be exempted from the periodic statement requirements of Regulation Z, as well as the following sections of the Regulation X rule:  Continuity of contact and early intervention requirements for delinquent borrowers, the general servicing policy and procedures and requirements, a vast majority of the loss mitigation procedural requirements and the restriction on purchasing force-placed insurance for borrowers with escrow accounts for the payment of hazard insurance as long as the cost to the borrower of the insurance obtained by the small servicer is less than the amount that would be disbursed from the borrower’s escrow account to ensure that the hazard insurance premium charges are paid in a timely manner.

To qualify for as a “small servicer,” a servicer must service 5,000 or fewer mortgage loans, where either the servicer or an affiliate is the creditor or the assignee.  Additionally, a servicer that owns mortgage servicing rights for mortgage loans that are not owned by the servicer or affiliate, or for which the servicer or an affiliate was not the entity to whom the obligation was initially payable, is not a small servicer. 

The issue of whether a credit union that uses a subservicer that services more than 5,000 mortgage loans may still be exempt has arisen.  We are still reviewing the rules, commentary and supplementary information and feel the answer to that is not clear, particularly since the rule has changed from the proposal.

We have been in contact with a senior attorney at the CFPB who helped write the rules.  She confirmed that the rule is intended to keep a large servicer from taking advantage of a small servicer’s exemption but said she would get back to us on the exemption issues.  As Monday is a holiday, she said she would get back on Tuesday. We reiterated that a credit union should not lose its exemption by virtue of doing business with a subservicer.

While CUNA’s early estimates indicate that approximately 130 credit unions will be directly impacted by the entirety of the mortgage servicing rules, and not eligible for the small servicer exemption, CUNA staff continues to review the rules to determine whether the small servicer exemption may have other implications for credit unions, and will be providing additional detail in the coming days.  For CUNA’s initial summary of both Regulation X and Regulation Z, click here.  

CFPB Adopts Reg B Changes on Appraisals

Today, the CFPB issued a final rule that amends Reg B in regard to the provision of copies of appraisals and valuations to loan applicants.  Specifically, the rule implements provisions of the Equal Credit Opportunity Act (ECOA)—as amended by Dodd-Frank—that require creditors to provide applicants a free copy of the appraisal and other written valuations developed in connection with an application for a first-lien mortgage loan.  In addition, the rule requires creditors to notify applicants that a copy of the appraisal will be provided to them.

Before the Dodd-Frank Act, ECOA required creditors to provide the applicant with a copy of the appraisal report only upon request.  Prior to today’s final rule, Reg B explicitly exempted credit unions from the appraisal requirement because NCUA has an existing rule that similarly requires credit unions to provide a copy of the appraisal upon request.  The final rule implements changes to ECOA that require creditors to automatically provide copies of the appraisal and valuation report.  Therefore, the final rule removes the credit union exemption, as necessary under amended-ECOA.

In the final rule, the CFPB addressed several comments included in CUNA’s comment letter on the proposal.  In response to a specific suggestion in our letter, the CFPB stated in the final rule’s supplemental information that the requirement to provide a free copy of each appraisal or valuation does not apply to subsequent copies provided to the applicant upon request.  In addition, the final rule clarifies that creditors may provide applicants with electronic copies of appraisals and other written valuations; this also was an issue we addressed in our comment letter to the Bureau.

The rule will become effective on January 18, 2014.

Mortgage Loan Originator Compensation Rules to be Issued on January 20, 2013

The CFPB announced today it is issuing rules on Sunday, January 20, 2013 to implement provisions of the Dodd-Frank Act to prevent unscrupulous mortgage loan originators (MLO) from steering borrowers into risky and high-cost loans that generate more income for the originators. 

The final rule will require mortgage servicers to simplify billing statements, provide additional notice of rate changes to borrowers and help ensure that consumers know all of their options to prevent foreclosures. 

The CFPB’s final rules will:

  • Broaden the application of prohibitions on compensation that varies with the loan terms.  For instance, an MLO should not be paid more if the consumer takes a loan with a higher interest rate, a prepayment penalty, or higher fees;
  • Prohibit “dual compensation”: Under the CFPB’s rules, the loan originator cannot get paid by both the consumer and another person such as the creditor; and
  • Set qualification and screening standards:  An MLO must meet character, fitness, and financial responsibility reviews, pass a criminal background check, be screened for felony convictions; and undertake training to ensure they have the knowledge about the rules governing the types of loans they originate.
  • The final rule also implements Dodd-Frank provisions that, for mortgage and home equity loans, generally prohibit mandatory arbitration of disputes related to mortgage loans and the practice of increasing loan amounts to cover credit insurance premiums.

One area in the proposal that concerned CUNA was the use of proxy factors to determine whether the rules apply to compensation plans.  While the final rules have not been issued yet, based on the agency’s summary the use of such factors remains in the final rule.

We will be reviewing the final rule and providing an analysis on CUNA’s Regulatory Advocacy website after the rule is issues next week. –Lisa McCue, NewsNow

CUNA Posts New Comment Call on CFPB’s Proposal on QM’s Final Rule

The CFPB is proposing to amend Regulation Z, Truth in Lending Act (TILA), in connection with the final rule issued January 10, 2013 that  requires creditors to make a reasonable, good faith determination of a consumer’s ability to repay a closed-end credit extension secured by a dwelling.  The proposal covers some new exemptions from the ability to repay requirements and would provide a new category of “qualified mortgage.”

To follow-up on the agency’s proposal, we have posted a new CUNA Comment Call today on our website.  We encourage all leagues and member credit unions to weigh in on this proposal, and provide your comments to us by Friday, February 15th, 2013.  CUNA continues to work with the Bureau to advocate for more action on the part of the CFPB to lessen the regulatory burden on credit unions. In the meantime, we will be posted a Final Rule Analysis on the Ability to Repay rule and QM standards next week.

Summaries of NCUA Final Rules Posted

CUNA’s summaries of the National Credit Union Administration Board’s  rules on Technical Amendments to its Treasury Tax and Loan Depositaries; Low Income Designation, Definition of Small Credit Union, Definition of Troubled Condition are now posted on our website.  These rules were approved at the January 10, 2013 NCUA Board meeting.  They impact regulatory relief for small credit unions, time for accepting a low-income status designation, amendments to the troubled condition rule and technical amendments to the share insurance rule. 

CUNA Urges CFPB to Delay Remittance Rule

Earlier this week, CUNA submitted a comment letter to the CFPB, urging the agency to postpone the effective date of the remittance transfers final rule by at least 12 months.  While we commend the agency’s consideration of a delayed compliance date, we believe that ample compliance time is essential, since many credit unions must rely on third-parties for remittances, and will also need to work within their credit union to make numerous changes.  CUNA, our International Remittances Working Group, leagues and credit unions continue to advocate for broader relief under the remittance transfers regulation.

CUNA will be filling a second comment letter to the CFPB on international remittances in response to the agency’s pending proposal to relieve some burdens regarding certain errors, disclosure of foreign taxes, and liability issues.

Also, you may access the recording of our free CUNA conference call on the CFPB’s remittance transfers proposal that was held on January 14.  During the call, Eric Goldberg, Counsel from the CFPB’s Office of Regulations, discussed the proposed rule, and answered technical questions from credit unions in the Q&A session.  We appreciate that over 300 credit unions joined us for the conference call. 

CUNA Updates Cus on NCUA’s “Rural District” Field of Membership Proposal

CUNA continues to meet with NCUA regarding the “rural district” field of membership proposal to advocate for a more flexible rule for credit unions.  We expect the final rule to be released around February or March of this year, and we are hopeful that the agency will make some beneficial changes from the proposed rule.  In late November, we submitted a comment letter regarding NCUA’s proposal that would amend the definition of a “rural district” by broadening the population criteria of the “rural district” designation from its current limit of 200,000 persons, to a limit of 200,000 persons or 3 percent of the population of the state in which the majority of the district’s persons are located.  We believe the current limit must be raised beyond the proposed level in order to be useful to credit unions that are operating in sparsely populated states.  

U.S. Treasury Bank Secrecy Act Advisory Group

The U.S. Treasury Financial Crimes Enforcement Network (FinCEN) is seeking candidates to serve on the U.S. Treasury’s Bank Secrecy Act Advisory Group (BSAAG).  Currently, CUNA, the California and Nevada Credit Union Leagues, and State Farm FCU represent credit unions on the BSAAG, which also includes representatives from federal regulatory and law enforcement agencies, financial institutions, and trade associations.  The BSAAG is chaired by the Director of FinCEN and is the means by which the Secretary of the Treasury receives advice on the operations of the Bank Secrecy Act (BSA).  We anticipate that the number of new members on the BSAAG will be very limited, and encourage credit unions with extensive BSA / AML experience in a variety of products and services, as well as resources to participate in meetings, calls, and working groups to submit their application to FinCEN by February 15, 2013. 

CUNA Chart of Current CFPB Rulemakings: Current as of 1/18/2013

Click here for a current chart of the CFPB’s proposed and final rules.

Conclusion

Thanks for your support and positive feedback on our reports. For any questions about this week’s report, please feel free to contact Eric Richard or me.

Mary Mitchell Dunn
Senior Vice President and Deputy General Counsel

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