Should Credit Unions add a Minimum Housing Expense When Applicants List Zero Housing Expenses?

Experts agree a blanket policy of adding an amount should be avoided, but that credit unions should also ask questions.

Hand holding the word "compliance."2/12/2019

During the most recent NWCUA Lenders’ Council the group discussed issues around a lender’s practice of routinely adding a minimum housing expense when an applicant listed $0 as their housing expense.

There could be several reasons an applicant may list $0 as their housing expense, including:

  • Living at home with parents/siblings and not contributing toward housing costs, or;
  • They have paid off their mortgage.

According to a 2005 NCUA legal opinion letter, credit unions generally should accept the housing expenses the member listed on their application. A blanket policy of adding an amount to every applicant’s debts to compensate for the absence of a stated housing expense is improper and could result in illegal discrimination under the federal fair lending rules.

Still, the opinion letter also stated that a lender may consider the circumstances surrounding an individual applicant’s lack of housing expense and may wish to ask further questions. For example, the paid off mortgage would still have hazard insurance and property taxes to pay every year. According to Fannie Mae’s bulletin B3-6-03, monthly housing expenses would include those.

In summary, a blanket policy is not good; however, feel free to ask clarifying questions. If the member still says their housing expenses are $0, then that is what you will need to use.

Question of the Week

What should be done if an IRS refund direct deposit went into a wrong account?

It depends on where the error occurred. But, in all cases, the person who received the deposit in error is not entitled to the funds. If the credit union made the error, then per Regulation E, the credit union needs to correct the error.

If the IRS made the error, the person who filed the tax return needs to contact the IRS customer service at 1-800-829-1040. The IRS will issue a recall of the direct deposit and send the return filer a new refund by check.

If the filer entered the incorrect routing or account number, the IRS assumes no responsibility for tax preparer or taxpayer errors and will not provide any help in this situation. It is the responsibility of the person filing the return to verify the account and routing number and double check for accuracy. 

While the IRS suggests the filer work directly with the respective financial institution to recover funds, the credit union also has no responsibility for the error. Due to privacy, you are not allowed to provide any information concerning the member whose account the payment went into. You can possibly work as an intermediary, but ultimately this is a civil issue between the filer and the person whose account they directed the payment to be made to.

Legal Briefs

National Credit Union Administration (NCUA)

The NCUA issued a statement on its review of security logs and alerts in light of recent spear phishing campaign which targeted BSA officers at credit unions. The review did not find any indication that information had been compromised at the NCUA.

Financial Accounting Standards Board (FASB)

FASB issued a proposed Accounting Standards Update (ASU) that would ease transition to the credit loss standard by providing the option to measure certain types of assets at fair value.

Consumer Financial Protection Bureau (CFPB)

The CFPB issued a Notice of Proposed Rulemaking on Payday Lending. Part of the proposed rule would rescind the rule’s requirements that lenders make certain underwriting determinations before issuing payday, single-payment vehicle title, and longer-term balloon payment loans. In addition, it would delay the compliance date for mandatory underwriting until Nov. 19, 2020.

The CFPB’s office of innovation proposes a Disclosure Sandbox to encourage companies to test new ways to inform consumers.

U.S. Department of Labor (DOL)

The DOL announced the release of an electronic version of the Handy Reference Guide to the Fair Labor Standards Act (FLSA). The new online version will assist American employers and workers with a simple, easy-to-follow resource that provides basic WHD information, as well as links to other resources.

Office of Foreign Assets Control (OFAC)
OFAC has updated the SDN list as of Jan. 28, 2019. The last update prior to this was Jan. 27, 2019.

Questions? Contact the Compliance Hotline: 1.800.546.4465; [email protected].