Supreme Court TILA Disclosure Ruling – How it Affects Credit Unions
A new ruling from the Supreme Court will make it even more important for credit unions to provide thorough Truth in Lending disclosures as part of their mortgage closing process.
In Jesonoski v. Countrywide Home Loans, the court unanimously agreed with homeowners Larry and Cheryle Jesonoski that U.S. law only required they notify Bank of America in writing within three years of closing that they were rescinding their mortgage because of disclosure problems.
The law did not, as Bank of America argued, require the homeowners to have sued within three years to rescind, the court said. “Section 1635(a) explains in unequivocal terms how the right to rescind is to be exercised,” wrote Justice Antonin Scalia for the court. “It provides that a borrower “shall have the right to rescind . . .by notifying the creditor, in accordance with regulations of the Board, of his intention to do so” (emphasis added).
The language leaves no doubt that rescission is affected when the borrower notifies the creditor of his intention to rescind, according to the court. It follows that so long as the borrower notifies within three years after the transaction is consummated, his rescission is timely, the court said. The statute does not also require him or her to sue within three years.
Analysts speaking to media outlets said the ruling would have only a limited impact now. However, it would likely take on more importance if another economic downturn led more homeowners to leave mortgages on properties that had fallen below their loan balances.
Sources: Credit Union Times
RBC2 improves: Still solution in search of problem, CUNA says
ALEXANDRIA, Va. (1/16/15)--While the National Credit Union Administration's revised risk-based capital (RBC2) proposal contained many changes wanted by the Credit Union National Association, the organization believes further changes are needed.
The proposal was approved by the NCUA board Thursday by a 2-1 vote, with board member J. Mark McWatters casting the dissenting vote.
See the below video (1 hour, 42 minutes), for the risk-based capital discussion from Thursday's meeting. The video is also available at CUNA's Risk-Based Action Center.
CUNA President/CEO Jim Nussle called the proposal a "solution in search of a problem," particularly given the likely costs to credit unions.
NCUA Director of Examination and Insurance Larry Fazio estimated that the one-time costs for credit unions to read the rule and make the appropriate operational changes to be approximately $5.1 million. He also estimated an annual cost of less than $1 million from credit unions in labor for new call report requirements.
This has led Nussle, along with National Association of Federal Credit Unions President/CEO Dan Berger, to again question the necessity of having the rule at all.
"Based on the healthy capital levels across the credit union industry and the millions of dollars in costs associated with this proposed rule, our respective organizations still have serious issues with it and continue to question the necessity of the proposal," the two said in a joint statement Thursday.
However, the rule does contain many improvements sought by CUNA in its original comment letter, and in its advocacy efforts throughout last year.
- Lowering the requirement to be well-capitalized to 10%, from the originally proposed 10.5%;
- Lowering of risk weights for mortgage loans, member business loans, long-term investments and credit union service organizations. CUNA pushed for a lower weight for mortgage servicing assets as well, but this was not lowered;
- Removal of interest-rate risk from the proposal. The NCUA has said interest-rate risk may be addressed in a separate rulemaking, which CUNA is against;
- Removal of the individual minimum capital requirement; and
- Changing the implementation period to Jan. 1, 2019. An 18-month period was originally proposed.
"The changes respond to the major criticisms we levied against the original proposal. As a result, it is a step toward a more palatable final rule, and the entire NCUA board is to be commended," Nussle said. "However, RBC2 is far from perfect, and CUNA and the leagues will again provide analysis and support for credit unions to generate comments to drive further improvements."
The 90-day comment period for the proposal will not start until it is published in the Federal Register , which could be a few weeks.
For more information, check's CUNA's Risk-Based Capital Action Center , Risk-Based Capital blog and future issues of News Now.
Source: CUNA News Now
Palm Springs FCU gets $50K from NCUA for data breach
ALEXANDRIA, Va. (1/16/15)--Palm Springs (Calif.) FCU will receive payment of up to $50,000 for costs associated with a data breach caused when a thumb drive given to an examiner was lost during an examination. The agency announced the reimbursement during its open board meeting Thursday.
The NCUA funds are intended to pay the credit union for activities such as credit report monitoring for members, credit union staff time associated with the breach and legal fees.
The agency noted in a release, "To date, the related costs associated with the data breach are approximately $36,000. Payments will come from NCUA's existing operating funds. In the event costs ultimately exceed $50,000, subsequent board action would be required."
Almost from the outset the NCUA has said the lost stored data was the results of a failure to follow longstanding agency policies on securing sensitive data. The agency has said the thumb drive did not include passwords or personal identifications numbers--PINs--and that the NCUA has received no indication of any unauthorized access to members' accounts or attempts to gain improper access.
The agency statement declares: NCUA takes its responsibilities for the security of credit union members' personally identifiable information very seriously and is committed to ensuring data shared in exams is protected at all times. The agency is taking appropriate action with staff involved in the incident and is reinforcing training on protecting sensitive information and reviewing regulations, policies and procedures in this area. NCUA is also moving as quickly as possible to consider and adopt additional safeguards to protect electronic data.
Source: CUNA News Now
CFPB releases new toolkit for prospective homebuyers
WASHINGTON (1/14/15)--On the heels of a report declaring that nearly half of mortgage borrowers do not shop around, the Consumer Financial Protection Bureau (CFPB) unveiled a toolkit designed to help potential homebuyers assess mortgage options. The "Owning a Home" toolkit contains resources about understanding loan options, a portal to check interest rates and more.
"'Owning a Home' has great new tools to help consumers throughout the home buying experience, from the very start of the process all the way to the closing table," said Richard Cordray, CFPB director, as he announced the toolkit. He added that in addition to the tools helping consumers decide how much they can borrow, get a grasp on new mortgage disclosure forms and other information, the bureau plans to add additional tools over the course of this year.
One feature Cordray highlighted while speaking at the Brookings Institution Tuesday is the Rate Checker. It incorporates information from lenders' internal rate sheets, which is used to calculate available interest rates for specific consumers.
"Borrowers looking to buy a single-family home can use the Rate Checker to input their own information and find out what interest rates they are likely to be offered from lenders in their area," he said. "By plugging in their credit score, their location, and information about the loan they are seeking, they can see the rates that lenders are offering to borrowers like them."
The CFPB report, "Consumers' mortgage shopping experience," features data from the 2013 National Survey of Mortgage Borrowers, an initiative from the CFPB and Federal Housing Finance Agency to better understand mortgage markets. The survey results come from more than 5,000 respondents who answered approximately 100 questions pertaining to the entire mortgage process.
The report found:
- Almost half (47%) of consumers who take out a mortgage only seriously consider a single lender or mortgage broker. This tendency is somewhat higher among first-time homebuyers;
- The primary source of information for borrowers is a lender or broker, followed by a real estate agent;
- A sizable share of borrowers report that outside factors, such as a lender or broker's reputation and geographic proximity, are very important in their decision makers. These borrowers are much less likely to shop around; and
- Borrowers who prioritize the terms of the loan over the characteristics of the lender and who are more confident in their knowledge about the mortgage process are more likely to shop around
Source: CUNA News Now