Escrow Tweaks, Exemption Areas Finalized By CFPB
The Consumer Financial Protection Bureau last week unveiled two tweaks to its pending escrow regulations: a final rule clarifying and making amendments to its previously issued 2013 escrows final rule, and a final list determining both rural and underserved county status regarding the escrows rule.
The CFPB's escrow rule, issued in January, generally extends the required duration of a mortgage loan escrow account to five years, up from one year. Lenders that work in rural or underserved areas will be exempt from the escrow changes, provided they meet certain other criteria.
The final escrow rule clarifications released last week establish a temporary provision to ensure existing protections remain in place for higher-priced mortgage loans until expanded consumer protections take effect in January 2014. The rule also clarifies how to determine whether a county is considered "rural" or "underserved" for purposes of applying an exemption.
The final list of CFPB-approved rural and underserved areas covers counties in 46 states and Puerto Rico. The CFPB defines rural counties by using the U.S. Department of Agriculture Economic Research Service's urban influence codes. Underserved counties are defined by reference to data collected under the Home Mortgage Disclosure Act.
Some counties' status may change from year to year, according to the CFPB.
Source: CUNA News Now
NCUA Releases CU Derivatives Program Proposal
Well-run federal credit unions would be permitted to use simple derivatives to hedge against interest rate risks under a just-proposed National Credit Union Administration program.
Under the terms of the NCUA proposal, only credit unions that have assets of more than $250 million, are well-managed, and have the appropriate expertise will be eligible to apply for an agency derivatives investment program. Swaps and caps will be the only approved derivatives investments, the NCUA said. There will be an application process, and fees will be charged to cover costs related to application processing and supervision.
The NCUA estimated that 75 to 150 credit unions would apply for derivatives authority within the first two years of the program. The agency said it would need to add new resources to handle application processing and supervision if the program is approved.
The agency is seeking comments for 60 days on the proposal.
The Credit Union National Association is reviewing the proposal in detail and will work with its Examination and Supervision Subcommittee to develop its comments CUNA urges any credit unions interested in engaging in these investments to share their reaction to the proposal and to flag problem areas as well as favorable provisions they identify.
While CUNA commend the agency's decision to move forward on this issue, CUNA plans to urge that the final rule not be so restrictive that it discourages well run credit unions that meet the proposal's criteria from applying for derivatives authority.
A board briefing on a supplemental interagency proposed rule that covers appraisals for higher-priced mortgage loans, and a final rule making technical adjustments to credit union regulations are also on today's open meeting agenda.
Source: CUNA News Now
CFPB Encourages CUs To Write Non-QM Mortgages
Credit unions should continue to feel free to write non-qualified mortgage loans, as long as those loans are supported by strong underwriting, Consumer Financial Protection Bureau Director Richard Cordray said this week.
Cordray made his remarks before a National Association of Realtors gathering. In his remarks, Cordray said "lenders that have long upheld strong underwriting standards have little to fear" from the CFPB's ability to repay regulations.
The CFPB issued standards to define a "qualified mortgage" under the agency's "ability to repay" rules in January. The rule amended Regulation Z, which implements the Truth in Lending Act, to require creditors to make a reasonable, good faith determination of a consumer's ability to repay any consumer credit transaction secured by a dwelling (excluding an open-end credit plan, timeshare plan, reverse mortgage, or temporary loan). It also establishes certain protections from liability under this requirement for "qualified mortgages."
"These qualified mortgages cover the vast majority of loans made in today's market, but they are by no means all of the mortgage market. This point is quite important, and it should not be misunderstood," Cordray said this week.
Credit unions and other community financial institutions "have seen the strong performance of their loans over time," he added. "Nothing about the traditional lending model has changed, and they should continue to offer such mortgages to borrowers whom they evaluate as posing reasonable credit risk--whether or not they meet the criteria to be classified as qualified mortgages. We all benefit by recognizing and sustaining responsible lending wherever we find it in the mortgage market," Cordray said.
Source: CUNA News Now
CU Mag Compliance Column Takes On Credit Reporting Queries
The Fair Credit Reporting Act's (FCRA) treatment of credit report information-sharing rights and adverse action notices are two topics taken on in the May edition of Credit Union Magazine's Compliance Q&A Column.
First, credit reports: As explained by Credit Union National Association Senior Director of Compliance Analysis Valerie Moss in the column, section 1681e of FCRA permits a credit union to disclose the contents of a member's credit report to that member if a loan denial or other adverse action is based in whole or in part on information in the report.
Credit unions should check their credit reporting bureau contracts to see if it is permissible to provide their members with actual copies of their credit reports, Moss recommended.
The FCRA does not require adverse action notices to be released in written form. When a financial institution takes adverse action with respect to a consumer based--in whole or in part--on any information contained in a credit report, the financial institution shall provide an oral, written, or electronic notice of the adverse action to the consumer, Moss explained.
On the other hand, she noted, Regulation B [the Equal Credit Opportunity Act] requires adverse action notices to be in writing for consumer credit. "The term 'in writing' includes electronic delivery of the notice if provided in compliance with the federal ESIGN statute. But, you may give the notifications for business credit verbally or in writing," Moss wrote.
Source: CUNA News Now