NAFCU Compliance Blog

NCUA Board Meeting; Upcoming NCUA Webinar; The NCUA Report

Written by Tessema Tefferi, Regulatory Affairs Counsel

NCUA October Board Meeting.  The NCUA Board held its monthly public meeting last Thursday, at which one final rule was approved and a monthly NCUSIF and Corporate Stabilization Fund report was provided.  Here’s a link to the draft items considered.

The final rule the Board approved concerns the agency’s regulations governing the Community Development Revolving Loan Fund (CDRLF).  As a background, the CDRLF provides financial support for credit unions serving predominantly low-income members.  It offers funds in forms of loans and grants, and is administered by the Office of Small Credit Union Initiatives (OSCUI).

While the rule makes comprehensive changes to the CDRFL rule, there are some key aspects worth highlighting.  First, the NCUA will have greater flexibility in terms of determining interest rates (the rule removes references limiting an interest rate to between 1 and 3 percent). Going forward, the NCUA will publish the interest rate in the Notice of Funding Opportunity, which will be periodically published in the Federal Register and provided through Letters to Credit Unions and other means.  Second, the rule eliminates the requirement for matching, although the agency retains the discretion to require matching funds on a case-by-case basis.  Third, a credit union that receives funds will be required, among other things, to issue a report annually to its members on the progress of providing needed community services, and submit a copy (or summary) of the report to the NCUA. The final rule will become effective 30 days after publication in the Federal Register.

November 9 NCUA Webinar.  NCUA’s Board Chairman Debbie Matz will be hosting a town hall webinar on November 9, 2011, at 3:00pm EST.  The announcement and instructions for how to sign-up can be found here.  According to Chairman Matz, the webinar will feature updates on the corporate credit union system resolution, NCUSIF update, NCUA’s Regulatory Modernization Initiative and the agency’s 2012 budget.

The NCUA Report (October 2011 edition).  October’s edition of The NCUA Report has been released and can be found here.  The report includes articles on loan participations, economic outlook and credit risk management. 

Thank You; Upcoming Webcast; 2012 Compliance Conferences

Written by Steve Van Beek

Today marks the end of another great Regulatory Compliance Seminar.  I wanted to extend a thank you to all our attendees and presenters.  We had a great week of audience participation and outstanding question and answer sessions.  As the compliance challenges continue, the ability to learn from each other and discuss common issues and concerns will continue to pay dividends and help everyone stay up-to-date on the latest requirements and interpretations.

Thanks again for making this year's Compliance Seminar a success.  Have a great weekend!    

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Upcoming Webcast.  If you weren't able to make it to Seminar (or you want to pass information along to your collegues), Sarah and I will be doing a webcast on November 16 discussing some of the same issues we hit on during our talk at Seminar.  

Additional information on the webcast - including a list of topics - can be found here.   

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Upcoming Compliance Conferences.  Now also seems like a great time to provide a reminder about our 2012 Compliance Conferences.  

• Our 2012 NAFCU Compliance School will be held March 12-16 at the Gaylord National, National Harbor, MD. 
• Our 2012 NAFCU Compliance Seminar will be held October 23-26 at the Sheraton in Seattle, WA!  

Registration is already open for both events.  Remember, all of NAFCU conferences are open to anyone.  We hope to see you in 2012!  

Round 5 of Know Before You Owe

Written by Dillon Shea, Regulatory Affairs Counsel

Steve asked me to write a guest blog post while he and Sarah are at Regulatory Compliance Seminar.  I want to follow up on Steve’s post from October 19 regarding the most recent round of Know Before You Owe forms.  These forms will consolidate the current Reg Z early disclosures and the RESPA disclosures.  This is the fifth round of draft forms the CFPB has released. 

When I looked at the forms, two things jumped out at me.  First, the forms have increased from two to three (I will get to what was added in a moment).  The second thing I noticed is much more worrisome for mortgage lenders.  On page 3 of the forms, in the Comparisons section, there is a spot where the lender is required to disclose the “Lender Cost of Funds” which is described as “the rate the lender pays to borrow money to lend you.” 

Yes, you read that last sentence correctly.  In this case, that rate that is disclosed on the draft forms is the average rate of interest paid on deposits in the state of New Mexico (where consumer testing is taking place for this round of forms).  This is not something that the CFPB chose to include on its own.  Section 1419 of the Dodd-Frank Act requires lenders to disclose “the approximate amount of the wholesale rate of funds in connection with” a residential mortgage loan.  Since the requirement is part of the statute, the agency’s hands are tied to some extent in that some sort of disclosure to this effect must be made.  The statute, however, provides the CFPB authority to define exactly what the term means.  The CFPB will likely issue a proposed rule seeking comment on how exactly the term should be defined and disclosed. 

The rest of the changes are less worrisome.  As I said, the form has grown one page in length.  The bulk of that extra page consists of a section to verify receipt of the disclosure and a new section titled Other Considerations.  This new section is fairly straightforward.  Several of the disclosures are common sense and thus I question what value they add, nonetheless, the additions are not particularly problematic. 

Page 1 of these forms is an improvement over the last version.  Spreading out the disclosures to three pages raises its own questions, but it did allow the agency to design a less cluttered first page.  Also, the projected payments section does a better job of breaking down the component costs that make up the total monthly payment. 

Finally, the CFPB has continued to tinker with page 2, which discloses settlement costs and the cash needed to close on the loan.  I think the format used on this round of forms is a bit more user-friendly but I would be interested in hearing what NAFCU’s members think.

NAFCU will submit a letter to the CFPB on these draft forms.  If you have thoughts concerning how the lender’s cost of funds should be disclosed or any other input on these forms, please e-mail me at dshea@nafcu.org. 

Tracking Federal Legislation on the Web

Written by Jillian Pevo, Associate Director of Legislative Affairs

Let me preface this by saying it was Steve’s idea for me to walk his faithful readers through the best ways to track different pieces of legislation online. So, if you find this post boring, you know who to blame. To spice things up let’s first look at the origins of the Internet (at least according to some), and the long history politicians apparently have with this wonderful research tool.

In all seriousness, these days there are a lot of resources on the Web that can be very helpful in checking up on the legislative goals of your Representative and Senators. The most encompassing and up-to-date legislative information tends to be on the "Thomas" site maintained by the Library of Congress. There are several ways to conduct an inquiry here.

For example, if you want to read the text of the legislation introduced by Representative Ed Royce to raise the credit union member business lending cap, or see if your own Representative has signed on as a cosponsor, click “search by bill number” and enter H.R. 1418. A bill originating in the House of Representatives is designated by the letters “H.R.” followed by a number that it retains throughout all its parliamentary stages. Bills introduced in the Senate begin with an “S.” After you plug in H.R. 1418, you can see all actions taken on the bill including the recent subcommittee hearing, how many members are cosponsoring the bill and who those members are. If you didn’t know the bill number, you could have just gone under “browse bills by sponsor” and selected Ed Royce. This would give you a bucket list of every single bill Representative Royce has introduced this Congress. Thomas is a quick and easy way to gather baseline information about what issues members of Congress care about.

From the Thomas site, you can also gain access to the Congressional Record which each day updates the public on every detail of the previous day’s legislative work. Every bill introduced, every member added as a cosponsor, every amendment filed, every roll call vote taken – you name it, it’s in here.  There is also a lot of information found on the House.gov and Senate.gov websites about members and committees.

That’s the basics, but you are always welcome to call our Legislative team at NAFCU who can help answer questions and give you more up-to-date information on how various issues are shaping up on the Congressional front. Most of us have worked on Capitol Hill and we all enjoy connecting our credit union members with what’s going on “Inside the Beltway.”

I’m so appreciative that I could be a guest writer on this blog – as they say, always a bridesmaid never the bride! I’ll leave that to Steve.  :)     

Credit Union Disaster Recovery Plans

Written by Curt Long, Research Assistant

Each month NAFCU’s research staff publishes our Economic & CU Issues Monitor, which features analysis of macroeconomic and financial trends, as well as member survey data covering critical credit union topics.  This month’s report focused on disaster recovery plans.  Some of the key findings include:

• Most respondents (95.7 percent) test their business continuity plans annually, while the remaining credit unions (4.3 percent) test twice per year. Among those responding to the survey, nearly one-third (32.1 percent) have used their plans.
• Roughly one-third (35.3 percent) of respondents indicated that their credit unions intend to use mobile branching in the event of a disaster. Almost half of the respondents (49.1 percent) have arranged to share resources with other credit unions.
• More than 70 percent have a plan to restock ATMs with cash during a disaster. Furthermore, 14.6 percent of respondents plan to waive ATM fees for non-members.
• The economic recovery is in its third year, but growth will remain sluggish, slipping from its 2010 level of 2.8 percent to 1.6 percent. Among the 14 million currently unemployed workers, 44.6 percent have been out of work for six months or more. A much larger economic expansion is needed to reduce unemployment to a more normal level.

For a copy of the full report, click here (member login required).  To participate in the monthly survey, please e-mail the research staff at research@nafcu.org.

Wedding Weekend; Seminar Week

Written by Steve Van Beek

The 13 months of planning were worth it!  Erin and I had a wonderful weekend with family and friends in Ohio.  Here are a couple of quick photos from Saturday.  

(To get the full effect of the 2nd photo - listen to the intro of "Long Cool Woman in a Black Dress.")

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I know quite a few of you figured out the timeline:  the wedding fell awfully close to our Compliance Seminar.  The result is spending my first week as a married man away from my wife.  Luckily, I have a very understanding wife!

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NAFCU-members:  Sarah and I will both be down at Compliance Seminar all week - so the best way to get in touch with us (unless you're in Orlando!) is to send an email to:  compliance@nafcu.org  

We will do our best (along with help from our outstanding Regulatory Affairs team), but there will be a delay from our normal response time.  

Trash Talk; 30-Year Fixed Rate Mortgages

Written by Brad Thaler, Vice President of Legislative Affairs

Steve came to me and asked me to fill in while he is out for the big weekend, and I assumed he was talking about ESPN’s College GameDay coming to my old Michigan State stomping grounds of East Lansing on Saturday, but I understand there may be a wedding or something else getting in the way of his GameDay viewing.

Anyway, I am sure many of here have had to put up with Steve’s talk about Michigan football, so I thought I would balance things out and provide the Michigan State perspective, especially after last Saturday’s game where my beloved Spartans handled the school we (not so) affectionately call “Ann Arbor Community College” for the fourth straight year.  In case any of you missed it, you can watch some highlights here.

We all wish Steve and Erin well on their big day, but there is one song that I doubt Steve will let be played at the reception, so you will just have to watch it here.

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On the legislative front, John Fenton of Affinity FCU in New Jersey testified on behalf of NAFCU before the Senate Banking Committee Thursday on the issue of Housing Finance Reform and the future of the 30-year fixed rate mortgage.  Housing Finance Reform is not expected to be enacted before 2013, but there is a lot of debate going on now in both the House and Senate.  I know many of you are following NCUA and what they are doing on interest rate risk, and the hearing and witness testimonies examine the issue of the interest rate risks associated with long term fixed rate mortgages and what the government role should be in the marketplace.  You can access the testimony or watch an archived webcast of the hearing here.  

Dodd-Frank's Impact on Small Institutions; Guest Bloggers

Written by Steve Van Beek

Given the prospect of changes to mortgage regulation in 2012 that we blogged about yesterday, (and perhaps changes to checking accounts), it was interesting to see Neil Wolin, Deputy Treasury Secretary, claim that Dodd-Frank is not hurting small banks.

Politico.com covered the story here.

I'd like to add my two cents:  Just because other institutions are hurt more doesn't mean that small banks and credit unions are not hurt when new regulations are written and existing regulations are constantly changed and tweaked.

In other words, if a large bank needs to read and comply with 12 new regulations - that doesn't alleviate the burden placed on a smaller institution of having to read, interpret and comply with 5 new regulations.  

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Over the next couple of weeks, we will have a few guest bloggers from other divisions at NAFCU that we hope you find useful and informative.  

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I'm off to Ohio tonight for a weekend that I'll remember for the rest of my life.  Thank you again for the all the wedding wishes! 

Know Before You Owe; MLO Renewal Fees

Written by Steve Van Beek

The CFPB will be testing its "Know Before You Owe" application disclosures this week.  The CFPB's blog post also mentioned their next steps on working on the closing disclosures:

"So far, we’ve been testing a disclosure that combines the Truth in Lending form and Good Faith Estimate that you get after you apply for a mortgage loan. But what about at the other end of the transaction? When you close your mortgage, you get a new form that discloses the final terms and costs. Well, we’d like that disclosure to be just as clear and effective as the application disclosure will be, thanks to you. So, stay tuned because soon we will be sharing a prototype closing disclosure and asking for your feedback.

And, stay with us throughout this process, because this isn’t the last you’ll see of the application disclosure. It needs to work together with the closing disclosure, so we’ll be asking for your feedback on both in the future."

Remember, Dodd-Frank included a mandatory date of July, 21 2012 (one year from the designated transfer date) for the CFPB to propose combined disclosures.  This along with Raj Date's indication that the "Ability to Repay" rule might go final this spring assures mortgage changes in 2012.  

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Yesterday, we blogged on the SAFE Act renewal process.  A helpful reader (Hat Tip to Bob B.) pointed out that renewal fees won't be charged for individual MLOs in 2012 as those fees were rolled into the initial registration for this year.  

This language comes from the Federal Renewal Handbook (Page 12):

"Please note that for the 2012 renewal year there will be no MLO renewal/reactivation  processing fees. The 2012 renewal/reactivation processing fee was included in the 2011 registration processing fee." 

Also, on Page 3 is this Note:

"NOTE: There is a $100 renewal/reactivation processing fee for institutions. There is no MLO renewal/reactivation processing fee for 2012." 

SAFE Act Renewal Process

Written by Steve Van Beek

The SAFE Act requires mortgage loan originators (MLOs) to renew their registrations annually.  The annual renewal period is from November 1 to December 31.  

The underlying regulatory requirement for the annual renewal comes from 12 CFR 761.103(b):

"(b) Maintaining registration. (1) A mortgage loan originator who is registered with the Registry pursuant to paragraph (a) of this section must:

(i) Except as provided in paragraph (b)(3) of this section, renew the registration during the annual renewal period, confirming the responses set forth in paragraphs (d)(1)(i) through (viii) of this section remain accurate and complete, and updating this information, as appropriate; and

(ii) Update the registration within 30 days of any of the following events:

(A) A change in the name of the registrant;

(B) The registrant ceases to be an employee of the credit union; or

(C) The information required under paragraphs (d)(1)(iii) through (viii) of this section becomes inaccurate, incomplete, or out-of-date.

(2) A registered mortgage loan originator must maintain his or her registration, unless the individual is no longer engaged in the activity of a mortgage loan originator.

(3) The annual registration renewal requirement set forth in paragraph (b)(1) of this section does not apply to a registered mortgage loan originator who has completed his or her registration with the Registry pursuant to paragraph (a)(1) of this section less than 6 months prior to the end of the annual renewal period."

As Section 761.103(b)(3) indicates - the renewal process does not apply to MLOs who registered after July 1st.

The Nationwide Mortgage Licensing System (NMLS) has numerous resources on the renewal process.

• Streamlined Annual Renewals (Federal Registry) 

• Federal Registry Renewal and Reactivation Handbook

• FAQs on Renewal Process

Here is one of the FAQs:

"Q. Who needs to renew?

A. According to federal regulations, registrations that become initially active before July 1 must be renewed by the end of that same calendar year, as well as all subsequent years.  Registrations initially made active after July 1 are not required to be renewed by the end in that same calendar year, but must be renewed in subsequent years.  All institution accounts must be renewed on an annual basis, regardless of when the institution’s account was created."