NAFCU Compliance Blog

Overdraft Extension; NLRB Notice Delay; MBL Appraisal Opinion Letter

Written by Steve Van Beek

A pretty eventful Spring so far as the CFPB seems to be hitting their stride.  Apologies for politely asking the CFPB to start issuing guidance - who knew they'd begin blasting out Bulletins left and right?  I guess that does show how complex and confusing the existing regulatory environment has become.

Below are a couple of quick items.  Additionally, if you didn't catch yesterday's free webcast with CFPB Director Cordray you can still view the on-demand version (just register first and then view).  

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Overdraft Comment Period Extended.  The CFPB issued a notice in today's Federal Register that it would be extending the comment period for its Overdraft Inquiry until June 29, 2012.  If your CU hasn't submitted comments yet, be sure to take this additional time to do so.  NAFCU's Regulatory Alert is here (12-EA-07) but feel free to send your comments directly to the CFPB as well.  

NLRB Notice.  The deadline for the National Labor Relations Board (NLRB) poster was scheduled for April 30th, 2012.  However, a recent court decision has delayed this requirement until further notice.  Here is from the NLRB's website:

"Important note: The DC Circuit Court of Appeals has temporarily enjoined the NLRB’s rule requiring the posting of employee rights under the National Labor Relations Act. The rule, which had been scheduled to take effect on April 30, 2012, will not take effect until the legal issues are resolved. There is no new deadline for the posting requirement at this time."   

Prior blog postings on this issue can be found here and here.  

NCUA Opinion Letter.  NCUA recently issued their third opinion letter of 2012 - this one on appraisals when selling a participation interest in a member business loan.  If your CU is involved in these types of issues it is best to review the full letter - 11-1126.    

Know Before You Owe; Appraisal Forms

Written by Steve Van Beek

In late June, we blogged about the CFPB's second round of the Know Before You Owe project to combine the TILA and RESPA disclosures.  If you didn't have a chance to look at the prototypes at that time, you can still review the disclosures and send NAFCU any comments that you might have.  This could be design-related or actual disclosure issues that the new forms don't address.  Kick the tires, as they say, and send us your comments (send them to Dillon Shea - dshea@nafcu.org).  

We will share them with the CFPB in the hopes that this will not be a repeat of the 2010 RESPA changes (too soon?)  

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Yesterday, Fannie Mae released a reminder about upcoming changes to their appraisal forms.  The notice also discusses various training options available.  If your credit union sells mortgages on the secondary market, be sure to take a look at these changes.  A broader discussion of the Uniform Collateral Data Portal (UCDP) is here.    

Mortgages; Happy Birthday Kate and Briggs!

Posted by Anthony Demangone

A few of us were chatting around the office the other day, and the subject of mortgages came up.  We quickly began shaking our heads.  On one hand, many people are chewing out financial institutions for not making enough loans.  And the government has spent the last few years doing what it can to prop up the U.S. housing market.  All the while, credit unions and other mortgage lenders are getting pounded from every conceivable direction.  Just think about the following.

Regulation Z.  MDIA disclosures were put in place.  Then there was the mortgage loan sale or transfer notice regulation..  In case that wasn't enough, along came a rule on mortgage loan originator compensation.  Those MDIA disclosures?  They were amended. Requirements regarding higher-priced mortgage loans were put in place.  And then new HPML loan requirements for jumbo mortgages were announced.  In that same announcement, the Fed issued a proposal that would amend the first set of HPML requirements. And don't tell me that they tweaked that MDIA disclosure again?  Oh, and the entire system of disclosures for closed end mortgages and HELOCs are in the process of being amended.  The CFPB will pick that process up sometime in the future. 

SAFE Act.  Need I say more? 

RESPA.  The GFE and HUD-1 were completely overhauled.  And the CFPB announced that they want to rework the disclosures as soon as they gain their official powers.

Appraisals.  First, a state Attorney General from New York manages to ink a deal with Fannie and Freddie that practically changed appraisal requirements for the entire country.  Then regulators, including NCUA, issued their interagency appraisal and evaluation guidelines, which completely overhauled just about every aspect of the appraisal process.  And the Fed has issued its appraisal regulation.  All of these requirements have mortgage lenders jumping through hoops - many of which appear to complicate the process without ensuring any benefit to the housing system. 

GSEs.  The future of GSEs are on the line. Congress and the Obama administration are trying to craft solutions to deal with these entities, all the while, leaving a great deal of uncertainty for credit unions that need access to some sort of secondary market for liquidity and interest rate risk management. 

Servicers.  Add to all of this a recent development.  State Attorney Generals crafted an agreement/settlement offer sheet for the largest mortgage lenders in America.  While this on the surface doesn't directly affect credit unions, many of the agreement's requirements may find their way into regulations and guidance documents or become industry servicing standards.  Some of those provisions are quite onerous, such as one that raises the issue of cram downs. 

Dodd-Frank. Provisions in Dodd-Frank will likely increase downpayment requirements for many mortgage loans. 

CFPB.  As noted above, Elizabeth Warren has indicated that one of the CFPB's first priorities will be to overhaul mortgage disclosures.  Combining TILA and RESPA disclosures is not necessarily a bad thing, but given everything we've gone through already, a break might be nice. 

Market Forces.  Oh, lest we forget.  Mortgage values are down, there is talk about a partial elimination of the mortgage interest deduction, and mortgage rates will likely increase in the not too distant future.

So, if you work with mortgages and someone wants to know how "work is going," feel free to send them this post. The pace and amount of change in this area has been practically unmanageable.  There is so much risk and uncertainty, I wonder if some lenders will simply decide to exit the mortgage market altogether.  All of this uncertainty and change also creates another problem - it tends to favor large organizations who can throw oodles of compliance and legal resources at the problem. Smaller shops may eventually leave the market or merge themselves out of existence.  Wasn't there a cry about ending "too big too fail?" 

Oh, and feel free to share this with your Congressman if he or she wants an example of regulatory burdens faced by credit unions. 

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Speaking of the rapid pace of change, Kate and Briggs turned two today. Looking back on these two years, well, the words just escape me. It is hard to describe the effect they've had on my life. 

 

 

Appraisals

Posted by Anthony Demangone

Last week, all of the federal financial regulators, including NCUA, issued final appraisal and evaluation guidelines.   These guidelines replace the 1994 guidelines, and they represent the most up-to-date regulator expectations in this area. (Keep in mind though, that the new guidelines do not replace the 2005 Interagency FAQs on Residential Tract Development Lending and the 2005 Frequently Asked Questions on the Appraisal Regulations and the Interagency Statement on Independent Appraisal and Evaluation Functions.)

These documents usually look scarier than they really are.  The total document is 70 pages in length, but the first 15 pages are made up of historical texts, reactions to comments, etc.  The new guidelines start on page 16.  They did a nice job of organizing the guidelines, including a handy-dandy table of contents.  

So, when you do appraisal related research, here appears to be the universe of available regulatory "stuff."

1. NCUA's appraisal regulation. 
2. The new guidelines, which will eventually be published in The Federal Register.
3. The 2005 Interagency FAQs on Residential Tract Development Lending.
4. 2005 Frequently Asked Questions on the Appraisal Regulations and the Interagency Statement on Independent Appraisal and Evaluation Functions
5. There's also the recent interim final rule that amends Regulation Z concerning appraisals. 

I think that's more than enough appraisal information for a Monday.

This and That...

Posted by Anthony Demangone

My inbox still runneth over. Here are some more items of note.

Da Fed.  The Fed just released two rule-makings.  I'll get into more details later in the week, but for now...

• They released this interim final rule (compliance deadline April 1, 2011), to address appraiser independence and compensation. The rule-making was required under Dodd-Frank.
• They released this proposal to close a few loopholes that popped up concerning Reg Z's rules on credit cards. 
• They also released a final rule that finalizes an interim final rule concerning the compliance date for gift cards. 

STS.  I guess that's the new acronym for NCUA's short-term, small amount loan regulation. NCUA recently released NCUA Regulatory Alert 10-RA-13, which is a FAQ document that addresses the recent changes. For example, the following question and answer addresses balloon payments in relation to STS loans. 

Must the loan be amortized, or can the borrower make a balloon payment at the end of the loan term?

The loan must be amortized in such a way that allows the borrower to repay the loan in the given term. FCUs must structure the payments so that the borrower is paying a portion of the principle and interest in equal or near-equal installments on a periodic basis over the course of the loan. While NCUA is not prescribing specific payment schedules (such as monthly or bi-weekly), FCUs should offer payment schedules that allow borrowers to easily repay the loan within the given term.

 FinCEN.  FinCEN was a busy beaver recently.

• FinCEN will reorganize its rules  next year in an effort to make the rules easier to understand.  Rules affecting a particular industry will be grouped together, for example.  Here's an index of the proposed reorganization.  Our rules will be under Part 1020.  Keep in mind that this will not change anything of substance.  But it will take some time to get used to, and all of our existing BSA citations will be dated once the changes go into affect.  Ugh.
• FinCEN published a study  that looked at SARs which reported identify theft.  There is a ton of information in there, and I would forward the study on to your fraud team.  Of note, credit card fraud continues to be the most common type reported on SARs.  And roughly 27 percent of fraud victims know the alleged suspect.  

FTC.  Speaking of identity theft, the FTC announced a bundling of consumer-oriented ID theft resources. You may be able to help consumers by pointing them toward these free resources.  (SHAMELESS PLUG ALERT!) In addition, NAFCU does sell a number of security and ID-related statement stuffers. 

HVCC Clarifications Issued; HOEPA Trigger Updated

Posted by Anthony Demangone

As those of you who deal with Fannie Mae and/or Freddie Mac know, Fannie and Freddie now require that lenders follow the Home Valuation Code of Conduct (HVCC) in order to deliver conventional, single-family loans originated on or after May 1, 2009 to them.  Many of you have told us about the difficulties you've had with the HVCC.   NAFCU continues to seek relief from HVCC-related burdens.   We also sent a letter to the Hill on this issue.  Download H R 3044 Comment Letter.

The Federal Housing Finance Agency (FHFA), which oversees Fannie and Freddie and is in charge of their conservatorship, issued a statement to try to clear up common misunderstandings related to the HVCC.   Fannie and Freddie themselves have also updated their respective "frequently asked questions" on the HVCC.Combined, these documents address, among other things, what loans are specifically covered by the HVCC and communication with appraisers and lender removal of appraisers. You can find these documents by clicking FHFA Notice or Fannie’s FAQ or Freddie’s FAQ.  (And know how I love my FAQs.)

For example, here's a Fannie FAQ that attempts to clarify a major area of confusion: providing borrowers a copy of their appraisal.

Question: Can you clarify the requirements around Section II of the Code requiring the borrower’s receipt of the appraisal?

Answer: The Code requires that a borrower be provided a copy of the appraisal no less than three days prior to the closing of the loan. The Code allows that the borrower may waive this three-day requirement. Situations where a borrower is unaware of his or her right to a copy of the appraisal prior to the three days and is then provided a waiver of that right at the closing table, would not be compliant with the intent of the Code. The time period of rescission in a refinancing situation does not constitute a valid three-day waiver period.     

    The Code does not specify what form the waiver must take or whether it be oral or written. In addition, the Code does not prohibit that a waiver, given in a timely manner, be recorded at some later point when the parties are available. Each lender must develop its own policies, procedures, and documentation. For example, a lender may obtain a waiver from a borrower through an email, phone call, or some other means, prior to the three-day period, and then have that waiver recorded in writing at the settlement table or at some other time.

    The three-day period begins on the day of the receipt of the appraisal. For example, in a non-waiver situation, where a borrower received an appraisal on Monday, the closing could be held on Wednesday. Saturday is included for purposes of counting the three-day period. Sundays and legal holidays are not included for counting the three-day period.

I would forward this to whomever at your credit union is tracking the HVCC issue. 

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In other compliance happending, the Fed has updaded the dollar amount of its fee-based HOEPA trigger down to $579, effective January 1, 2010.  Read all about it here.

Independent Valuation Protection Institute; SAFE Act

The Home Valuation Code of Conduct required the creation of the IVPI (I wasn't going to spell that out twice).  This entity was to serve as a body that would accept referrals and complaints about noncompliance with the HVCC.  Fannie Mae issued a Lender Letter recently to note that the IVPI is not in place yet.  It is still being finalized.  A temporary process will be put in place until the IVPI starts rolling. Read all about it here.

Editor's Note: IVPI does look like a Roman Numeral, but it isn't.  The P won't work.  For anyone who wants to quickly convert Roman Numerals into normal numbers (and vice versa), go here.

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Fannie Mae also issued Announcement 09-11, which discusses the Nationwide Mortgage Licensing System, as required by the S.A.F.E. Act.   Read all about it here.  Of note:

Q4. When will the federal banking agencies, Federal Financial Institutions Examination Council, and Farm Credit Administration have a system for registering employees of federally insured depository institutions and their subsidiaries?

A specific date has not been set, but Fannie Mae will communicate updates to lenders as more information becomes available. Lenders are expected to comply with their regulators’ requirements as systems and processes are established.

Home Valuation Code of Conduct; Whoops!

You may have heard about the Home Valuation Code of Conduct (HVCC).  For credit unions that do mortgage lending, this is a big deal.  Well, here's some help.

• Fannie Mae has put together a very nice HVCC resource page.  Access it here.  It has an FAQ, the HVCC itself, and some Fannie-related guidance.  (OK, that last phrase sounds funny.)  Seriously, though - this is a very good source of HVCC information.
• NAFCU is also offering an HVCC/Appraisal webcast later this month.  Read all about it here.   We put together a nice line-up.  We have someone from NCUA's Examination and Insurance side, a person from NCUA's Office of General Counsel, an expert from Fannie Mae, and an expert from the appraisal industry.  I can't imagine a better panel to address the changes.

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Yesterday's post on preemption had a dead hyperlink.  Use this link to access NCUA's recent legal opinion letter, which indicates that NCUA's regulations preempt a New York State law that attempts to limit insurance-related activities at federal credit unions.  I apologize for any inconvenience.

FinCEN Annual Report; Valuation Code

I'm not sure if this is good or bad, but there just seems to be a bunch of different things to write about.  I hope you don't mind this mish-mash of information which has become the trend as of late...

• Yesterday, FinCEN issued its annual report for 2008.  Access it here.  If you need to do board or staff training, this document does a good job of giving you the history of FinCEN, basic information and definitions for the filings, and a broad overview of what happened this year at that Agency.
• Last week, Fannie Mae and Freddie Mac reached a new valuation agreement with New York Attorney General Andrew Cuomo.  Here's a NAFCU Today article that details the changes.  Effective date?  The new rules will be effective for single-family mortgage loans (except government-insured loans) that are originated on or after May 1, 2009.  Here's a link to the new code provided on Fannie Mae's website.  Look for more guidance in the next week or so.

Appraisals; Web 2.0 and your Reputation

FFIEC regulators, including NCUA, have issued proposed guidelines to address appraisals.  Read a NAFCU Today article about the proposal here.  (The article also contains a link to the actual proposal.)  If your credit union does real estate lending, make sure someone is aware of the proposal. 

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Earlier, I posted about "Web 2.0" and your reputation.  In short, many consumers have blogs, use Twitter and post videos about...well, whatever they want.  The earlier post showed how Bank of America was taking a beating over some overdraft protection fees.

Well, be sure to read this post by Tim McAlpine of Currency Marketing.  He does a great job of showing how Motrin managed to anger many, many mothers.  And how their anger is surging through the Internet. 

My thoughts are this: to properly manage your credit union's reputation, you have to understand today's environment.  If you do something to anger a member, that member has many ways of venting their frustration on the World Wide Web.  Does your credit union have a mechanism to monitor what is being said about you in blogs, on Twitter or in Pod-casts?