NAFCU Compliance Blog

Keeping a Record of NCUA's Regs; NAFCU's Comment Letter on TILA/RESPA

Written by Steve Van Beek

On Tuesday we blogged about the FTC's rescission of their regulations that transferred to the CFPB.  We also indicated that NCUA was likely to follow soon after and rescind their rules.  We also included this information about making a copy of the current rules:

"Prior to this occurring, it might be a good business practice to make a copy of the soon-to-be rescinded regulations to ensure your credit union has a copy of the regulations in effect in the past in the case of a member complaint, exam issue or lawsuit."

A very helpful comment highlighted that the Government Printing Office (GPO) retains a copy of each year's CFR in PDF or XML format.  Below are the 2011 PDFs of the rules that transferred from the NCUA to the CFPB.   

Main Rules.  These three rules were transferred either completely (Privacy and SAFE Act) or almost completely (Fair Credit Reporting Act).

• Part 716 - Privacy of Consumer Financial Information
• Part 717 - Fair Credit Reporting
• Part 761 - Registration of Residential Mortgage Loan Originators 

There are a few other regulations listed in the CFPB's Federal Register notice on the transferred regulations but they are not major changes and only impact certain situations.  Part 707 - NCUA's Truth in Savings regulation - is also included on the list but rulemaking authority for Part 707 remains with NCUA.

Note:  Prior years of regulations can be found by using this GPO starting page.  Hat tip to Kennyb.      

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TILA/RESPA Disclosure Combination.  On Monday, NAFCU submitted a comment letter to the CFPB on their plans to combine the TILA and RESPA disclosures.  The comment letter is 7 pages long and highlights areas of concerns as the CFPB continues along their Dodd-Frank mandate.  

Remember:  The CFPB has to have an official proposal out for the TILA/RESPA combined disclosures by July 21, 2012.  Their Know Before You Own project was not an official proposed rule and was not part of the Administrative Procedures Act.   

Playing Catch-Up: SAFE Act Procedures; Compliance Monitor; Final Regulations

Written by Steve Van Beek

Initially, I want to say Thank You to all the attendees at last week's Regulatory Compliance School.  It was a great week, made even better by the great questions and interaction among attendees.  Thank You - and hope to see you at Regulatory Compliance Seminar in the future (no tests - I promise!)  

And - good luck to everyone who took the NCCO Exams!  

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Strange as it sounds, it feels good to be back in the office after a long week at School.  I'm sure there are more than a few items to get up to speed on, but first a few older items that might be useful.

CFPB's SAFE Act Examination Procedures.  On March 7, the CFPB announced their SAFE Act examination procedures.  While the CFPB's primary examination authority extends only to credit unions above $10 billion in assets, all credit unions offering mortgage loans need to follow Regulation G - 12 CFR 1007.  I'd pass these examinations procedures along to the appropriate folks at your credit union as NCUA might take a similar approach in its future examinations.  If nothing else, the examination procedures could serve as a useful internal audit tool.      

NAFCU's March Compliance Monitor.  The March 2012 NAFCU Compliance Monitor is available.  The Worth Noting section highlights issues over the past month or so that might impact your credit union and there are articles on the CFPB and small blurbs on Health Care Reform and Periodic Statements for Mortgages.  

The Compliance Monitor is a NAFCU member-only publication.  If your credit union is interested in learning more about NAFCU membership, take a peek at our trial membership program.

NAFCU Final Regulation - Reg E:  International Remittances.  NAFCU-members, our Final Regulation on the Remittances rule is available (12-EF-02).  Compliance is required by February 7, 2013. 

NAFCU Final Regulation - NCUA:  Interest Rate Risk Policy.  Our Final Regulation on NCUA's Interest Rate Risk Policy and Management is also available (12-EF-01).  Remember, compliance is required by September 30, 2012.

Finding the CFPB's Regulations

Written by Steve Van Beek

Dodd-Frank transferred authority for the "enumerated consumer laws" to the CFPB on July 21, 2011.  In late December, the CFPB officially republished the regulations that implemented these "enumerated consumer laws" in its own section of the Electronic Code of Federal Regulations.

For credit unions, this means we need to use the CFPB's regulations for our research and our citations.  For example, the correct citation for Regulation Z is now 12 C.F.R. 1026 and not 12 C.F.R. 226.  

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Why does this matter?  When the CFPB issues changes to these regulations - such as the remittances final rule - these regulations will only update the CFPB's Regulation E.  The prior version of Regulation E - under the Federal Reserve - will not be updated.  In order to research the latest and most accurate information, look to and cite the CFPB's regulations.  Note:  The remittances final rule can be found in Subpart B to Regulation E.    

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CFPB Regulations.  Below are links to the CFPB's regulations with the updated citations.  This should be the starting point for your research.  

• 12 C.F.R. 1002 - Regulation B:  Equal Credit Opportunity Act
• 12 C.F.R. 1003 - Regulation C:  Home Mortgage Disclosure Act
• 12 C.F.R. 1005 - Regulation E:  Electronic Funds Transfers
• 12 C.F.R. 1006 - Regulation F:  Fair Debt Collection Practices Act
• 12 C.F.R. 1007 - Regulation G:  SAFE Act Mortgage Licensing - Federal System
• 12 C.F.R. 1016 - Regulation P:  Privacy of Consumer Financial Information
• 12 C.F.R. 1022 - Regulation V:  Fair Credit Reporting Act
• 12 C.F.R. 1024 - Regulation X (RESPA):  Real Estate Settlement Procedures Act
• 12 C.F.R. 1026 - Regulation Z - Truth in Lending Act

Above is not a complete list, but they are the ones with the biggest impact on credit unions.  The full listing of the CFPB's regulations is in Section 1000-1099 of Title 12 of the Electronic Code of Federal Regulations.

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A couple of other items to keep in mind:

• Truth in Savings.  Credit Unions need to follow Part 707 for Truth in Savings rather than Regulation DD.  This blog post has more information.
• Federal Reserve.  The Federal Reserve lost authority for quite a few regulations.  However, they retain control over regulations that were not deemed to be "consumer" regulations.  This blog post has additional information on which regulations stayed with the Federal Reserve.  

NCUA Webinar with Richard Cordray; Consumer Compliance Outlook; NAFCU Compliance Monitor

Written by Steve Van Beek

NCUA Town Hall Webinar.  Yesterday, NCUA announced it would host a February 8th town hall webinar that will include Richard Cordray, Director of the CFPB.  The webinar is free, but you do need to sign-up.    

Consumer Compliance Outlook.  The 4th Quarter issue of Consumer Compliance Outlook has been released by the Philadelphia Federal Reserve.  This issue includes the two articles below that might be useful:

• Flood Insurance Compliance Requirements
• Servicemembers Civil Relief Act - Compliance Update 

January Compliance Monitor.  The January 2012 Compliance Monitor is now available for NAFCU members.  This month's issue features Tips for Conducting a SAFE Act Audit and an Overview of the CFPB's Streamlining Initiative.

NAFCU Members: If you'd like to receive an email each month when the Compliance Monitor is available, simply email us at compliance@nafcu.org and we'll get you added to the email subscription list.   

SAFE Act Renewal Period…Going…Going…

Written by JiJi Bahhur, Regulatory Compliance Counsel

Just a friendly reminder that the SAFE Act renewal period is set to expire on December 31, 2011.  Under the SAFE Act, all credit unions and its MLOs must renew their registration between the annual renewal period each year (there is an exception for MLOs registering for the first time less than six months prior to the end of the annual renewal period).  Part 761.102(a) of NCUA’s Rules and Regulations define the annual renewal period as November 1 through December 31 of each year.  If a credit union and its MLOs do not renew their registration, they would be prohibited from originating residential loans.  Here is from 12 CFR 761.103(a)(2): 

Ҥ 761.103 Registration of mortgage loan originators.

.......

(2) Credit union requirement —(i) In general. A credit union that employs one or more individuals who act as a residential mortgage loan originator must require each employee who is a mortgage loan originator to register with the Registry, maintain this registration, and obtain a unique identifier in accordance with the requirements of this part.

(ii) Prohibition. A credit union must not permit an employee of the credit union who is subject to the registration requirements of this part to act as a mortgage loan originator for the credit union unless such employee is registered with the Registry pursuant to this part.”

There is some leniency in the SAFE Act.  First, although all institution accounts must be renewed during each annual renewal period, the same does not always apply to the institution’s MLO(s).  If the MLO completed his/her initial registration less than 6 months prior to the end of the annual renewal period for that year, Part 761.103(b)(3) of the rule allows for an exception to annual renewal for that particular year.  Thus, any MLOs who registered on or after July 1st of 2011 would not be required to renew in 2011.    

Second, if for some reason the institution’s MLO(s) misses the December 31 deadline for annual renewal, it doesn’t mean the MLO is forever banned from originating loans.  What it does mean is that the MLO’s status goes inactive.  During the period of inactivity, the MLO cannot originate loans, but as soon as the MLO renews his/her registration, he/she will go back to active status and may begin originating again.

Below is a Q&A from the November 2011 NAFCU Compliance Monitor explaining the exception for MLOs who registered after July 1, 2011:

Question: We registered all our mortgage loan originator (MLO) personnel at the beginning of the year. I understand that we need to renew the credit union account before December 31, 2011, but I don’t need to renew our MLO registrations until next year, correct?  

Answer: No. If your employees were registered before July 1st then you will need to renew the registrations before December 31st and again annually thereafter as long they are active mortgage loan originators. “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.” See, 12 C.F.R. §761.103(b). Thus, any registrations that were made active after July 1st are not required to be renewed in that same calendar year but must be renewed in subsequent years. Any registrations prior to July 1st would need to be renewed between November 1 and December 31.     

For additional information on the SAFE Act renewal process, check out our October 18th blog post.

Upcoming Compliance Dates; Veterans Day

Written by Sarah Zimmermann

I believe we've touched on these upcoming compliance issues separately but we thought it might be helpful to put them together in a cohesive post. Below are three compliance issues that are coming up soon.

SAFE Act Renewal.  MLOs that were registered before July 1 are required to renew their registrations before December 31 and they will not need to pay a renewal fee this year. Individual employees who registered after July 1 are not required to renew their registrations by the December 31 deadline but must do so in coming years. All institution accounts need to renew on an annual basis regardless of when the initial registration occurred and will pay a $100 fee. For more information the Nationwide Mortgage Licensing System & Registry has a Federal Registry Renewal and Reactivation Handbook.

 

NCUA's Advertising Rule.   NCUA's final advertising rule has a mandatory compliance date of January 1, 2012. This rule requires credit unions to include the agency’s official advertising statement on annual reports and financial statements of condition required to be published by law and shortens the radio and television advertisement exemption requiring the statement with advertisements that are 15 seconds or longer. This final rule also defines the term “advertisement” and details the size requirement for NCUA’s official advertisement statement in print materials. NAFCU members, you can read more about this in NAFCU's Final Regulation 11-EF-15, which can be accessed from this page.

Member online authentication. In June, NCUA issued Letter to CUs 11-CU-09 which included supplemental guidance to the 2005 FFIEC guidance on online member authentication. NCUA notes in the letter that examiners will evaluate authentication controls under the enhanced expectations outlined in the supplemental guidance, which includes further guidance on layered security.

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In honor of Veterans Day, NAFCU offices will be closed tomorrow, November 11. As always, we'd like to extend our gratitude and appreciation to those who have served, do serve, and will serve. Your service allows us to the live the lives we do. On that note, Anthony penned a great blog last year reminding us of the laws that protect servicemembers financially. Rather than recreate, I figured we could link to it.

Have a great weekend everyone. We'll be back on Monday.

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."

SAFE Act - Consumer Access; CFPB Advisor Named

Written by Steve Van Beek

The SAFE Act included a requirement for consumers and members to be able to view mortgage loan originator information in a publicly available database.  That "Consumer Access" database is now up and running and can be found here.  This is a good way to see what your members might see.  

There is additional information on the Consumer Access from the Federal Registry here.   

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Bart Shapiro has been announced as Senior Advisor for the CFPB Office of Community Banks and Credit Unions.  This office is headed by Elizabeth Vale.  Shapiro comes to the CFPB from the Department of Housing and Urban Development (HUD).  More information on Shapiro is available in the NAFCU Today.

CFPB Nomination Hearing; SAFE Act

Written by Steve Van Beek

Congress will be heading out of town for August and the Senate Banking Committee has postponed Richard Cordray's Nomination hearing until September 6, 2011.  Both chambers will continue to meet in pro forma sessions which will prevent President Obama from making any recess appointments - including for Cordray as Director of the Consumer Financial Protection Bureau.

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We have been getting quite a few SAFE Act NMLS # questions - specifically where and when the number must be disclosed.  The best starting resource is 12 C.F.R. 761.105(b) which is part of NCUA's regulations implementing the SAFE Act.  That section states:

 

"(b) A registered mortgage loan originator shall provide his or her unique identifier to a member:

(1) Upon request;

(2) Before acting as a mortgage loan originator; and

(3) Through the originator's initial written communication with a member, if any, whether on paper or electronically."

The two most common questions we received are: does the NMLS # need to be on emails and does the NMLS # need to be on business cards?

The Agencies discussed business cards when they issued the final rule.  Here is from the preamble:

"Furthermore, the Agencies intend § __.105(b)(3) of the rule to cover written communication from the originator specifically for his or her customers, such as a commitment letter, good faith estimate or disclosure statement, and not written materials or promotional items distributed by the Agency-regulated institution for general use by its customers. While, this provision does not require institutions to include the unique identifier on loan program descriptions, advertisements, business cards, stationery, notepads, and other similar materials, institutions are not prohibited from doing so. We also clarify that the requirement to provide the unique identifier to the consumer through the originator’s initial written communication, if any, applies whether that communication is provided in writing on paper or through electronic means. We have clarified this requirement in the final rule. The Agencies also clarify that the unique identifier may be provided orally, except pursuant to paragraph (b)(3) under which the unique identifier would be provided with the written or electronic communication."  (emphasis added).

That discussion is dealing with Section 761.105(b)(3) and the initial written communication.  

However, what about Section 761.105(b)(2)?  That section requires disclosure before acting as an mortgage loan originator (MLO).  Credit unions have options in meeting this requirement - but they do need to make sure the MLO discloses their NMLS # before acting as an MLO.  

Including the NMLS # on email signatures and business cards is one way of disclosing the unique identifier to members before acting as an MLO.  The credit union could adopt other procedures to meet the disclosure requirement as it is not a regulatory requirement to include the number on business cards or email signatures.

On a practical note, I'm not sure there is a concern about overdisclosure in this situation.  The credit union could include the NMLS # on business cards, email signatures and disclose the number via other means without worry about disclosing the number in too many places.

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The CFPB now has authority over the SAFE Act.  Perhaps the CFPB will provide straightforward guidance in the future?   

SAFE Act; NCUA on Interchange; Shameless Plug - GPS

Posted by Anthony Demangone

The SAFE Act questions appear to be gaining momentum here at NAFCU.  That means that many of you are in the middle of the MLO registration process.  We've heard one particular issue from many of you, and it concerns background checks.  In short, many credit unions are starting to receive "criminal record" information about employees as a result of the MLO registration process.  In many cases, the information is less than clear.  Just what do regulators expect financial institutions to do with this information? 

The following comes from the "preamble" of the SAFE Act final regulation. 

“The employing institution will be responsible for reviewing the criminal history background report once it is completed, and taking any necessary action based on the findings of this report, pursuant to the institution’s policies and procedures, as required by this final rule. We note that the registrant will obtain a unique identifier during the registration process and not when the registration is complete.”

You'll need to review your own policies and procedures to see what they say.  Perhaps they are silent.  If so, now might be a good time to think about how you want to handle any information you receive as a result of a criminal history background report.  What will the process entail?  Who will handle such issues?  What will you do if the report is less than clear?  

The good news is that regulators have given you the flexibility to handle this issue as you see fit.  The bad news is that such flexibility comes with a price - you will need to sit down and make a business decision on how to proceed.

NCUA on Interchange.   NCUA Chairman Debbie Matz sent this letter to the Fed regarding NCUA's views on their debit interchange regulation. The letter seems to say that the Fed's proposal will adversely affect those CUs under $500 million in assets.  In the letter, NCUA notes that it didn't look at all foundational costs.  The implication is that if your shop is over $500 million in assets, you can sit back, relax, and enjoy your berries and cream while watching Wimbledon on the tele.  In any event, we think their analysis fell short, and we responded as such with this letter. 

GPS.  The NAFCU Compliance Credit Union Compliance GPS is now available for purchase.   This is the manual we created for our own NAFCU Compliance School  Check out its table of contents, which should give you a good idea of whether the manual is a good fit.  A few things I'd like to point out:

• This is designed to be an electronic manual.  There are links, links, and more links.  If you want to print this puppy out, that's on you. 
• It is available for purchase by NAFCU members and nonmembers alike.  Just one manual is needed per shop - you can share amongst yourselves as you see fit after the purchase.
• We'll update this again for next year's Regulatory Compliance School.  Attendees of the 2011 school already have this manual, so if your credit union sent someone to that school - there's no need to purchase it again this year. 

Have a great weekend!