Dodd-Frank Mandates Statements for Mortgages - Part 1

Written by Steve Van Beek

Quite a threatening headline, right?  I'm sure quite a few of you have heard the rumblings in the last few days.  

CFPB Prototype.  On Tuesday, the CFPB released a prototype mortgage statement.  Similar to the CFPB's Know Before You Owe campaign, there is no proposed rule yet.  This means credit unions need to look to the language of Dodd-Frank itself to get a feel for what is coming.

The CFPB also wrote a blog post, press release and op-ed which discuss the prototype statement.

Dodd-Frank.  Section 1420 of Dodd-Frank includes the Mortage Statement requirement.  More specifically, Section 1420 creates Subsection (f) to Section 128 of the Truth in Lending Act.  The full section is not long and will take implementing by the CFPB before we'll know the full details of the requirements.  

For now, take a look at the language of Section 1420 along with the prototype statement as they are the best resources until we have a proposed rule (which will be part of Regulation Z).

Agency Rule List.  This rulemaking is listed in the CFPB's Agency Rule List.  It is included as being in the "proposed rule stage" under Mortgage Servicing.  The indication is that we'll see a proposed rule sometime this summer.  Which is the same timeframe given in the CFPB's blog post.  

Timing. The specific information on Mortgage Servicing also indicates the CFPB is required to have a final rule in place by January 21, 2013.  Director Cordray has mentioned a couple of times that the CFPB intends to meet all the CFPB's statutory deadlines from Dodd-Frank.  

Of course, this doesn't mean the mortgage statement requirement will become effective in early 2013.  There will still be an implementation period after the proposed and final rules - however, it does indicate the CFPB's hands are tied with regard to timing.  

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Coupon Books.  There is a specific exception for creditors - including credit unions - who provide coupon books to borrowers.  The exception is located in subsection (f)(3):

‘‘(3) EXCEPTION.—Paragraph (1) shall not apply to any fixed rate residential mortgage loan where the creditor, assignee, or servicer provides the obligor with a coupon book that provides the obligor with substantially the same information as required in paragraph (1).’’

Keep in mind that this is a limited exception.  

• It would only apply to fixed-rate mortgages.
• It would only apply to coupon books that contained substantially the same information as required to be on the monthly statement.  

As is usually the case, the devil will be in the details of the "coupon book" exception when the CFPB proposes a regulation to implement the statement requirement.  We won't know how the CFPB interprets "substantially the same information" until they issue a proposed rule.  

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Tomorrow we'll take a look at which types of mortgage loans would be covered by this requirement.  Stay tuned.

Comments

[Joyce]

Oh, the amount of money that we're going to have to spend removing our mortgage information from our current combined periodic statements and having to create this new statement. I hope that we'll be allowed to include this new statement in the same envelope as other periodic statements or the cost of mailing will be yet another additional cost. And I'm curious...does anyone even use coupon books these days? That seems to be an outdated exception.

[Steve Van Beek]

Joyce,

We'll need to bring these points - combined statements and mailing costs - to the CFPB's attention as they work through the rulemaking process.

As for coupon books, I've heard from some folks who do offer them. They would probably need to be reviewed to ensure they have additional information in the future to meet the to-be-determined specifics of the "coupon book" exception.

I wouldn't be surprised if some credit unions moved away from coupon books to monthly periodic statements as they work to comply with this requirement.