NAFCU Compliance Blog

August 2013 NCUA Report Released; Illinois Follows Suit with ATM Fee Disclosure Requirements; NAFCU’s 2013 Compliance GPS Updated; NAFCU Office Closures

Written by JiJi Bahhur, Regulatory Compliance Counsel

August 2013 NCUA Report.  Earlier this week, the NCUA released its August 2013 NCUA Report.  There are several featured articles, but I’d like to bring attention to the Region II Report: Understanding Member Business Loan Waivers (Report). 

Member business loan (MBL) waivers were addressed in NCUA Letter to Credit Unions 13-CU-02.  The purpose was to clarify the waiver process under Part 723 of the NCUA Rules and Regulations.  However, even with the guidance, the subject remains confusing and has resulted in a number of frequently asked questions (FAQs).  In this Report, NCUA provides the FAQs that it receives on MBL waivers.  The combination of 13-CU-02 and these FAQs can assist credit unions with proper management of their MBL programs.

To review the FAQs, click here.  To review the August 2013 NCUA Report in full, click here.

***

ATM Fee Disclosures.  You may recall that the federal requirement for an “on the machine” fee notice for ATMs was removed in late 2012 when President Obama signed the ATM Fee Disclosure Bill (the CFPB officially amended Reg E in March). However, there are still state laws that could require this "on the machine" notice. New York was one of those states until August 1, when Governor Andrew Cuomo signed legislation to remove the requirement from New York law.  And, Illinois Governor Pat Quinn signed legislation to remove the “on the machine” requirement – effective on August 16 – from Illinois law.

***

NAFCU’s 2013 Credit Union Compliance GPS has been updated to include recent regulatory changes.  What is this GPS, you ask?  It is a compliance officer’s dream!  NAFCU’s GPS is a must-have, electronic resource for all credit union compliance officers and staff. It explains complex regulatory language in plain English and covers everything from the basic anatomy of a federal credit union to specifics of the NCUA, CFPB, and important credit union regulations including Regulation E, BSA and much more.  For more information and a sneak-peek into the GPS, click here.

***

Programming Note.  NAFCU’s offices will close today at noon and remain closed Monday for the long holiday weekend.  We’ll be back to blogging next Wednesday!  Have a great weekend!

CFPB Supervisory Highlights – Mortgage Servicing

Written by Bernadette Clair, Regulatory Compliance Counsel

Earlier this week, we blogged about the CFPB’s Summer 2013 Supervisory Highlights Report, and the sections of the report dealing with compliance management systems and fair lending issues related to providing adverse action notices.  Another hot button topic covered in the report is mortgage servicing, particularly issues related to servicing transfers, payment processing, and loss mitigation.  Here are some of the highlights:

Servicing Transfers. Back in February 2013, the CFPB announced its intention to closely monitor transfer activity by mortgage servicers and issued Bulletin 2013-1 providing information on particular areas of focus. The latest Supervisory Highlights Report reflects the CFPB’s focus in this area and provides examples of some of the servicing transfer issues that the CFPB has found during reviews. From the report:

“During its reviews of mortgage servicing, the CFPB detected risks to consumers in transfers of the servicing of  loans among institutions. For example, examiners found noncompliance with the requirements of the Real Estate Settlement Procedures Act (RESPA)⁵ to provide disclosures to consumers about transfers of the servicing of their loans. In other reviews, examiners noted lack of controls relating to the review and handling of key documents –  such as loan modification applications, trial modification agreements, and other loss mitigation agreements – necessary to ensure the proper transfer of servicing responsibilities for a loan. For example, examiners noted that one servicer conducted some due diligence on transferred servicing data but did not review any individual documents that the prior servicer had transferred, such as trial loan modification agreements.” (Footnote omitted.)

Payment Processing. The CFPB also found issues related to payment processing during its reviews. A couple of the examples in the report include a servicer that failed to provide adequate notice to borrowers of a change in the address for sending payments, and a servicer that paid property taxes late. Here’s a taste of how the CFPB handled the servicer that paid property taxes late:

“In another review, the CFPB determined that a servicer paid certain property taxes late, in violation of RESPA. The CFPB directed the servicer to pay any fees associated with the late payment, and to investigate whether consumers experienced any additional harm as a result of the late payments. Further, at the CFPB’s direction, the servicer will notify consumers of the late payment and fee payment, and solicit information from borrowers about any additional harm caused by the late payment. If any such harm is identified, the servicer will remediate it.”

Loss Mitigation. In the area of loss mitigation, CFPB examiners found several issues, including:

• Inconsistent loss mitigation underwriting;

• Inconsistent waivers of certain fees or interest charges;

• Long application review periods;

• Missing denial notices;

• Incomplete and disorganized servicing files;

• Incomplete written policies and procedures; and

• Lack of quality assurance on underwriting decisions.

The CFPB also provides its expectations when these types of issues are identified by examiners. From the report:

“When examiners identify these issues, CFPB expects corrective action, and in the case of violations, directs the servicer to improve its policies and procedures governing the handling of loans in loss mitigation and the documentation of servicer actions, as well as training appropriate personnel on the new policies and procedures. Additionally, CFPB has directed servicers to engage in specific corrective actions appropriate to the circumstances, such as: reviewing loss mitigation decisions and related fees or charges to borrowers to determine whether any reimbursement is appropriate, conducting periodic testing to monitor areas of concern, and providing reports to CFPB on progress completing these corrective actions.

In addition to general compliance risks, weak compliance management surrounding loss mitigation processes creates fair lending risk. CFPB expects that entities servicing mortgage loans will implement fair lending policies, procedures, and controls to ensure that they are complying with the Equal Credit Opportunity Act. ⁸ While the appropriate program will vary from financial institution to financial institution, CFPB expects that at a minimum, entities servicing mortgage loans will conduct fair lending training for loss mitigation staff, and will engage in effective and timely fair lending risk assessments, compliance monitoring, and testing of fair lending risks.” (Footnote omitted.)

Once again, fair lending issues are emphasized, and as Mike noted in Monday’s blog post, this will continue to be a hot topic for the CFPB and NCUA.

For more details on the CFPB’s supervisory findings and program developments, check out the complete Supervisory Highlights Report.

CFPB Supervisory Highlights; Metsger sworn in to NCUA Board

Written by Michael Coleman, Regulatory Compliance Counsel

Last week we blogged about the CFPB’s release of their second Supervisory Highlights Report, which concerns exams completed between November 2012 and June 2013. As the CFPB’s press release noted, the Supervisory Highlights focuses on issues with mortgage servicing and non-bank compliance management systems, here is an excerpt from the press release quoting CFPB Director Richard Cordray:

“Our examinations of banks and nonbanks allow us to correct problems before more consumers are affected,” said CFPB Director Richard Cordray. “Today’s report highlights both the mortgage servicing problems throughout the industry and the challenges of making sure that nonbanks are following federal law. Fixing both is a priority for us.”

Today we’d like to take a closer look at some of the content of the report, specifically the section of the report which deals with the CFPB’s supervisory observations regarding:

• Compliance Management Systems;
• Mortgage Servicing;
• Fair Lending – Provision of Adverse Action Notices; and
• Significant Violations Detected.

We’ll take a closer look at the mortgage servicing section in a future blog post, but I wanted to pull out a couple of things the Supervisory Highlights report has to say about compliance management systems and fair lending issues involving the provision of adverse action notices (AANs). The report section on compliance management systems summarizes the CFPB’s findings, noting that non-banks are more likely to lack a robust compliance management system (CMS) as their compliance activities have not been subject to examination at the federal level (until now). However, the CFPB also noted that supervised banks also lacked one or more of what the CFPB considers the components of an effective CMS. The report notes on page 8 that although the CFPB does not require any specific CMS structure, they believe that effective CMS has four independent control components, which are:

1. Board of directors and management oversight;

2. A compliance program;

3. A consumer complaint management program; and

4. An independent compliance audit.

The CMS section goes on to describe these control components and what the CFPB expects they should be comprised of, it is an interesting read (and it contains some familiar information I am sure for all you compliance professionals).

The CFPB also had this to say with regard to adverse action notices in the section devoted to fair lending:

“The CFPB has noted that some lenders are not complying with various aspects of the adverse action notification requirements under ECOA and Regulation B. ECOA requires creditors to provide notification of any adverse action taken on an application, unless the applicant is currently delinquent or in default. Furthermore, ECOA requires that the creditor provide or make available a specific statement of reasons for such action. Finally, a creditor must send an adverse action notice to an applicant within 30 days of receipt of a completed application. The CFPB has found instances where supervised entities violated ECOA and Regulation B by failing to comply with either the provision, content, or timing requirements for adverse action notices.

In such instances, the CFPB has directed the entities to develop and implement plans to ensure that the appropriate monitoring and internal controls are in place to detect and prevent future violations. Supervised entities should maintain compliance management systems that ensure notifications are sent to consumers with the appropriate content and within the timeframes required under Regulation B.”

Fair lending is definitely a hot topic for the CFPB, and for the NCUA (see this blog for some NCUA fair lending resources), and I think it’s safe to say that we should expect this focus to continue.

***

New NCUA Board Member. On Friday, August 23, Rick Metsger was officially sworn in as a new National Credit Union Administration Board member. Metsger, a Democrat, was nominated to the NCUA Board May 16. His nomination was approved by the Senate Banking Committee June 27, and the full Senate confirmed him Aug. 1. He succeeds former NCUA Board Member Gigi Hyland, who left the board last Oct. 5. His term continues through Aug. 2, 2017.

Update on Interchange Fees; CFPB Releases Supervisory Highlights; Seminar Savings End Today

Written by Steve Van Beek

Happy Friday! First off, there was another hearing on Wednesday discussing the interchange fees and the next steps for the Federal Reserve. At the hearing, the Federal Reserve indicated:

• It was appealing the District Court decision;
• It was requesting a stay of the decision (and if that was denied, they would appeal that decision); and
• It was seeking an expedited appeal to return certainty to the market.

Interestingly, the merchants supported the Fed's request for a stay - as a world without the Fed's regulation would mean no cap on interchange fees.

For additional information, be sure to review NAFCU's video update featuring Carrie Hunt, NAFCU's senior vice president of government affairs and general counsel:

***

CFPB's Supervisory Highlights. On Wednesday, the CFPB issued their second Supervisory Highlights Report (which looks at exams completed between November 2012 and June 2013). 

The first two sentences of the CFPB's press release sum up the report:

"Today, the Consumer Financial Protection Bureau (CFPB) issued a report detailing mortgage servicing problems at banks and nonbanks. The report also found that many nonbanks lack robust systems for ensuring they are following federal laws."

We'll be taking a deeper look at this report in future blog posts but, for now, be sure to read through the press release.

***

NAFCU's Regulatory Compliance Seminar. Today is the last day of savings for NAFCU's Regulatory Compliance Seminar - October 22-25 in Nashville, Tennessee. Need to convince someone at your credit union that you need to attend? I'm biased, of course, but pass along the Curriculum and the Faculty information and that should help!!

Hope to see you in Nashville! And, the seats are filling up fast - if you are planning on attending - register soon!

CFPB Releases Second Update to its Exam Procedures Pertaining to the Mortgage Rules; Oh, How Time Just Flies

Written by JiJi Bahhur, Regulatory Compliance Counsel

Last week, the CFPB released its second update to its exam procedures in connection with the new mortgage regulations that were issued in January 2013.  Specifically, the second update covers the Ability-to-Repay/Qualified Mortgages, high-cost mortgages, appraisals for higher-priced mortgage loans, the new amendments related to the escrows rule, the recent changes to the credit card rules, the mortgage origination rules issued through May 29, 2013, and mortgage servicing rules issued through July 10, 2013. 

The updated exam procedures will, according to the CFPB’s press release, help financial institutions understand and prepare for how they will be examined in a number of different areas.  For a list of some of examination areas from the second update and how to prepare for them, click here to view the second press release.

Also, if you’re interested in what examination areas were covered in the first update, click here to view the first press release.

***

If you’re looking for further assistance with the mortgage rules, take a look at NAFCU’s mortgage rules resources page.  Also, take a look at these NAFCU Monitor articles (NAFCU log-in required) we’ve written on the mortgage rules:

• Understanding the Qualified Mortgage Quagmire
• Small Creditor Portfolio Exemption for QMs Explained
• Understanding the Small Servicer Exemptions
• Mortgage Loan Originator Requirements for Qualification and Screening, Training and Disclosures
• New Appraisal Disclosure Requirements: Regulation B and Higher-Priced Mortgage Loans
• Escrow Requirements for Higher-Priced Mortgage Loans
• New Homeownership Counseling Disclosure Requirement

 

***

It’s a good thing that the CFPB is making these updates and providing them to the industry, especially since it’ll be January, 2014 before we know it.  Speaking of time flying . . . one year ago (from yesterday), my sweet babies – Kyse and Ava – were born.  I cannot believe how quickly the time has come and went.  I’m not going to bog you down with pictures at this very moment, but I assure you there will be pictures to share after this weekend . . . since I plan on having a big birthday bash for them!

Updated Small Entity Compliance Guide on ATR/QM; Consumer Compliance Outlook Webinar

Written by Bernadette Clair, Regulatory Compliance Counsel

Small Entity Compliance Guide on ATR/QM. Last week, the CFPB issued an updated Small Entity Compliance Guide for the Ability-to-Repay and Qualified Mortgage (ATR/QM) Rule. This update incorporates changes  that were included in the June 2013 ATR/QM Concurrent Final Rule and July 2013 Final Rule, both of which amended the final rule issued January 10, 2013.

Today I want to focus on the section of the guide dealing with balloon-payment qualified mortgages (balloon-payment QMs). In the June 2013 ATR/QM Concurrent Final Rule, the CFPB adopted a two-year transition period during which all small creditors can make balloon-payment QMs, even if they do not operate predominantly in rural or underserved areas.

Keep in mind that to qualify for the exemption as a small creditor, a credit union must have less than $2 billion in assets and have originated 500 or fewer closed-end, first lien mortgages in the preceding year.  The guide provides this overview of the transition period:

“The Bureau is providing a two-year transition period during which all small creditors can make Balloon-Payment QMs, regardless of where the small creditor operates. After that two-year period expires, only small creditors that operate predominantly in rural or underserved areas will be able to make Balloon-Payment QMs. On or before  January 10, 2016 (two years after the effective date of the ATR/QM rule), you can originate Balloon-Payment QMs if you satisfy the asset size and number of originations requirements. Balloon-Payment QMs that are originated during this two-year period will retain their QM status after January 10, 2016, assuming the requirements to hold the loan in portfolio are met.

After January 10, 2016, you can originate Balloon-Payment QMs only if you meet the asset size and number of originations criteria as well as a requirement that you operate predominantly in rural or underserved areas.”

The CFPB also provides this tip:

“Implementation Tip: After January 10, 2016, in order to make Balloon-Payment QMs, more than half of your organization’s first-lien covered transactions in the prior calendar year must have been secured by properties in rural areas (equivalent to the USDA’s Economic Research Service Urban Influence Codes 4, 6, 7, 8, 9, 10, 11, or 12) or underserved areas (counties where no more than two creditors extend five or more first-lien covered transactions in a calendar year). The Bureau will publish an annual list of rural or underserved counties. This is not the same definition of “rural” used for Home Mortgage Disclosure Act (HMDA) reporting or used by other agencies. For example, you may not be considered rural under this definition even though you are considered rural under HMDA and are not a HMDA reporter.”

****

NAFCU Resources. Credit unions can learn more about the updates to the ATR/QM rule during a NAFCU webcast on August 21st.  Find more information and register here. Remember, NAFCU's webcasts are available to anyone and everyone.  Also, NAFCU’s Compliance Calendar has been updated with the latest CFPB small entity guides for ATR/QM and remittances.

****

Consumer Compliance Outlook Webinar. Tomorrow, the Federal Reserve System “Outlook Live” Audio Conference series will host a webinar on Conducting Consumer Compliance Risk Assessments – Examiner Insights. Topics to be covered include:

• What are risk assessments and why are they important?

• Suggestions on ways to complete a risk assessment for a business line or product

• Suggestions on ways to complete a risk assessment for a specific department

• Risk assessment red flags

The webinar will be Tuesday, August 20, 2013, 2:00 p.m. – 3:00 p.m. Eastern. You can find more information and register for the webinar here.

Metsger; Latest on Interchange Fees; Compliance Seminar versus Compliance School

Written by Steve Van Beek

NCUA Board. Rick Metsger will be sworn into office as an NCUA Board member on August 23 in a private ceremony on Capitol Hill. NCUA General Counsel Michael McKenna will deliver the oath of office to Metsger, paving the way for Metsger’s participation in NCUA's September 12 Board meeting (there will not be an August meeting).

***

Interchange Fees (Durbin Amendment). As we mentioned on August 1st, the Federal Reserve's interchange regulation was overturned by a Federal District Court leaving the interchange fee caps and the network exclusivity provisions in limbo. On Wednesday, Judge Richard Leon held a hearing which focused on whether Federal Reserve should write an Interim Final Rule.

For additional information on the next steps, check out Carrie Hunt's video recap:

For background information on the Interchange Fee issue, check out NAFCU's Issue Brief (and consider attending NAFCU's Congressional Caucus next month). 

***

Seminar versus School. We're often asked which of NAFCU's compliance conferences is right for a particular individual. Below are a few guidelines that should help. Of course, if you have any questions - please shoot me an email and I'll be happy to help. 

Regulatory Compliance Seminar

• Four days each October at different locations throughout the country. Next: October 22-25, 2013 in Nashville, Tennessee. Sneak Peek: October 14-17, 2014 in Baltimore, Maryland (registration coming soon!)

• Sessions include in-depth discussion of the hottest compliance issues facing credit unions - including detailed analysis of new and future regulations. For example, this year's conference will have multiple sessions reviewing the new mortgage regulations.

• Perfect conference for existing NAFCU Certified Compliance Officers (NCCOs) to obtain recertification (no exams!)

• Reconnect with your network of compliance professionals from around the country

Regulatory Compliance School

• Five days each March in the Washington D.C. area. Next: March 10-15, 2014 in National Harbor, Maryland. Registration is open; details coming soon (check out 2013 School for a good outline).

• Perfect conference for individuals interested in obtaining their NAFCU Certified Compliance Officer (NCCO) designation. Attendees have the option of taking the NCCO exams on-site (exams are the morning following each day of content).

• Sessions provide a comprehensive foundation of the compliance environment facing credit unions. We walk through the nuts and bolts of various regulations - such as Regulation D, Regulation E and Regulation Z - and review topics such as Share Insurance, the E-SIGN Act and Privacy of Member Information. Bring your pencils (and your sharpener(s))!

• Ideal for new compliance officers, those taking on more and more compliance responsibilities as well as those who are looking for a comprehensive "refresher" (School also provides 24 credits for existing NCCOs to complete their recertification).

We hope to see you Seminar or School in the upcoming year! For 2013 Seminar in Nashville - be sure to register by Friday, August 23 to lock-in early-bird savings!

CFPB Bulletin on Debt Collection Practices: Part 3

Written by Michael Coleman, Regulatory Compliance Counsel

Last month, the Consumer Financial Protection Bureau (CFPB) released two bulletins on debt collection practices. We blogged about their release here, and about Bulletin 2013-08 in more detail here (concerning representations made by creditors and third party debt collectors about the effects of debt payments on credit reports and scores). Today we would like to take a closer look at CFPB Bulletin 2013-07, which concerns the prohibition of unfair, deceptive, or abusive acts or practices (UDAAPs) in the collection of consumer debts.

The Bulletin provides an overview of the legal prohibitions against UDAAPs contained in the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), and the standards which apply. But if you have ever been in the position of having to determine whether something is or is not a prohibited UDAAP, you know that this particularly difficult. The general “sniff test” is useful to a certain extent (I always say “If you think you have a UDAAP problem, you probably do.”) However, some actual examples of what constitutes a UDAAP violation would be pretty useful.

I feel like the CFPB has done a pretty good job of reading my mind lately (or at least reading my blog posts), like the fact that they just released a consolidated –unofficial- version of the regulatory text and commentary to the remittance transfer final rule(s). Well, the Bulletin actually gives some potential examples of UDAAPs:  

“C. Examples of Unfair, Deceptive and/or Abusive Acts or Practices

Depending on the facts and circumstances, the following non-exhaustive list of examples of conduct related to the collection of consumer debt could constitute UDAAPs. Accordingly, the Bureau will be watching these practices closely.

• Collecting or assessing a debt and/or any additional amounts in connection with a debt (including interest, fees, and charges) not expressly authorized by the agreement creating the debt or permitted by law.
• Failing to post payments timely or properly or to credit a consumer’s account with payments that the consumer submitted on time and then charging late fees to that consumer.
• Taking possession of property without the legal right to do so.
• Revealing the consumer’s debt, without the consumer’s consent, to the consumer’s employer and/or co-workers.
• Falsely representing the character, amount, or legal status of the debt.
• Misrepresenting that a debt collection communication is from an attorney.
• Misrepresenting that a communication is from a government source or that the source of the communication is affiliated with the government.
• Misrepresenting whether information about a payment or nonpayment would be furnished to a credit reporting agency.
• Misrepresenting to consumers that their debts would be waived or forgiven if they accepted a settlement offer, when the company does not, in fact, forgive or waive the debt.
• Threatening any action that is not intended or the covered person or service provider does not have the authorization to pursue, including false threats of lawsuits, arrest, prosecution, or imprisonment for non-payment of a debt.”

The Bulletin notes that whether these examples will amount to UDAAPs will depend on the facts and circumstances of the situations, and that this list is not exhaustive.

The Bulletin references the CFPB’s Supervision and Examination Manual version 2 section on UDAAP in several places, credit unions might find it useful to review.  The CFPB also released an updated section on debt collection examination procedures on October 24, 2012, which credit unions will also want to review. 

Remittance Transfer Resources from the CFPB

Written by Michael Coleman, Regulatory Compliance Counsel

The Consumer Financial Protection Bureau (CFPB) recently released some additional resources for the remittance transfer final rule. If you are like me and have been deep diving into these final rules trying to figure out all the various intricacies and nuances, you might have employed Steve’s stress reduction kit (I know I have), so any compliance resource is most welcome.

Last week the CFPB released, via this blog post, a few resources that should help you in your efforts to get your compliance solution in place before the October 28^th effective date of the final rule, including:

• an updated small entity compliance guide;
• an updated video/webinar on the final rule(s); and
• a consolidated (unofficial) copy of the regulatory text and official commentary from the various final rules.

The rulemaking process for the remittance transfer final rule has been complicated and confusing to keep up with (which we have mentioned several times) as the CFPB has issued several final rules amending the text of the regulations and the commentary. Note that the updated small entity compliance guide and the updated video are replacing previously released versions, which the CFPB has stated are outdated and should not be relied upon.

The consolidated regulatory text should be a great benefit for compliance officers when they are researching the remittance rule, and I am glad that the CFPB took a page out of NAFCU’s handbook (we created our own consolidated version of the regulatory text and the commentary back in June). Fingers crossed for consolidated versions of the mortgage final rules! 

***

NAFCU On-Demand Webcasts. NAFCU has hosted two webcasts this year on the remittance transfer final rules, both of which were presented by Mary Lou Heighes. In case you missed them live, they are both available on-demand for purchase:

• The CFPB's International Remittance Transfer Disclosure Rules  (originally aired January 24, 2013; available on-demand until January 24, 2014)
• Comply with the CFPB's International Remittance Rules (originally aired July 16, 2013; available on-demand until July 16, 2014)

As always, NAFCU's On-Demand webcasts are open to everyone. And, remember that you (or your colleagues) can watch the archived version for up to one year after the original air date.

Supplemental Proposal on Appraisals for Higher-Priced Mortgage Loans

Written by JiJi Bahhur, Regulatory Compliance Counsel

Earlier this week, several agencies (Agencies) – including the Consumer Financial Protection Bureau (CFPB) and the National Credit Union Administration (NCUA) – released a supplemental proposal on appraisals for higher-priced mortgage loans (Supplemental Proposal). 

The proposal relates to the 2013 Interagency Appraisals final rule (Final Rule), which goes into effect on January 18, 2014.  Among other requirements, the Final Rule requires creditors to obtain an appraisal or appraisals for certain mortgages that meet the definition of a higher-priced mortgage.  In part, the Supplemental Proposal would amend the Final Rule to include exemptions from the appraisal rules in the following instances: transactions secured by existing manufactured homes and not land; certain “streamlined” refinancings; and transactions of $25,000 or less (indexed for inflation). 

For more information on these exemptions and what other amendments are contained within the proposal, you can access the Supplemental Proposal here.  Also, NAFCU’s Regulatory Affairs team will be releasing a Regulatory Alert (NAFCU Member log-in required) on the proposal very soon, so keep an eye out for that. 

If the proposal is finalized, the intent of the Agencies is for these exemptions to become effective on January 18, 2014, the same date on which the Final Rule will become effective. 

NCUA’s Regulatory Alert on Regulation B Appraisal Disclosure and Delivery Requirements; Regulatory Relief Continued

Written by Bernadette Clair, Regulatory Compliance Counsel

Earlier this week, Steve mentioned NCUA’s Regulatory Alert on the Regulation B Appraisal Disclosure and Delivery Requirements. The alert summarizes requirements under the CFPB’s Equal Credit Opportunity Act (ECOA) Valuations Rule (effective January 18, 2014).

Some of the areas highlighted by the alert include the types loans covered by the rule, what is or isn’t considered a “valuation” and sending valuation copies promptly upon completion. The alert also provides the following steps for complying with the rule:

• You must notify the applicant in writing within three business days of application of the right to receive a copy of any appraisal developed in connection with the application. Appendix C to the rule includes sample text for this disclosure.

• If you have an application that was not originally going to be secured by a first lien on a dwelling and you later determine that it will be secured by a first lien on a dwelling, then you have three business days after you determine the change has occurred to notify the applicant about the right to receive appraisals.

• When processing an application for a closed-end loan, you must deliver copies of appraisals and other written valuations “promptly upon completion,” or three business days before consummation, whichever is earlier.

• When processing an application for an open-end loan, you must deliver copies of appraisals and other written valuations “promptly upon completion,” or three business days before account opening, whichever is earlier.

• You cannot charge the applicant for fees for photocopying or to cover the cost of postage to mail copies of appraisals or other written valuations you provide. However, you can charge a reasonable fee to reimburse the cost of developing an appraisal or other written valuation, unless applicable federal⁵ or state law prohibits or otherwise restricts it. You cannot condition providing copies on payment of this fee.

• For applicants who waive the right to receive the required copies at least three business days before consummation or account opening, you must provide the copies either at, or prior to, consummation or account opening. (Footnote omitted)

Refer to the alert  for complete details.

****

Regulatory Relief. In a letter sent to NCUA on Monday regarding the agency’s 2013 regulatory review, NAFCU General Counsel and Vice President of Regulatory Affairs Carrie Hunt raised numerous issues that deserve the agency’s immediate attention.

Related to today's blog post, one area addressed is the need for NCUA to update its appraisal regulations in light of the CFPB’s ECOA Valuations Rule.  Currently, federal credit unions are exempt from the appraisal requirements of Regulation B, as current section 1002.14 contains an exemption from these requirements for credit unions subject to NCUA’s regulation section 701.31(c)(5) regarding the provision of appraisal copies.

The ECOA Valuations Rule removes this exemption. Here is from the letter:

"Starting on January 18, 2014, credit unions will be required by Regulation B to provide an applicant a copy of all appraisals and other written valuations developed in connection with an application for credit that is to be secured by a first lien on a dwelling. Unless NCUA section 701.31(c)(5) is amended, credit unions will also have a duty to make, at the request of the member, copies of appraisals used for that member’s real-estate related loan application available for up to 25 months, regardless of whether the credit is secured by a first lien on a dwelling.

...

In order to update NCUA regulations to reflect a new world where credit unions are under the rule of Regulation B starting January 18, 2014, NCUA should, at a minimum, change the scope of 701.31(c)(5) to include only subordinate lien loans that fall outside the scope of Regulation B's requirements. This would ensure that for all first lien loans on a dwelling, a member would receive an appraisal provided by the credit union pursuant to section 1002.14 as amended. For all subordinate lien loans, the member would still be able to request a copy of the appraisal from the credit union."

Click here to download NAFCU's comment letter.

Metsger Confirmed for NCUA Board; ATM Fee Disclosure in NY; NCUA Reg Alert on Reg B

Written by Steve Van Beek

NCUA Board. Late Thursday, the Senate confirmed, in action taken by unanimous consent, Rick Metsger for the National Credit Union Administration Board. Metsger, a Democrat, succeeds Gigi Hyland who left the Board in October of 2012. Metsger's term will run until August 2, 2017.

Current Board Member Michael Fryzel, the lone Republican on the Board, recently announced his decision to remain on the NCUA Board until his successor is confirmed. Fryzel's term officially ended on Friday but NCUA Board Members have the ability to remain until a successor is confirmed.  

***

ATM Fee Disclosures - New York. On December 20, 2012, President Obama signed the ATM Fee Disclosure Bill which removed the federal requirement for an "on the machine" fee notice for ATMs (the CFPB officially amended Reg E in March). However, there are still state laws that could require this "on the machine" notice. New York was one of those states until action Thursday by Governor Andrew Cuomo to remove the requirement from New York law.   

***

NCUA Regulatory Alert. Last Tuesday, Bernadette blogged about NCUA's recent Regulatory Alerts on Remittances, Garnishments and Escrow Requirements for HPMLs. Well, NCUA hasn't slowed down and they recently issued a Regulatory Alert on the Regulation B Appraisal Disclosure & Delivery Requirements (effective January 18, 2014). 

***

Programming Note: Just a quick reminder that we'll be blogging on Mondays, Wednesdays and Fridays in August. 

Regulatory Relief; NAFCU's Congressional Caucus; August Compliance Monitor

Written by Michael Coleman, Regulatory Compliance Counsel

Programming Note: As Steve mentioned yesterday, for the month of August, we'll be blogging on Monday, Wednesday and Friday rather than our usual every business day.

***

Regulatory Relief. We blog a lot about the regulatory burden faced by credit unions today (it even has its own category on our blog), and I have been known to describe the current regulatory environment as “The Reg-pocalypse.” Credit union professionals know that this is a serious issue facing the credit union industry. Just ask any compliance officer, they’ll probably just point to the phone book(s) sized set of recent final rules they are trying to wade through. That being said, it’s one thing for me to sit at my computer and shout into the vast expanse of the internet blogosphere about the issue, but the real question is: “What can we do about it?”

Which brings me to the issue of regulatory relief. My colleagues here at NAFCU tirelessly advocate on behalf of credit unions to provide much needed regulatory relief to the industry. On Wednesday July 31st NAFCU’s Vice President of Legislative Affairs Brad Thaler sent a letter to Speaker Boehner and Minority Leader Pelosi in support of the regulatory relief efforts found in the Regulations from the Executive in Need of Scrutiny (REINS) Act (H.R. 367), here is an excerpt:  

“The REINS Act would make an important step toward regulatory relief by requiring any executive branch regulation with an economic impact in excess of $100 million as scored by the Office of Management and Budget to come before Congress for an up-or-down vote before it could be enacted. NAFCU believes putting this legislative process into place could help ensure additional accountability from the Administration and Congress regardless of which political party is in the majority.

As Congress looks for ways to cut down on duplicative and over-burdensome federal regulation, we urge you to also support efforts to provide regulatory relief for credit unions such as legislation introduced by Representative Gary Miller—H.R. 2572, the Regulatory Relief for Credit Unions Act of 2013. This legislation reflects key provisions we shared with Congress on February 12th of this year as part of NAFCU’s five-point plan for credit union regulatory relief.”

As Brad points out, the REINS Act is definitely a step in the right direction. He also referenced NAFCU's Five-Point Plan for Regulatory Relief which calls on Congress to provide comprehensive broad-based regulatory relief for credit unions, and H.R. 2572 introduced by Representative Gary Miller (R-CA). For additional information on the Miller bill and NAFCU's Five-Point plan, make sure to check out NAFCU's Regulatory Relief webpage, and this blog post.

***

NAFCU's Congressional Caucus. You might still be asking yourself: “OK, regulatory relief is a big deal, but what can my credit union do about it?” NAFCU’s 2013 Congressional Caucus is just around the corner - September 8-11 in Washington, D.C.  Caucus is the perfect time for your credit union to meet with your Senators and Representatives and let them know about the increasing regulatory burden on your credit union. Don’t miss this opportunity to make your credit union’s voice heard! Sign up today.

***

August Compliance Monitor. The latest NAFCU Compliance Monitor is available for download (NAFCU login required). This month’s issue contains the following in depth articles:

• Small Creditor Portfolio Exemption for QMs Explained
• Lessons Learned from the CFPB’s Recent MILES Enforcement Action

***

Have a great weekend everyone!  

Fed's Interchange Rule Overturned; Management & Leadership Institute

Written by Steve Van Beek

Programming Note: For the month of August, we'll be blogging on Monday, Wednesday and Friday rather than our usual every business day. If you need a NAFCU blog fix on Tuesdays and Thursdays, I strongly recommend Anthony Demangone's Musings from the CU Suite blog (subscribe here).

*** 

Interchange. Yesterday, a federal district court ruled that the Federal Reserve Board failed to carry out federal statutory requirements on debit interchange fees in its final rule (Regulation II). For now, the current rules will remain in place. If any appeals are unsuccessful, the Fed would need to write new rules (including possibly an interim final rule). 

Of particular note for credit unions is the judge's rejection of the Fed's network exclusivity provisions in 12 CFR 235.7. Under the current rules, a credit union complies if it has two unaffiliated networks (one signature, one PIN). The judge indicated the Fed's interpretation of the Durbin Amendment was improper and the future rules would need to have network exclusivity provisions that require two unaffiliated signature networks and two unaffiliated PIN networks.

What we don't know is how long the process (including any potential appeal by the Federal Reserve) would take before we have a new rule. And, after the new rule - how long will the implementation period be for credit unions?  

***

NAFCU's Management & Leadership Institute. While we normally discuss compliance issues (and conferences), I wanted to make sure you were aware of NAFCU's Management & Leadership Institute in Philadelphia - October 7-11, 2013.

The Management & Leadership Institute features a mixture of classroom discussions, case studies and proactive strategy coursework and you'll walk away with:

• A solid understanding of financial management, including how to conduct accounting cost analysis
• Clarity on board vs. management roles
• Tools to effectively build relationships with board members  
• Successful communication techniques to help move projects forward
• Tactics for leading a successful credit union— from operations to marketing
• A strong network of colleagues that share your drive for leadership excellence

The Institute will also feature a full-day leadership workshop with award-winning expert John Spence.

But, don't take my word for it - listen to John Spence here:

Sound interesting? Take a look at the Institute Experience and the words of a past attendee. 

Register by August 8 and save $100!