NAFCU Compliance Blog

Credit Union Incentive Plans Can Be a Useful Tool to Drive Performance, if Done Properly + Compliance Trivia!

Written by Shereefat Balogun, Regulatory Compliance Counsel

Credit unions generally use incentive plans to drive results, whether that be more loans or more deposits.  The overall goal is to reward employees for achieving certain results.  In May 2016, NCUA and other financial regulators issued a proposed Incentive Compensation Rule; while the rule is not yet finalized, credit unions are subject to other regulations that place restrictions on employee compensation or incentive plans.  NAFCU gets a number of question regarding employee incentives, and given NCUA’s growing concern and examination of these plans, credit unions are advised to develop an Incentive Compensation policy that is approved by the Board, and complies with the regulatory framework governing compensation and incentive structures.

NCUA Regulations

There are generally 3 NCUA rules that limit incentive compensation practices: Section 701.21 (c)(8) which restricts practices in connection with lending activities; Section 701.23(g) which places limits on compensation relating to the sale or purchase of eligible obligations; and Section 721.7 which addresses compensation related to incidental powers.

NCUA’s lending rules prohibit senior management employees from participating in a loan incentive plan.  Section 701.21(c)(8)(i) prohibits paying compensation in connection with any loan made by the credit union.  This rule regulates incentives given to employees in connection with the extension of a loan to a non-employee member.  There are some exceptions in (c)(8)(iii), which include salaries and incentives based on overall financial performance. There is also an exception for employee loan incentive programs established and monitored by a credit union’s board of directors; however, senior management is specifically excluded from this exception.  From the rule:

(8)(i) Except as otherwise provided herein, no official or employee of a Federal credit union, or immediate family member of an official or employee of a Federal credit union, may receive, directly or indirectly, any commission, fee, or other compensation in connection with any loan made by the credit union.

…

(iii) This section does not prohibit:

(A) Payment, by a Federal credit union, of salary to employees;

(B) Payment, by a Federal credit union, of an incentive or bonus to an employee based on the credit union's overall financial performance;

(C) Payment, by a Federal credit union, of an incentive or bonus to an employee, other than a senior management employee, in connection with a loan or loans made by the credit union, provided that the board of directors of the credit union establishes written policies and internal controls in connection with such incentive or bonus and monitors compliance with such policies and controls at least annually.

(D) Receipt of compensation from a person outside a Federal credit union by a volunteer official or non-senior-management employee of the credit union, or an immediate family member of a volunteer official or employee of the credit union, for a service or activity performed outside the credit union, provided that no referral has been made by the credit union or the official, employee, or family member.

12 C.F.R. §701.21(c)(8)(emphasis added).

Note that under this rule an employee, including senior management employees, may receive an incentive in connection with a loan based on the credit union’s overall financial performance.  However, only non-senior management employees may receive incentives in connection with a loan pursuant to the credit union’s written procedures that are established and approved by the Board of Directors.

Section 701.23(g) is very similar and tracks the language of 701.21(c)(8), except that the restrictions pertain to the purchase, sale, or pledge of an eligible obligation (i.e., a loan or group of loans). The rule generally has the same restriction and exceptions, as well as limitation as applied to senior management employees. 

Similarly, Section 721.7 places the same restriction but is not specific to any particular activity, and is more broadly applied to any authorized activity the credit union engages in.  See, 12 C.F.R. §721.7.

Regulation Z Prohibition on Mortgage Loan Originators’ Compensation Practices

Incentive compensation is also regulated in Regulation Z, as applied to mortgage loan originators and is indeed a much scrutinized area.   Regulation Z, §1026.36(d) prohibits mortgage loan originators from receiving compensation based on certain terms of a mortgage loan transaction, such as interest rate, APR, collateral type, and origination fees.  See, 12 C.F.R. §1026.36(d).

It’s worth flagging, the CFPB’s definition of “loan originator”, as this could include non-lending employees.  The rule’s definition of “loan originator” is broader than the definition of “loan originator” used in the SAFE Act, and includes the following activities if done for or in the expectation of compensation:

• takes an application;
• offers, arranges, assists a member in obtaining or applying to obtain credit;
• negotiates, or otherwise obtains or makes an extension of credit for another person; or
• advertises, communicates, or represents to the public that they can or will perform any loan origination activities.

See, 12 C.F.R.§1026.36(a).

NCUA in 2014 issued a Regulatory Alert discussing the CFPB’s Mortgage Loan Originator Compensation Requirements.   

Preferential Loans to Employees

On a related matter, we also receive questions relating to preferential loans to employees.  Generally, credit unions may give preferential loans, or lower loan rates, to its employees, so long as those employees do not include officials.  The relevant section to rely on is 12 CFR 701.21(d).

Section 701.21 sets forth the standards to which a federal credit union must adhere when making loans. Under this provision, a federal credit union is prohibited from granting preferential loans to its officials or an immediate family member of an official. See, 12 C.F.R. §701.21(d)(5).  This includes any member of the Board of Directors, credit committee or supervisory committee.  However, there is no prohibition against a federal credit union offering preferential loans to its employees.

For reference, here are two NCUA legal opinion letters on the topic:

• https://www.ncua.gov/Legal/OpinionLetters/OL2006-0343.pdf

• https://www.ncua.gov/Legal/OpinionLetters/OL1997-0247.pdf

In light of the current rules regulating compensation and incentive structures and the impending finalization of the Incentive Based Compensation Rule, credit unions are strongly advised to develop comprehensive Board policies regarding compensation.  The policy should comply with the regulatory framework, including the presence of strong internal controls, and should be reviewed by the Board annually. 

As always, if you have any questions relating to this article or any other compliance issue, please contact NAFCU’s regulatory compliance team.  We’re here for you!

Trivia: Under the proposed Incentive Based Compensation Rule, what would be the record retention for documenting the credit union’s incentive-based compensation arrangement?

 

CFPB Says Mortgage Company’s Loan Originators Rewarded For Directing Customers To More Costly Mortgages

Written by Shari R. Pogach, Regulatory Paralegal

Last week, the Consumer Financial Protection Bureau (CFPB) filed a complaint in federal district court against RPM Mortgage, Inc. (RPM), a residential-mortgage lender headquartered in California, and its CEO, Erwin Robert Hirt for violations of the Loan Originator Compensation Rule and the Consumer Financial Protection Act (CFPA).  According to the complaint, in April 2011, RPM instituted a compensation plan that gave loan officers financial incentives to steer consumers into higher-rate mortgage loans. RPM’s loan officers were given different forms of compensation that were derived in part from the interest rates of the loans they closed.

The interest-rate-based compensation was filtered through “employee-expense accounts.” RPM deposited profits that were directly tied to an originator’s closed loans interest rates into an expense account set up for the originator. RPM then used the expense accounts to pay bonuses and higher commissions. From April 2011 through December 2013, the company also allowed loan officers to use their employee expense accounts to offset interest-rate reductions or credits for RESPA-tolerance cures or appraisal costs they sometimes granted to avoid losing loans to a competitor. This “point bank” arrangement allowed loan originators to “bank” profits extracted from certain consumers that enabled them to close on and receive additional compensation from loans to future consumers. In 2011, RPM paid millions of dollars in periodic bonuses to its loan officers from their employee-expense accounts.  All told, RPM paid or financed millions of dollars in unlawful bonuses, pricing concessions and supplemental commissions.

According to the CFPB, RPM’s CEO Erwin Robert Hirt was responsible for managing the design and implementation of this illegal compensation plan.  From April 2011 through December 2013, Mr. Hirt managed the design and implementation of RPM’s expense-account plan that allowed the company’s loan officers to withdraw expense-account funds derived from the interest rates those loan officers charged consumers. Further, from January 2012 through December 2013, he managed the design and implementation of the company’s expense-account plan that allowed its loan officers to reset their commission rates on future loans and withdraw funds from their expense accounts to cover resulting deficiencies.  

If entered by the court, the CFPB’s proposed consent order would require RPM and Mr. Hirt to comply with the Loan Originator Compensation Rule and the CFPA and to the following: 1) RPM will pay $18 million in redress to consumers affected by its unlawful compensation practices; 2) RPM and Mr. Hirt will each pay $1 million to the CFPB’s Civil Penalty Fund; and 3) RPM and Mr. Hirt will submit to five-year reporting requirements and to compliance monitoring.

CFPB Files Mortgage Steering Case; A Few Useful Resources

Written by Steve Van Beek

Last Tuesday, the CFPB filed suit against Utah-based Castle & Cooke Mortgage LLC alleging the payment of bonuses to loan officers who steered consumers into mortgages with higher interest rates. Here is from the CFPB's press release:

"The CFPB alleges that the company violated the rule with its quarterly bonus program, which paid more than 150 Castle & Cooke loan officers greater bonus compensation when they persuaded consumers to take on more expensive loans. The average quarterly bonus ranged from $6,100 to $8,700. By contrast, those loan officers who did not charge consumers higher interest rates did not receive quarterly bonuses. The CFPB estimates that more than 1,100 illegal quarterly bonuses were paid and that tens of thousands of customers may have been upsold since April 2011. By tying bonuses to the interest rate of the loans in this manner, the CFPB alleges that Castle & Cooke was in direct violation of the law."

For additional information, check out the full press release and the CFPB's complaint.

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Below are a few resources you might find useful.

Delinquency FAQs. NCUA posted FAQs on 2013 Loan Delinquency Reporting Changes in the call report section of their website.

Kaufman & Canoles. A recent creditunions.com by attorneys at Kaufman & Canoles discusses Recent Court Rulings that May Impact Credit Unions. Additional information can be found in Kaufman & Canoles' Summer 2013 Credit Union Legal Update.

Note: Andy Keeney of Kaufman & Canoles will be presenting on Fair Lending and the Mortgage Ability-to-Repay Requirements at NAFCU's Regulatory Compliance Seminar in October.

Weltman, Weinberg & Reis. Rob Rutkowski has started a video series on the CFPB's mortgage regulations over at That Credit Union Blog. You can find the first three videos here: Part 1; Part 2; and Part 3.

Note: Rob Rutkowski will also be at Seminar - speaking on Legal Aspects of Social Media as well as leading the Live Credit Union Podcast for the 3rd straight year.

NB Hotlist. If you haven't seen the NB Hotlist, check it out. NeighborBench aggregates compliance information from various credit union and bank blogs in one location.   

Ding! Ding! Ding! Round One in Effect

Written by JiJi Bahhur, Regulatory Compliance Counsel

In case it slipped your mind, I thought I’d throw it out there that a few requirements from the Consumer Financial Protection Bureau’s (CFPB) mortgage rules – what I like to call Round One – became effective as of June 1, 2013.  Of note are the final TILA Escrow Rule and its recent amendments/clarifications – located at 12 C.F.R. 1026.35(b) – and the final Prohibition on Mandatory Arbitration – located at 12 C.F.R. 1026.36(h).

Escrow Requirements for HPMLs. The final TILA Escrow Rule lengthens from one year to at least five years the required minimum period most creditors must maintain an escrow account for first-lien higher-priced mortgage loans (HPMLs) secured by a consumer’s principal dwelling.  A creditor or servicer must either maintain the escrow account until the underlying debt obligation is terminated, or after the five-year period the consumer requests that the escrow account be cancelled.  If the consumer requests cancellation, the creditor or servicer is only permitted to cancel the escrow account if the loan’s unpaid principal balance is less than 80 percent of the original value of the property securing the underlying debt obligation and the consumer is not currently delinquent or in default on the underlying obligation. The new escrow requirements for HPMLs took effect as of June 1, 2013, and apply to applications received on or after June 1, 2013. 

Arbitration Clauses. The prohibitions on mandatory arbitration for mortgage loans – also effective as of June 1, 2013 – prohibits credit unions from including contractual or agreement terms that require mandatory arbitration or any other non-judicial procedure to resolve disputes arising out of consumer credit transactions secured by a dwelling.  This prohibition also applies to home equity lines of credit (HELOCs) secured by a consumer’s principal dwelling.  Although such a practice was never too prominent in the credit union industry – since Fannie Mae and Freddie Mac already prohibited it – loan agreements should be reviewed to ensure that a mandatory arbitration clause does not exist. 

Financing Credit Insurance. And the last CFPB mortgage requirement I wanted to mention was the prohibition on financing single-premium credit insurance.  I won’t get into details, but just wanted to mention that the original June 1, 2013 effective date has been delayed until January, 2014.  The delay will give the CFPB the ability to clarify, before the provision takes effect, its applicability to transactions other than those in which a lump-sum premium is added to the loan amount at closing.  We’ll have more on that at a later date. 

In the meantime, credit unions should prepare themselves for Round Two, which includes heftier players such as Ability to Repay and Qualified Mortgages, Regulation Z’s High-Cost Mortgage and Homeownership Counseling Amendments, Regulation X’s Homeownership Counseling Amendments, the Mortgage Servicing rules, Appraisal rules, etc. To see the list of regulations and their effective dates, view NAFCU’s Compliance Calendar, open to all.   

Finding the New Reg Z & Reg X Requirements in the Electronic Code of Federal Regulations

Written by Steve Van Beek

A couple weeks back, we looked at finding the new homeownership counseling disclosure requirements in the Electronic Code of Federal Regulations (e-CFR).  Now that all the final rules have been published, I thought it would be good to link to all the new and amended regulatory texts so that you have a central location for finding the future regulatory language. 

Note:  Below are links to the major changes - but there are tons of other little changes and tweaks to other sections of Regulation Z and Regulation X.  Additionally, some of the link names have the same citations but they go to a different regulatory text.  For example, there are numerous links to "Appendix I" but they all go to different staff commentary.   

Regulation Z (Truth in Lending Act) - 12 CFR 1026

• New Interest-Rate Adjustment Notices - 12 CFR 1026.20

• New Points & Fees Test - Closed-end Credit - 12 CFR 1026.32

• New High-Cost APR Thresholds & Expansion of High-Cost to Open-end Credit - 12 CFR 1026.32

• New Prohibitions & Requirements for High-Cost Mortgages - 12 CFR 1026.34

• Changes to Escrow Requirement for Higher-Priced Mortgage Loans - 12 CFR 1026.35

• New Appraisal Requirements for Higher-Priced Mortgage Loans - 12 CFR 1026.35

• New Negative Amortization Counseling Requirement - 12 CFR 1026.36(k)

• Changes to Prompt Payment Crediting & Payoff Statements - 12 CFR 1026.36(c)

• New Mortgage Loan Originator Compensation, Qualifications, Training, Disclosures & More - 12 CFR 1026.36

• Periodic Statements for Mortgage Loans - 12 CFR 1026.41

• Ability-to-Repay Requirements & Qualified Mortgage Standards - 12 CFR 1026.43

Appendices to Regulation Z

• New Model Forms for Adjustable-Rate Mortgages and Periodic Statements - Appendix H

• Higher-Priced Mortgage Loan Appraisal Safe Harbor Review - Appendix N

• Illustrative Written Source Documents for HPML Appraisal Rules - Appendix O

• Standards for Determining Monthly Debt and Income - Appendix Q

Official Staff Commentary to Regulation Z - Appendix I

• New Staff Commentary for Points & Fees Test; Ability-to-Repay Requirements & Qualified Mortgage Standards - Appendix I

• New Staff Commentary for High-Cost Mortgages; Negative Amortization Counseling Requirement - Appendix I

• New Staff Commentary for Appraisals on Higher-Priced Mortgage Loans - Appendix I

• New Staff Commentary for ARM notices; Payment Crediting & Payoff Statements; and Periodic Statements - Appendix I

• New Staff Commentary for Mortgage Loan Originator Requirements (all of them) - Appendix I

Regulation X (Real Estate Settlements Procedures Act) - 12 CFR 1024

• Changes to Escrow Accounts - 12 CFR 1024.17

• New Homeownership Counseling Disclosure - 12 CFR 1024.20

New Subpart C to 12 CFR 1024

The CFPB reorganized Regulation X - including a new Subpart C with Mortgage Servicing Requirements.  Sections 1024.30 through 1024.41 can all be found at this link.  Below are the new sections under Subpart C:

Subpart C—Mortgage Servicing

1024.30   Scope.

1024.31   Definitions.

1024.32   General disclosure requirements.

1024.33   Mortgage servicing transfers.

1024.34   Timely escrow payments and treatment of escrow account balances.

1024.35   Error resolution procedures.

1024.36   Requests for information.

1024.37   Force-placed insurance.

1024.38   General servicing policies, procedures, and requirements.

1024.39   Early intervention requirements for certain borrowers.

1024.40   Continuity of contact.

1024.41   Loss mitigation procedures.

The language of those new sections is available here.

Appendices to Regulation X

• New Model Language for Force-placed Insurance Notices - Appendix MS-3

• New Model Language for Early Intervention; Loss Mitigation; and Housing Counselor Notices - Appendix MS-4

• Official Bureau Interpretations to Reg X - Supplement I (link goes to Federal Register)

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Wow - that is a lot of links and a long blog post.  I know I've been running down some rabbit holes in my research and I'm sure some blog readers have as well.  Hopefully this blog post helps organize the confusion.  A bit.  Have a great weekend!

NAFCU's Regulatory Compliance School Just Got Better - Regulatory Update Day

Written by Steve Van Beek

We've heard you!  For the past couple of years, we've received the following feedback about NAFCU's Regulatory Compliance School (paraphrased, of course):

"School is great and provided a solid foundation for understanding the regulatory requirements credit unions face on a daily basis.  BUT, the rules are changing so fast that it would be great to receive updates on what has just changed and what is changing next."

With this in mind, we've created Regulatory Update Day at NAFCU's 2013 Regulatory Compliance School (March 18-23 in National Harbor, Maryland).  

Regulatory Update Day (Thursday, March 21st) will provide:

• A clear understanding of what changes NCUA has in store for 2013 – including their Exam Focus

• An overview of the scope and applicability of the CFPB’s seven new mortgage regulations*

• A detailed look at the CFPB’s Qualified Mortgage/Ability-to-Repay requirements*

• Answers to Frequently Asked Questions on the mortgage rules from NAFCU’s compliance team*

• Insight from credit union attorneys and practitioners on how best to set up your implementation strategy

You can find more information on Regulatory Update Day here.  The three sessions with the "*" are sessions that are also part of NAFCU's Mortgage Reform Webcast Series.

The other 4 days of Compliance School will remain the same as will the opportunity to take the NAFCU Certified Compliance Officer (NCCO) exams.  Good luck!  

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And, all attendees at NAFCU's 2013 Regulatory Compliance School will receive NAFCU's 2013 GPS (coming soon!) as well as NAFCU's Scope & Applicability Charts.

Remember:  You do not need to be a NAFCU member credit union to attend NAFCU's conferences or webcasts.  In fact, you don't even need to work at a credit union.  Each School usually features a handful of consultants, vendors and other credit union "peeps" who support credit unions - in one way or another - on a daily basis.      

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Mortgage Headache Areas; Upcoming Mortgage Reform Webcasts

Written by Steve Van Beek

Yesterday was NAFCU's first webcast as part of our Mortgage Reform Webcast Series.  I provided an overview of the seven new mortgage regulations - focusing specifically on the scope & applicability of the new requirements.  

I also provided some insight on "Headache Areas" and included this list at the end of the presentation:

• Determining Exemption Applicability

• New Notices – Content-Rich and Strict Timelines

• Error Resolution & Information Request Procedures

• Loan Originator Compensation Determinations

• Implementing So Many Changes At One Time

And, there will be many additional headaches as credit unions work toward implementing the new requirements.  Even self-induced ones.  

There is some hope on the horizon as the CFPB issued their best press release of their history which highlights their Implementation Plan for New Mortgage Rules.  The CFPB's plan indicates they are listening to NAFCU and credit union concerns regarding the overwhelming burden of reading, understanding, interpreting and implementing numerous requirements simultaneously.  Of course, we'll have more information on the CFPB's plan in future blog posts.

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Upcoming Mortgage Reform Webcasts.  As I mentioned, yesterday's webcast was the first of our series and registration for the next three is now open.

• CFPB's Ability to Repay and Qualified Mortgage Requirements - March 6, 2013 - 2:00 p.m. to 3:30 p.m.

On March 6, Andy Keeney from Kaufman & Canoles will be examining the details of the CFPB's Ability-to-Repay Requirements and Qualified Mortgage Standards.  Andy will walk through the new underwriting guidelines - including the debt-to-income requirements - and explain how these rules will impact credit union mortgage lending.  And, importantly, the steps your credit union needs to take to comply by January 10, 2014.  

• Digging Deeper: CFPB's Mortgage Rules - March 27, 2013 - 2:00 p.m. to 3:30 p.m.

I'll be joined by my colleagues JiJi Bahhur, Bernadette Clair and Mike Coleman as we explore details of the CFPB's new mortgage requirements.  We'll provide answers to Frequently-Asked-Questions that our team has fielded from NAFCU member credit unions.  And, we'll take a look ahead at what other areas the CFPB is likely to address in 2013.  

• Which New Requirements Apply to HELOCs? - April 10, 2013 - 2:00 p.m. to 3:30 p.m.

I'll provide a detailed look at which requirements apply to home equity lines of credit and - just as importantly - which do not apply so that your credit union can best position your implementation strategy.  If your credit union makes HELOCs, this is one you'll want to attend as the new requirements are sprinkled throughout the CFPB's 3507 pages!

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Programming Note:  NAFCU's offices will be closing early tomorrow and will be closed on Monday for the Federal holiday.  We'll have a blog post tomorrow and then start back up again on Tuesday.   

NAFCU's Scope & Applicability Charts for the New Mortgage Rules; NAFCU Calls for CU Reg Relief

Written by Steve Van Beek

The CFPB's 3507 pages of new mortgage regulations has everyone wondering where to start and how to best handle the new requirements.  One of the best first steps is to determine which requirements apply to which types of mortgage loans.  To help with this, NAFCU has put together the following Scope & Applicability Charts:

• Regulation Z (TILA) Mortgage Servicing Requirements

• Regulation X (RESPA) Mortgage Servicing Requirements

• Loan Originator Compensation, Qualifications, Training and Disclosure Requirements

• Regulation B Appraisal Requirements

• Appraisal Disclosure Requirement for Higher-Priced Mortgage Loans

• Appraisal Requirements for Higher-Priced Mortgage Loans

• New Escrow Requirements for Higher-Priced Mortgage Loans

• New Requirements for High-Cost Mortgage Loans

• New Homeownership Counseling Disclosure Requirement

• Ability-to-Repay Requirements and Qualified Mortgage Standards 

Now, you might be wondering how you gain access to those charts.  There are Five Ways:

• NAFCU members have access directly via NAFCU's CFPB Mortgage Rules webpage.

• Registrants for today's webcast on The CFPB's Final Mortgage Regulations (registration is still open) will be able to download the charts during the webcast.

• Attendees at NAFCU's Regulatory Compliance School will hear a similar presentation to today's webcast and will receive access to the charts at School in March (of course, NAFCU members can access the charts here).

• Purchasers of NAFCU's Credit Union Compliance GPS will receive access in mid-March when the 2013 GPS is available.

• Non-NAFCU member registrants of NAFCU's Regulatory Compliance Seminar will receive access in the next week.  If you sign-up for Seminar after today, we'll get the charts to you within a week of your registration.   

A Note on Sharing of Charts.  We put a ton of time and effort into researching and creating these charts.  And, we've made the accessible - in one way or another - to any credit union or organization that is interested.  Please do not share these outside of your credit union.  Of course, if you have any questions - just shoot me an email.  

Hope to see you on today's Mortgage Rules Webcast.

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NAFCU Calls for Regulatory Relief.  Yesterday morning, NAFCU sent a letter to Senate and House leaders calling for a five-point plan on providing regulatory relief for credit unions through administrative, capital, structural, operational and data security reforms.  You can find the letter here.  For additional details, check out the NAFCU Today.

CFPB Mortgage Rules in Federal Register; NAFCU Rule Summaries; Upcoming NAFCU Mortgage Webcasts

Written by Steve Van Beek

CFPB's Mortgage Regulations.  The CFPB's mortgage regulations are starting to be published in the Federal Register.  Below are the links to the rules that have been published so far as well as links to rules that are at the Public Inspection Desk (waiting to be published).

Published in Federal Register

• Escrow Requirements for Higher-Priced Mortgage Loans - Regulation Z

• Disclosure and Delivery Requirements for Copies of Appraisals and Other Valuations - Regulation B

• HOEPA/High-Cost Mortgages and Homeownership Counseling Amendments - Regulation Z & Regulation X

• Ability-to-Repay and Qualified Mortgage Standards - Regulation Z

• Concurrent Proposal - Ability-to-Repay and Qualified Mortgage Standards - Regulation Z

• Mortgage Servicing Rules (02/14) - Regulation Z (TILA)

• Mortgage Servicing Rules (02/14)- Regulation X (RESPA)

• Loan Originator Compensation Requirements (02/15) - Regulation Z

• Interagency Final Rule on Appraisals for Higher-Priced Mortgages.

***

NAFCU Resources.  Yesterday, we mentioned our new mortgage rules webpage.  That page includes tons of resources to help credit unions comply and it will be growing each day.  Included are summaries of the new rules from NAFCU's Regulatory Affairs team, such as:

• Final Regulation:  Ability-to-Repay and Qualified Mortgages
• Regulatory Alert:  Concurrent Proposal for Ability-to-Repay and Qualified Mortgages
• Final Regulation:  Escrow Requirements for Higher-Priced Mortgages
• Compliance Monitor Article:  Escrow Requirements for Higher-Priced Mortgages
• Final Regulation:  HOEPA/High-Cost Mortgage Loans and Homeownership Counseling Amendments
• Final Regulation:  Mortgage Servicing Requirements (Both Reg Z and Reg X)

Note:  The resources linked above are for NAFCU members-only.  However, the new mortgage rules webpage has additional resources that are available to everyone - including webcasts, conference sessions and links to blog post categories.   

***

Upcoming NAFCU Mortgage Webcasts.  The first two webcasts of NAFCU's Mortgage Reform Webcast Series are quickly approaching:

• The CFPB's Final Mortgage Regulations - February 13, 2013 - Special Two-Hour Webcast - 2:00 p.m. to 4:00 p.m.

I'll be providing an overview of the new regulations - including specifically the scope and applicability of each regulation.  I'll also be zeroing-in on the finalized exemptions and how credit unions determine if they qualify for the exemptions.  For a taste of the resources I'll be providing, check out this Scope & Applicability Chart for the Escrow Final Rule. 

• CFPB's Ability to Repay and Qualified Mortgage Requirements - March 6, 2013 - 2:00 p.m. to 3:30 p.m.

On March 6, Andy Keeney from Kaufman & Canoles will be examining the details of the CFPB's Ability-to-Repay and Qualified Mortgage Requirements.  Andy will walk through the new underwriting guidelines - including the debt-to-income requirements - and explain how these rules will impact credit union mortgage lending.  And, importantly, the steps your credit union needs to take to comply by January 10, 2014.  

                     

Effective Dates for New Mortgage Regulations: The CFPB and "Issue Dates"

Written by Steve Van Beek

With all the new regulations, I thought it would be useful to list the effective date of each new regulation along with a link to the corresponding regulation page on the CFPB's website.

• June 1, 2013 - Escrow Requirements for Higher-Priced Mortgage Loans

• June 1, 2013 - Prohibition on Mandatory Arbitration and Financing of Credit Insurance Premiums (from MLO Compensation Regulation)

• January 10, 2014 - Qualified Mortgage and Ability-to-Repay Requirements

• January 10, 2014 - Mortgage Servicing Requirements - Reg Z (TILA) and Reg X (RESPA)

• January 10, 2014 - Loan Originator Compensation and Training, Certification and Identifier Disclosure

• January 10, 2014 - High-Cost/HOEPA Mortgage Loans and Homeownership Counseling Disclosures

• January 18, 2014  - Disclosure and Delivery of Free Copies of Appraisals - Regulation B

• January 18, 2014 - Appraisals for Higher-Priced Mortgage Loans

***

CFPB and "Issue Date."  The CFPB likes to make up its own rules.  Including their recent announcement that their rules are considered "issued" when they are posted on the CFPB's website rather than the normal Administrative Procedure Act timeframe of when the rules are published in the Federal Register.  

Well, as chance would have it, the CFPB's mortgage rules are slated for publication in the Federal Register for the following dates:

• January 22nd for Escrow Final Rule (link goes to actual Federal Register document)

• January 30th for Qualified Mortgage/Ability-to-Repay Final Rule (link goes to Public Inspection Desk)

• January 30th for High-Cost/HOEPA and Homeownership Counseling Disclosures (link goes to Public Inspection Desk)

The other regulations will be in the Federal Register at an even later date.  

Why does this matter?  The CFPB gave 12 months (and sometimes less) from the "issue date" to implement the majority of the new requirements.  Because the CFPB considers the "issue date" as the date of publication on the CFPB's website - rather than publication in the Federal Register - your credit union will have less time to comply with the final rules.  

Summary.  If the CFPB would have followed the normal Administrative Procedures Act process, your credit union would have 12 months - from the date of publication in the Federal Register - to comply.  

Unfortunately, Dodd-Frank gave the CFPB very strict deadlines for issuing their final regulations and the CFPB chose to alter long-standing rulemaking practices instead of using its exemption authority (like it did for other Dodd-Frank requirements) to ease the impact of these regulations.    

IRS Issues - Box 4 of 1098 & Truncated TINs Proposal; Credit Card Agreements to CFPB

Written by Steve Van Beek

Whenever I get a chance to talk to regulators directly, I make a point of explaining to them that credit unions are not able to focus solely on their regulations, even if they wanted to.  This morning's blog post is an example of that.  We've all been trying to keep up with the CFPB's final mortgage regulations, but there are plenty of other issues out there to stay on top of.  Plenty.  

***

MLO Compensation (and more) Final Rule.  Oh, and by the way, the CFPB's MLO compensation rule is finally out.  Cordray's remarks are here, the press release here, the summary is here, special regulation page here and the full rule is available here (541 pages).

Effective Date:  The majority of the rule is effective on January 10, 2014.  However, the prohibitions on mandatory arbitration and financing of credit insurance premiums are effective June 1, 2013.

*** 

Now, on to a few other items.

Mortgage Insurance Premiums & 1098s.  Throughout 2012, it was known that mortgage insurance premiums would not be deductible for tax year 2012.  But then the fiscal cliff legislation happened, and mortgage insurance premiums were made retroactively tax deductible and credit unions (and their vendors) scrambled to correct Box 4 of their 1098s.  The IRS issued Internal Revenue Bulletin 2013-3 which indicates that Box 4 - for mortgage insurance premiums - has been reinstated.  Additional information is available in the NAFCU Today.

IRS Proposal for Truncated TINs.  The IRS has been operating a pilot program since 2009 that allows certain filers to truncate Social Security Numbers and TINs on IRS information returns (more on the pilot program is available here).  On January 7th, the IRS proposed a regulation that would allow filers of certain information returns - including credit unions - to use a "truncated taxpayer identification number" (TTIN).  While this is only a proposal at this time, the feedback from the prior pilot program was overwhelming positive and it is likely that credit unions will have the option to use TTINs for next year's IRS information returns.  

Note: The proposal would not require credit unions to use TTINs.  But, you'd have the option.  

I wish other regulators took this approach.  In this situation, the IRS had been getting feedback from filers, consumers and organizations that TTINs would help protect nonpersonal public information and, potentially, reduce identity theft.  Not only did they listen to concerns, but they also proposed a rule that would make this change optional which would allow credit unions to make the transition when the time is right for their credit union (and their vendor).  

***

Credit Card Agreements Due January 31st.  Speaking of other regulators, credit card agreements are due to the CFPB by January 31st.  The underlying requirement comes from 12 CFR 1026.58(c).  These agreements need to be sent quarterly:  January 31st, April 30th, July 31st and October 31st.  I'd put those dates on your calendar if your credit union has over 10,000 credit card accounts.  For those under 10,000 credit card accounts, Section 1026.58(c)(5) includes a de minimus exception and you wouldn't need to send your agreements to the CFPB (there are still other requirements in 12 CFR 1026.58 that do apply).

The CFPB's Credit Card Agreement database is available here.  

Improvements Needed.  I'll note that the CFPB hasn't exactly made this quarterly submission process easy.  There isn't any information on their website regarding the process.  The emails the CFPB sends to institutions are sometimes late and the information is usually only sent to one person at the credit union (what happens if they left, are on extended leave or just on vacation?)  And, what happens when a credit union reaches the 10,000 threshold?  How do they learn the CFPB's process?  How do they get on the super secret "update your credit card agreement" email list?  

These are all issues that NAFCU has raised with the CFPB.  Hopefully we'll see changes in their process in the future to make it more transparent and easy to follow.  With all the other issues going on, this is one the CFPB should streamline to reduce the burden and confusion for card issuers.    

One Improvement:  One thing we have heard is that you should be able to include additional employees onto the CFPB's emails regarding the card agreement submissions.  Send them an email request asking them to add the additional email(s) whenever they send your credit union information on your credit card agreements.   

Reg B Appraisal Final Out; CFPB Summary of Higher-Risk Appraisals; More on Mortgage Servicing Rules

Written by Steve Van Beek

A couple of additional items before the weekend.  Reminder: NAFCU's offices will be closing early today and will be closed until Tuesday.  

Regulation B Appraisal Finalized.  The CFPB released their final rule for free copies of appraisals under Regulation B.  The press release is here.  There is a consumer summary as well as a detailed summary.    

The special page for the Regulation B final rule is located here.   

Effective Date:  January 18, 2014.  

***

Appraisals for Higher-Risk Mortgages.  As expected, the CFPB issued their own information regarding the interagency final rule on appraisals for higher-risk mortgages.  Their press release is here.  They also released a consumer summary as well as a detailed summary.  Effective Date: January 18, 2014.    

The special page for the Appraisals for Higher-Priced Mortgages* is located here.

*Note: The final rule adopts the term "higher-priced" for these loans to help align the rule with the existing "higher-priced" mortgage loan requirements (including escrows).  

NCUA also issued a press release and a link to the final rule on their website.  

So where will credit unions need to look for this requirement?  NCUA's rule or the CFPB's?

Here is from the final rule:

"The NCUA and FHFA adopt the rules as published in the Bureau’s Regulation Z at 12 CFR 1026.35(a) and (c), by cross-referencing these rules in 12 CFR 722.3 and 12 CFR Part 1222, respectively."

Thus, after the rules are in the Electronic Code of Federal Regulations, credit unions will need to use 12 CFR 1026 - Regulation Z - as NCUA's rule will simply tell them to go find the requirements in 12 CFR 1026.35. 

Just for fun, here is the wonderful legalese that will be located in 12 CFR 722.3(f):

"(f)  Higher-priced mortgage loans.  A credit union may not extend credit to a consumer in the form of a “higher-priced mortgage loan” as defined in 12 CFR 1026.35(a)(1), without meeting the requirements of section 129H of the Truth in Lending Act, 15 U.S.C. 1639h, and its implementing regulations in Regulation Z, 12 CFR 1026.35(c)."

Say that five times fast.  

***

More on Mortgage Servicing.  There has been quite a bit of discussion in the news about the 5000 transaction exemption for mortgage servicing.  Unfortunately, some of it has the potential to cause confusion.  When you are reading news stories or summaries of the mortgage servicing rule, remember that the 5000 transaction exemption does not cover all the new requirements.  For example, the requirements for error resolution and information requests procedures will apply to all credit unions performing mortgage servicing.  And, it looks like the force-placed insurance requirements will apply as well.  

"The Bureau agrees that additional exemptions are appropriate for certain of the rulemakings.  As discussed in more detail below, the Bureau has determined not to implement these additional exemptions to those regulations that principally implement requirements set forth in the Dodd-Frank Act.  These include the requirements in §§ 1024.35 (Error Resolution Procedures), 1024.36 (Information Requests), and 1024.37 (Force-Placed Insurance).  With respect to error resolution procedures and information requests, those provisions build upon the existing Qualified Written Request procedures, which are currently applicable to the servicers discussed above.  Providing an exemption to these requirements would have removed a currently existing consumer protection."  Page 90-91 of the Reg X/RESPA Mortgage Servicing Final Rule.

There could be more.  For now, if a colleague starts celebrating that you are under 5000 transactions and not subject to the mortgage servicing rule - just remind them of these six words that compliance officers know too well: "the devil is in the details."

Note: NAFCU's Mortgage Reform Webcast Series will feature a May 15 webcast on the error resolution and information request requirements.  

What is a Transaction?  We'll have more on this in a future blog post, but the periodic statement requirement covers all closed-end loans secured by a dwelling.  This would include closed-end home equity loans.  Open-end loans (i.e., HELOCs) are excluded.  Again, expect additional information next week on this issue (I have a weekend reading date with the devil to discuss the details).  

***

Final Rule for Mortgage Loan Originator Compensation?  I haven't seen it yet, but it is likely to come out today as well.  

The best place to check is the CFPB's main regulation page.  We'll also post the information on this blog post (yes, the one you are reading) after it is out.  Just click this link and you'll go to the compliance blog itself and will be able to see any updates.

Update at 4:30 p.m. on 01/18/2013.  Cordray's remarks on mortgage loan originator compensation are here.  Our NAFCU Today story is here.  Additional information on the rule - including the full regulatory text - is not expected until Sunday.    

Update at 6:45 a.m. on 01/19/2013.  The CFPB's press release is available as is their summary of the rule.  The full rule will come out Sunday, January 20th.  

Update at 2:00 p.m. on 01/20/2013.  The CFPB's special regulation page for the MLO rule is here.  The full MLO compensation rule is available here (541 pages).

Effective Date:  The press release indicates the effective date for the majority of the new requirements will also be January 10, 2014.  However, two provisions - prohibition on mandatory arbitration and the prohibition on financing credit insurance - will be effective June 1, 2013.

Have a great weekend!

Tracking the Comment Deadlines for the CFPB's Mortgage Proposals

Written by Steve Van Beek

With all the various mortgage proposals from the CFPB, it can be quite hard to track the proposals - including the comment deadlines.  We've highlighted the actual Federal Register notices in a past blog post (now updated with the Mortgage Servicing proposals), but we also wanted to highlight the comment deadlines for you as it is extremely important that credit unions make their voices heard to the CFPB about the magnitude of these proposed changes and, more specifically, the costs and operational changes that the proposals would require.  

Comment Deadlines.  Below are the comment deadlines for submitting comments to the CFPB.  

• September 7, 2012:  High-Cost/HOEPA Proposal

• October 9, 2012:  Mortgage Servicing Proposals

• October 15, 2012:  Mortgage Loan Originator Proposal

• October 15, 2012:  Higher-Risk Appraisal Proposal

• October 15, 2012:  Regulation B Appraisal Proposal

• November 6, 2012:  TILA/RESPA Integrated Disclosure Proposal

• November 6, 2012:  Proposed Change to Definition of Finance Charge 

***

NAFCU Regulatory Alerts.  NAFCU's regulatory affairs team has produced Regulatory Alerts for NAFCU members on each of these proposals.  You can view the Regulatory Alerts by clicking here (or download the PDFs directly from the links below):

• 12-EA-20: CFPB: Mortgage Disclosures (TILA/RESPA Integrated Disclosures)

• 12-EA-19: CFPB: Mortgage Disclosures (Finance Charge)

• 12-EA-21: CFPB: Proposed Rule to Amend HOEPA Regulations

• 12-EA-24: CFPB: Mortgage Servicing

• 12-EA-28: CFPB: MLO Compensation

• 12-EA-27: CFPB: Appraisals for Higher-Risk Mortgages

• 12-EA-26: CFPB: Free Access to Appraisals

***

NAFCU Webcasts.  In addition to the alerts above, we are also explaining the proposed rules in webcasts.  Below are two that may be of interest:

• Inside the CFPB's Mortgage Proposals - On-Demand Webcast - Special 3-hour webcast which highlights the Mortgage Servicing proposals, the High-Cost/HOEPA proposal as well as the TILA/RESPA Integrated Disclosure proposal (including a thorough discussion of how the proposed change to the definition of "finance charge" will impact your credit union).

• The CFPB's Latest Mortgage Proposals - November 7, 2012 - NAFCU's compliance team will highlight the impacts from the mortgage loan originator proposal, the higher-risk appraisal proposal and the Regulation B appraisal proposal.  Sign up by October 31st and Save $100.

We'll also be discussing the TILA/RESPA Integrated Disclosures and the Mortgage Servicing Disclosures at our 2012 Regulatory Compliance Seminar in Seattle.  Remember, NAFCU's webcasts and conferences are open to everyone - regardless of NAFCU membership.    

Tracking the CFPB's Mortgage Proposals - Federal Register

Written by Steve Van Beek

With the various mortgage proposals from the CFPB, I thought a good Friday blog post would be one that linked to the various proposals in the Federal Register so that credit unions had the proposed rules in one place.

Initially, here is a link to the CFPB's section of the Federal Register.  Below are links to the CFPB's mortgage proposals.

• High-Cost Mortgages and Housing Counseling Amendments Note: The comment period for the finance charge portion has been extended until November 6th.  
• Equal Credit Opportunity Act (Regulation B) - Appraisals
• Integrated Mortgage Disclosures under TILA/RESPA Note:  The comment period for the finance charge portion was also extended until November 6th.
• Appraisals for Higher-Priced Mortgage Loans
• Loan Originator Compensation (Regulation Z)

Update (10/01): The Mortgage Servicing proposals can be found here (Reg Z) and here (Reg X).  It doesn't appear that the Mortgage Servicing proposed rules have been published in the Federal Register yet (the comment period ends October 7th for those proposals).  Those proposals can be found here:  Reg Z and Reg X.  Our August 23rd blog post also has a recap of our mortgage servicing blog posts to date.

***

NAFCU Seminar.  We'll be discussing both of the Mortgage Servicing proposals as well as the TILA/RESPA Integrated Mortgage Disclosures in breakout sessions in Seattle (October 23-26th).  We'll also be discussing the other proposals in our CFPB Update sessions.  

On-Demand Webcast.  If you missed the 3-hour marathon webcast on Wednesday, you can still purchase the on-demand version in order to get a detailed update of the CFPB's proposals on mortgage servicing and high-cost mortgages (including the impact on HELOCs).  I also provided an overview of the proposed Integrated Disclosures.

***

Football Season.  I'll admit we've been a little slow on the football talk lately.  With that being said:  Go Blue!

Have a great weekend!

More on CFPB's Mortgage Loan Originator Compensation Proposal

Written by Michael Coleman, Regulatory Compliance Counsel

We recently blogged about the CFPB’s proposed rule concerning loan originator compensation. Today, we would like to take a closer look at the restriction on upfront points or fees and the “zero-zero” alternative loan contained in the proposed rule.  

Restriction on upfront points or fees. Under the proposed rule, the creditor or mortgage broker would be prohibited from imposing upfront points or fees on a consumer in a closed-end mortgage transaction “unless the creditor makes available to the consumer a comparable, alternative loan that does not include discount points and origination points or fees, unless the consumer is unlikely to qualify for such a loan.” See proposed Section 1026.36(d)(2)(ii)(A). This alternative loan is referred to as a “zero-zero alternative” by the CFPB.

In addition to the “zero-zero alternative” loan, the proposed rule requires that no discount points and origination points or fees could be imposed on the consumer unless there was a bona fide reduction in the interest rate. See proposed Section 1026.36(d)(2)(ii)(C).

Here is an excerpt from the summary of the proposed rule concerning the CFPB’s proposed use of its exemption authority in relation to the zero-zero alternative:

“For mortgage loans in which a mortgage brokerage firm or creditor pays  a loan originator a transaction-specific commission, the Dodd-Frank Act bans the imposition on  consumers of upfront discount points, origination points, or fees that are retained by the creditor,  broker, or an affiliate of either.  Although bona fide upfront payments to independent appraisers and other third parties would still be permitted, this change would require creditors in the vast majority of transactions in today’s market to restructure their current pricing practices.

However, the Bureau is proposing to use its exemption authority under the Dodd-Frank Act to allow creditors to continue making available loans with upfront points and/or fees, as long as they also make available an alternative loan, as described below.  The Bureau believes this approach would benefit consumers and industry alike.  Making both options available could  make it easier for consumers to evaluate different pricing options, while preserving their ability  to make some upfront payments if they want to reduce their periodic payments over time.  And the proposed approach would promote stability in the mortgage market, which otherwise would face radical restructuring of its existing pricing structures and practices to comply with the new Dodd-Frank Act requirement.”

Note that back in May, the CFPB was considering a prohibition on origination charges that varied with the size of the loan, and permitting only “flat” origination fees. NAFCU members expressed their concerns with these “flat” fees at the SBREFA panel on the proposal.

As a result of industry feedback on this issue, the CFPB did not include this prohibition in the proposed rule.  The CFPB indicates in the preamble to the proposed rule that the “zero-zero alternative” and the bona fide reduction in interest rates where origination fees are imposed, was developed as an alternative to the “flat fee” requirement, and that it accomplishes its purpose. 

CFPB’s Mortgage Loan Originator Compensation Proposed Rule

Written by Michael Coleman, Regulatory Compliance Counsel

The CFPB recently issued a proposed rule concerning loan originator compensation. The Federal Reserve finalized a rule (which was proposed prior to Dodd-Frank) on September 24, 2010, concerning loan originator compensation.  The CFPB’s proposed rule would implement additional provisions required by Dodd-Frank.

The CFPB issued a press release which gives an overview of the proposed rule. The CFPB also issued a 6 page summary of the proposed rule which discusses some of the major elements contained in the proposed rule. Here are several important requirements from the CFPB's proposed rule we would like to draw your attention to:

• Restriction on upfront points or fees. Under the proposed rule, the creditor or mortgage broker would be prohibited from imposing upfront points or fees on a consumer in a closed-end mortgage transaction “unless the creditor makes available to the consumer a comparable, alternative loan that does not include discount points and origination points or fees, unless the consumer is unlikely to qualify for such a loan.” See proposed Section 1026.36(d)(2)(ii)(A).

• Restrictions on loan originator compensation. The proposed rule retains the general ban on paying or receiving commissions or other loan originator compensation based on the terms of the transaction (other than loan amount), and the general ban on loan originators being compensated by both consumers and other parties, with some additional revisions. The proposed rule also clarifies and revises restrictions on pooled compensation, profit-sharing, and bonus plans for loan originators, depending on the potential incentives to steer consumers to different transaction terms.

• Qualification requirements for loan originators. For loan originators who are not already required to be licensed under the SAFE Act (for example loan originators employed by credit unions, who are only registered pursuant to 12 CFR § 1007.103) the proposed rule requires the employer ensure that the loan originator meets character, fitness, and criminal background check standards that are equivalent to SAFE Act requirements and receives training commensurate with the loan originator’s duties. (Note, we will talk about this in more detail in a future blog post.)

• Use of the loan originator’s unique identifier. The CFPB proposes that the loan originator include their Nationwide Mortgage Licensing System and Registry (NMLSR) ID on certain loan documents, including: the credit application; the GFE and settlement statement required by RESPA; disclosures required by section 128 of the Truth in Lending Act (15 U.S.C. 1638); the note or loan contract; and the security instrument.

• Anti-steering rules. The proposed rule retains the anti-steering rules from the Federal Reserve’s final rule and adds a requirement that where two or more loans have the same dollar amount of discount points and origination points or fees, the creditor must present the loan with the lowest interest rate and lowest total dollar amount of discount points and origination points and fees.

• Arbitration agreements. The proposed rule would ban general agreements requiring consumers to submit any disputes that may arise to mandatory arbitration rather than filing suit in court.

• Credit insurance. The proposed rule would generally ban the financing of premiums for credit insurance.

These are the broad strokes of the proposed rule, we will focus on one or two of the specific requirements in more detail in a future blog post. Note, the comment period for this proposed rule ends on October 16, 2012.

CFPB Releases Semiannual Regulatory Agenda - Spring 2012; Seminar in Seattle

Written by Steve Van Beek

CFPB Regulatory Agenda.  Yesterday, the CFPB posted its Semiannual Regulatory Agenda - for spring 2012.  The previous Semiannual Regulatory Agenda was released in February 2012.  The latest release follows the same format and includes a listing of regulations in the various rulemaking stages: prerule stage, proposed rule stage, final rule stage, long-term actions and completed actions.  

Below is a listing of the various future regulations - organized by rulemaking stage.  Keep in mind the agenda is current as of April 13, 2012 and the CFPB has taken numerous actions since putting this agenda together.    

Prerule Stage:

• Registration of Certain Nonbank Covered Persons
• Supervision of Larger Depository Institutions and Affiliates
• Home Mortgage Disclosure Act (Regulation C)
• Requirements for Prepaid Cards (Regulation E) 

Proposed Stage:

• Amendments to TILA and FIRREA Concerning Appraisals
• Disclosure Rules and Substantive Protection for Certain High Cost Mortgage Loans (Regulation Z)** (proposed on July 9th)
• Mortgage Originator Standards (Regulation Z)
• Mortgage Servicing (Regulation X; Regulation Z)
• TILA/RESPA Mortgage Disclosure Integration (Regulation X; Regulation Z)** (proposed on July 9th)
• Credit Card Pre-Opening Account Fees (Regulation Z)
• Procedural Rule To Establish Supervisory Authority Over Certain Nonbank Covered Persons Based on Risk Determination
• Supervision of Certain Nonbank Covered Persons—Defining Larger Participants in Certain Consumer Financial Product and Service Markets (LP 2) 
• Copies of Appraisals or Other Valuations To Be Furnished by Creditor (Regulation B)

Final Rule Stage:

• Supervision of Certain Nonbank Covered Persons—Defining Larger Participants in Certain Consumer Financial Product and Service Markets (LP 1)** (finalized on July 16th)
• Disclosure of Records and Information
• State Official Notification Rule
• Rules Relating to Investigations
• Rules of Practice for Adjudication Proceedings
• Restatement of Federal Consumer Financial Law Regulations
• Requirements for Escrow Accounts (Regulation Z)
• TILA Ability to Repay (Regulation Z)
• Confidential Treatment of Privileged Information
• Disclosure Rules for Remittance Transactions (Regulation E)

Long-Term Actions:

• Alternative Mortgage Transaction Parity (Regulation D)
• Business Lending Data (Regulation B)
• TILA Mortgage Amendments (Regulation Z) 

Completed Actions: 

• Disclosure Rules for Remittance Transactions (Regulation E)

***

Only 27 potential rulemakings!!  The Regulatory Agenda also includes a short summary of each rulemaking that is useful for providing a quick overview of what will be covered by the rulemaking.  However, as last Monday's proposed rules show - a short summary doesn't do much when the proposals are 1099 pages and 293 pages.  

***

NAFCU's 2012 Regulatory Compliance Seminar.  Luckily, you don't have to read and understand all 27 potential rulemakings on your own.  We'll be covering quite a few of them at our 2012 Regulatory Compliance Seminar in Seattle, Washington - October 23-26.

The program-at-a-glance is available here (and we'll be including additional sessions as the proposals continue to flow).  We already have a session on the TILA/RESPA mortgage disclosures, the upcoming mortgage servicing proposal (including the periodic statement requirement) as well as a session on the remittances final rule.  Detailed session descriptions can be found here.

Remember - you do not need to be a NAFCU member to attend.  And, Save $100 if you Register by August 31st!

CFPB Bulletin on Mortgage Loan Compensation; NCUA Report - EHL Poster

Written by Steve Van Beek

I've been wondering if and when the CFPB would start issuing guidance to regulated entities on the existing regulatory requirements the CFPB inherited.  It seemed the CFPB's focus - outside of examinations and inquiries - was placed on making sure they met their Dodd-Frank deadlines for adding new regulatory requirements on financial institutions.  

With that lead-up, on April 2nd the CFPB issued Bulletin 2012-02 which seeks to clarify an area of 12 CFR 1026.36 of Reg Z on mortgage loan compensation.  Prior Bulletins from the CFPB can be found here.

Bulletin 2012-02.  The CFPB stepped into an area that had caused quite a bit of confusion since it was enacted (and the Fed's Webinar last March seemed to muddy the waters more).  The rule itself - 12 CFR 1026.36 - prohibits the payment of compensation based on the loan terms or conditions.  The staff commentary takes this prohibition into grayer waters by extending the prohibition to any factor that might be used "as a proxy for a term or condition."  As you can imagine, there has been quite a bit of confusion and the CFPB's Bulletin seeks to provide clarity in one area.

Qualified Plans  The Bulletin includes this description of the questions received:

"The Bureau has received several questions about whether and how the Compensation Rules apply to qualified profit sharing, 401(k), and employee stock ownership plans (collectively, "Qualified Plans"). 

The CFPB answers the Qualified Plan question as follows:

"To provide clarify at this juncture, the Bureau's view is that the Compensation Rules permit employers to contribute to Qualified Plans out of a profit pool derived from loan originations.  That is, financial institutions may make contributions to Qualified Plans for loan originators out of a pool of profits derived from loans originated by employees under the Compensation Rules."

Non-Qualified Plans.  The CFPB declined to comment or provide clarity on other profit-arrangements/plans that are not Qualified Plans.  However, the CFPB indicated they would address this in a future rulemaking required by Dodd-Frank.

Not the Last Word.  While clarity is usually welcomed, this particular clarity might not be long-lived as Section 1403 of Dodd-Frank requires the CFPB to adopt loan originator compensation rules by January 21, 2013.  According to the Bulletin, "the Bureau anticipates issuing a proposed rule for public comment in the near future on the loan origination provisions in the Dodd-Frank Act."  These new rules will also have the potential to change the CFPB's interpretation on Qualified Plans (but credit unions can rely on the Bulletin until then).  

In other words - we'll have continued confusion and lack of clarity as well as another round of proposed and final regulations on mortgage loan compensation.  And people wonder why Dodd-Frank creates regulatory burden?  

***

The April 2012 NCUA Report is now available.  I was very glad to see this put in writing by NCUA regarding the timeframe for the Equal Housing Lending poster:

• Updates nondiscrimination requirements for credit union operations (Part 701) to reflect the recent designation of NCUA’s Office of Consumer Protection to hear Fair Housing Act and Equal Credit Opportunity Act complaints. Credit unions engaging in real estate-related lending will have a reasonable amount of time to post updated Equal Housing Lender signs in public areas.

From Page 5.  As usual, the NCUA Report is a useful resource to review to get the latest directly from NCUA.