NAFCU Compliance Blog

New NCUA Database; NCUA YouTube Video Series; Free NAFCU Compliance Seminar UDAAP Presentation PowerPoint

 Written by Eliott C. Ponte, Law Clerk

NEW NCUA Database for Financial Service Providers

Last week, the NCUA announced a new online tool to assist credit unions in finding financial service providers.  Created by the NCUA’s Office of Small Credit Union Initiatives, the database will give credit unions the ability to research credit union service providers at no charge.

According to William Myers, Director of the Office of Small Credit Union Initiatives, “credit unions are often looking for companies to provide products and services to help them meet members’ needs, comply with regulations, or just handle day-to-day operational requirements.”  Director Myers believes that “NCUA’s new program can help [credit unions] find the right supplier.”

While I agree with Director Myers that such a database will benefit credit unions, after looking at the database, it does not appear that the database was ready to be released to the public.  Several categories listed in the database, like “Member Business Loan CUSO,” “Cost Benefit Analysis,” and “Credit Reporting Services” are completely empty.  Yes, the database is blank in several areas; but once vendors register, credit unions will be able to use this database as it was intended to be used... to find third party servicers. 

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NCUA Goes to YouTube to Fight Fraud

Regular NAFCU Compliance Blog readers will remember that we blogged about a NCUA video series on Fraud Prevention back in July of 2014.  In our July blog post, we noted that the NCUA had only released half of their eight-part series.  The first half of the series provided an overview of the series, and outlined the importance of maintaining a policy on employee fraud and conducting surprise cash counts.  The second half of the series includes videos on:

• Employee family accounts
• Vault cash
• File maintenance transaction reports

In addition to the three videos listed above, there is also a conclusion video that highlights the main points of the entire video series, and discusses several helpful resources available to credit unions.  After watching the latest four parts, I can attest that this video series is both well done and informative.  I encourage credit unions to take advantage of this free resource. 

The complete eight-part series, “Deterring, Preventing and Detecting Employee Dishonesty,” is available on NCUA’s YouTube channel.

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NAFCU Compliance Seminar Slides on UDAAP Available: See What You Missed

Last month, former colleague Steve Van Beek presented on UDAAP at NAFCU’s regulatory compliance seminar.  If you were not one of the lucky compliance officers that got to here Steve’s excellent presentation on UDAAP, but you are interested in all the information that you missed:  well, you’re in luck!  Steve has made available his power point presentation to at no cost.  Click on this link to access his presentation and see what you missed by not attending.

 

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NAFCU Closed on Veterans Day; Thank You!

In honor of Veteran’s day, NAFCU will be closed on Tuesday, November 11, 2014.  NAFCU will reopen at 9:00 AM on Wednesday, November 12, 2014. 

The NAFCU compliance team would like to thank all veterans for their service and sacrifice.   We appreciate all that you have done to make sure that freedom still comes free.  Thank you.

NCUA to Cease Paper Mailings - Sign-Up for NCUA Express; Google Reader Ending Service on July 1st

Written by Steve Van Beek

Last week Bernadette highlighted the May 2013 NCUA Report. On the very last page was this notice:

"NCUA will stop mailing Letters to Credit Unions and other regulatory alerts as part of its ongoing efforts to reduce operating costs and become more efficient.

NCUA CU Express recipients automatically get the latest regulatory guidance and letters. All credit unions CEOs and Board Chairmen with emails provided in the CU Profile system are automatically subscribed to NCUA CU Express, and should currently be getting all regulatory letters or alerts.

NCUA CU Express emails are mandatory for credit union CEOs and Board Chairmen, while the separate, but similar NCUA Express is open to the public and subscriber-driven. In addition to regulatory alerts, you can sign up and receive NCUA’s monthly newsletter, The NCUA Report, legal opinions, press releases and more, using the NCUA Express system.

For more information about NCUA Express and to subscribe, free of charge, visit http://go.usa.gov/TDsC."

If you haven't already, consider signing up for the NCUA Express. At a minimum, be sure to pass this along to your colleagues in case they rely on the paper mailings. And, while you are at it - make sure your CEO and Board Chairmen's emails are current so they are getting all the information from the NCUA CU Express.

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Google Reader. Many blog readers use an RSS aggregator such as Google Reader. On July 1st, Google will no longer be supporting Google Reader - so it makes sense to begin the migration to a new RSS aggregator soon. Personally, I've switched over to Feedly (and since wondered multiple times why I didn't earlier). And, best of all - you can connect your existing feeds from Google Reader over to Feedly. Of course, there are additional alternatives as well. 

If you're wondering what RSS is, Wikipedia has some good information. In short, RSS feeds (and an RSS aggregator) allow you to receive updates to a particular blog (or other website) when they occur. If your email inbox is overflowing with blog posts and other resources, having an RSS aggregator can help you stay on top of the news you need without it cluttering up your inbox.  

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Asheville, North Carolina. Last week, Erin and I had the chance to head down to Asheville for NAFCU's Board of Directors Conference. Asheville is a special city for us as we got engaged there over Labor Day weekend in 2010.

Biltmore Gardens

Chimney Rock State Park, Chimney Rock, NC. And, that is Lake Lure in the background. Erin informed me numerous times (plus or minus 20) that Lake Lure was where "Dirty Dancing" was filmed.

CFPB Proposes to Push Back Compliance Date for Credit Insurance; FSOC Report

Written by Steve Van Beek

Last week, the CFPB proposed to push back the compliance date for the prohibition on single-premium credit insurance. The prohibition - located in the loan originator final rule - is slated to become effective June 1, 2013. The proposed rule would provide a temporary delay to the new rule. In short, there has been quite a bit of confusion since the final rule was issued - mostly due to CFPB's inclusion of examples in the preamble to the final rule.

In addition to the delay, the CFPB has indicated they will be issuing another proposed rule on this issue to gain additional feedback in hopes of clarifying the requirements:

"In light of the interpretive questions that have arisen since publication of the Final Rule, the Bureau intends to publish a new proposal to seek further notice and comment on the provision in June 2013. In that proposal, among other things, the Bureau plans to (1) seek public comment, including from industry stakeholders and consumers, regarding the applicability of the prohibition to transactions in which credit insurance premiums are charged periodically; and (2) propose a new effective date for § 1026.36(i), under which the provision would take effect some time after finalization of that proposal."

Until that future proposed rule, the CFPB is issuing this proposal to temporarily delay the June 1, 2013 deadline. Are we having fun yet?  

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FSOC Annual Report. The Financial Stability Oversight Council (FSOC) recently issued their 2013 Annual Report detailing the activities of the Council, significant market and regulatory developments, and potential emerging threats to the financial stability of the United States. The report includes seven themes; however, notably absent is any discussion of regulatory burden on financial institutions. This is incredibly unfortunate as the FSOC has a statutory mandate from Dodd-Frank to facilitate coordination between federal regulators.   

Unfair, Deceptive or Abusive Acts or Practices: Airline Taxes Edition

Written by Steve Van Beek

Ok, we're going a bit off-topic for a couple of reasons.

1. It is Friday.
2. Why not?
3. It is interesting to think of the issues facing compliance officers in other industries.

The Washington Post ran a recent opinion piece from George Will which highlighted a requirement for airlines when they disclose taxes and fees:

"Spirit, Allegiant and Southwest are low-cost carriers that have thrived since the deregulation of the airline industry, which began in 1978. The government retains a narrow authority to prevent deceptive advertising practices. But as the airlines argued in petitioning the Supreme Court to hear their case, the government is micromanaging their speech merely to prevent the public from understanding the government’s tax burdens.

The government’s total price rule forbids the airlines from calling attention to the tax component of the price of a ticket by listing the price the airline charges and then the tax component with equal prominence. The rule mandates that any listing of the tax portion of a ticket’s price “not be displayed prominently and be presented in significantly smaller type than the listing of the total price.” The government is trying to prevent people from clearly seeing the burdens of government.

These three low-cost carriers compete for the most price-conscious travelers, and they want to tell those travelers which portion of a ticket’s cost the airlines control. The government, far from regulating to prevent customer confusion, is trying to prevent customers from understanding the taxes and fees that comprise approximately 20 percent of the average airline ticket." (Emphasis added).

I'm not trying to get political - but I found it very interesting that airlines face regulations which tell them their tax and fee disclosures cannot be displayed prominently. 

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I wonder what the CFPB would say about such a regulation......Have a great weekend!

What is Three-Dimensional Compliance?

Written by Steve Van Beek

Last week, I shared two slides from my upcoming presentation How the CFPB Impacts Your Credit Union at NAFCU's Directors Conference in Asheville, NC. One of the key takeaways will be the idea of Three-Dimensional Compliance.

So, what is Three-Dimensional Compliance? In short, it is a new way to think about the role compliance plays in the credit union. Here is a snippet from my article in the May/June The Federal Credit Union magazine:

"Beyond the Checklist

The creation of the CFPB means that credit unions need to review the role compliance plays in the credit union. Often the compliance officer is brought into a discussion late in the process, and her job is to approve or disapprove a particular action based on the regulatory requirements. Going forward, this “yes or no” approach to compliance will need to change. The CFPB’s focus is principle-based as well as requirement-based. Not only will credit unions need to determine if their product or service is compliant with laws, regulations and guidance, but they will also need to expend resources to document that the product or service provides a benefit to members.

When new requirements are issued, credit unions won’t be able to simply work through a checklist of new requirements and make tweaks to their products and disclosures. They will also need to undertake a three-dimensional analysis of the product or service, asking: 

• Why is the regulator taking this action?

• How were consumers impacted by the prior practices?

• How do consumers view the product or service?

• How does the credit union market the product or service?

• Does the credit union’s marketing of the product or service correspond with how the product or service is used by members? 

In other words, when regulators identify a product or service that has been abused (by either consumers or financial institutions), credit unions need to complete a full 360-degree review of their offerings in order to reduce their compliance, reputation and strategic risks."

You can find the full article here.

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Reading the CFPB's Tea Leaves. If that message sounds like something your senior managers or Board needs to hear, be sure to pass along information about NAFCU's Annual Conference - specifically our Regulation & Economy Track. We'll be meeting in Boston from July 9-13 and you can see the description of my talk below:

Reading the CFPB’s Tea Leaves 

The pace of the Consumer Financial Protection Bureau’s rulemaking has put credit unions on the defensive. For example, the CFPB’s final mortgage regulations will require a complete overhaul of credit unions’ mortgage operations. Hear which requirements will need special time and attention from your staff and gain best practices to stay on track with your implementation plan. And, just as importantly, hear which areas the CFPB is looking at next. Today’s scrutiny leads to tomorrow’s regulatory requirements. We’ll discuss the CFPB’s focus on prepaid cards, private student lending, overdraft protection programs and checking account disclosures – including what steps your credit union can take now to prepare for new requirements. 
Steve Van Beek, Esq., NCCO, Director of Regulatory Compliance, NAFCU

Full information on the conference can be found here.

What Does Your Board Need to Know About the CFPB?

Written by Steve Van Beek

The headline above was my goal when I created a presentation for NAFCU's Board of Directors & Supervisory Committee Conference next month in Asheville, North Carolina. The first point is that the CFPB's regulations apply to all credit unions.

After that, you can see my overview and key takeaway slides below.

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It's Not Too Late. Your Board can still sign up for the conference - May 15-17 in Asheville, NC - and we'll be having similar discussions at NAFCU's Annual Conference - July 9-13 in Boston, Massachusetts.  

Here is another question: How are you informing and updating your Board on the CFPB's actions (and potential actions)? 

CFPB Issues Escrow Guide; Proposes Changes to Ability-to-Repay & Servicing Requirements

Written by Steve Van Beek

Escrow Guide. On Friday, the CFPB issued a Small Entity Compliance Guide for the Amendments to the Escrow Requirement for Higher-Priced Mortgage Loans. As you work through the escrow changes - effective June 1, 2013 - be sure to review the Small Entity Guide as it is the CFPB's effort to explain the changes in plain English.

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Proposed Clarifications. Also on Friday, the CFPB announced they were proposing clarifications to the ability to repay/qualified mortgage requirements as well as the mortgage servicing requirements. This proposal is in addition to the escrow proposal issued the week prior.

The announcement includes this language from the CFPB:

"These proposals are part of our commitment to facilitate implementation of the rules issued in January under the Dodd-Frank Act. We at the Bureau believe that we have a responsibility not just to write a rule, but to see that it is implemented effectively."

These proposals have a very short comment period - so be sure to weigh in on the issues causing your CU headaches. The escrow proposal has a 15 day comment period (comments due May 3, 2013) and the latest proposal indicates there will be a 30 day comment period.

We'll have more on the ability-to-repay/QM and servicing proposal, but for now - here are the main areas that will be clarified:

• Debt-to-income ratio

• Contract variances and the temporary QM provision

• Purchase, guarantee or insurability status and the temporary QM

• No field preemption under Regulation X

• Small servicer exemption

For additional information, see the announcement and the language of the proposed text. 

2013 HMDA Getting it Right Guide; New NAFCU Calendar; Reg Alert on Escrow Proposal

Written by Steve Van Beek

2013 HMDA Guide. Yesterday, the Federal Financial Institution Examination Council (FFIEC) issued the 2013 HMDA Getting it Right! guide. According to the main page:

"The 2013 edition reflects the transfer of authority over Regulation C from the Federal Reserve Board to the Consumer Financial Protection Bureau. Appendix D, comment 1003.2 (Financial Institution)-2 is updated with the asset-size threshold exemption applicable to collection of 2013 data. There are also minor changes to the general text of the Guide, including updates to Sources of Geographic Information and Submitting the LAR."

You can find the full PDF of the 2013 Guide here.  

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Long Time Coming. Now, you may be wondering when the last version of the Guide was issued?  2010.  The 2011 version would have been the lame duck one when the Federal Reserve still had authority for Regulation C (HMDA). However, there was no guide issued. On July 21, 2011, the CFPB took over Regulation C and they failed to release a guide in 2012.  Fortunately, in year two, the CFPB found the time to update the Guide and provide guidance to HMDA-reporting institutions.

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Garbage In, Garbage Out? The CFPB is a self-described "data-driven" agency. If you doubt it, take a read through this Bloomberg.com story: U.S. Amasses Data on 10 Million Consumers as Banks Object. To me, if you want to be data-driven - the best first step is to make sure your regulatory requirements are clear and understandable so that the data you collect (whether it be consumer complaints, HMDA data, or anything else) is as reliable as possible. But, that's just me.  

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NAFCU Calendar.  NAFCU has a new calendar on our website that features:

• Compliance Deadlines;

• Important Regulatory Dates;

• Education & Conferences;

• CU Research Survey Deadlines; and

• Other Important Dates.

The calendar allows you to navigate month-by-month, click to find more information and add dates to your own calendar. For example, the "more information" link on the June 1st Escrow Changes Deadline includes this information:

CFPB Compliance Deadline: Escrow Requirement

Description:

Amended escrow requirements for higher-priced mortgage loans. Added a new small creditor exemption for credit unions that meet a four-part test.

Regulatory Text: 12 CFR 1026.35

NAFCU Compliance Blog: Mortgage Reform - Escrows

NAFCU Resources: www.nafcu.org/mortgagerules/#escrow

Download the latest full Compliance Calendar, including proposed regulations, past deadlines and more.

Date:Jun 01, 2013    

Add to Calendar                                             Back to Calendar

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NAFCU Members. The Mortgage Rules webpage includes NAFCU's Regulatory Alert on the CFPB's recent proposed rule. The proposal was published in the Federal Register yesterday and only provided 15-days for comments (comments to NAFCU on the Regulatory Alert are due on Wednesday, April 24).  

30 Minutes to Report Credit Card Plans?; Consumer Compliance Outlook; HELOC Webcast

Written by Steve Van Beek

Information Collection on Report for Credit Card Plans. Remember back on February 1 where I got all bent out of shape regarding the CFPB's expansion of their Credit Card Survey to certain credit unions with 10 days notice? 

Yesterday, the CFPB issued an Information Collection Request which asks whether the 30 minutes it estimates for financial institutions - including approximately 20 of the largest credit unions - is accurate. 

"Request for Comments: Comments are invited on: (a) Whether the collection of information is necessary for the proper performance of the functions of the Bureau, including whether the information shall have practical utility; (b) The accuracy of the Bureau's estimate of the burden of the collection of information, including the validity of the methods and the assumptions used; (c) Ways to enhance the quality, utility, and clarity of the information to be collected; and (d) Ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Comments submitted in response to this notice will be summarized and/or included in the request for Office of Management and Budget (OMB) approval. All comments will become a matter of public record."  (Emphasis added).

The reporting form is FR 2572. And, you can also review the instructions and form (opens as an Excel document) for responding to the report. After reading the instructions, would you say that completing the task would take 30 minutes?  Me neither.  

For the 20 or so credit unions who were recently added to the Report - did it take your credit union 30 minutes?  For those credit unions who weren't covered - how long did it take you to determine you weren't covered?  

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Consumer Compliance Outlook. The First Quarter issue of the Philadelphia Federal Reserve's Consumer Compliance Outlook is now available. The articles this issue include:

• Servicemember Financial Protection Webinar: Questions and Answers
• 2012 Year in Review Webinar: Questions and Answers
• Credit CARD Act Requirements for Gift Certificates, Store Gift Cards, and General-Use Prepaid Cards

You can also download the full PDF here.

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HELOC Webcast. Don't miss NAFCU's webcast tomorrow on Which New Requirements Apply to HELOCs? - where I'll be walking through the new mortgage requirements that apply to HELOCs.   

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Wow - you couldn't ask for a better game last night (a different outcome, sure!).  Hats off to Louisville on a great season and an outstanding game. For Michigan - what a run and well done. 

I'll leave you with my favorite image from the game (Getty Images):

Oh, yeah - that was called a foul. One thing is for sure, the blog has definitely upped its basketball coverage since the days of Anthony's Penn State Nittany Lions. Fred also mentioned the coverage was a little too skewed to Michigan - so here is a link to Navy's season as well (does David Robinson have any eligibility left?).   

CFPB to Begin Issuing Information to Help Credit Unions Comply with Mortgage Rules

Written by Steve Van Beek

Last week I was at a conference with other credit union attorneys and I noted the only parts of the CFPB's Implementation Plan for the new mortgage rules was the press release (sent on February 13th) and one blog post on the preliminary rural and underserved counties list.

Well, the CFPB must have been listening because on Friday afternoon they announced their plans to provide their first substantive guides to the mortgage rules in the upcoming weeks.  Below is from their email:

"In the coming months, we’ll release plain language compliance guides, updates of the official interpretations, examination procedures, and other materials. We’re planning to release the first set of materials next week. 
 
If you’re in the mortgage industry or just want to know what we’re doing to help them get ready, sign up for our regulations-specific email list. The signup form is in the upper-right section of the page. 
 
consumerfinance.gov/Regulations 
 
A good implementation plan reduces confusion and costs for industry. That means less time figuring out what the rules mean and more time designing business practices that serve consumers and follow the rules. That’s a market that works better for everyone."

I'd encourage you to sign-up for the announcements and set aside time to review the materials the CFPB provides. 

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Back in early 2013 (just before the rules were finalized) the CFPB reached out to NAFCU for input on their Implementation Plan for the Mortgage Rules. While I was hopeful at the time, as the days passed by I became more convinced the CFPB missed a huge opportunity by waiting so long to begin communicating with compliance officers on the new rules.

Below are the suggestions I sent to the CFPB back in January:  

• "Applicability.  It is very important to credit unions that the CFPB be specific regarding which new requirements apply to which types of mortgage products.  Credit unions usually think in terms of the mortgage products they offer and not which regulation might apply.  The more the CFPB can do to make distinctions in their communications (and in the actual regulation and commentary), the less burden credit unions will face.  Some of the distinctions that would allow credit unions to know if the regulations apply to their product are included below. 
  • Open-End Credit versus Closed-End Credit
  • First lien versus Subordinate lien
  • Principal dwelling versus Any dwelling
  • Real-estate secured versus secured by personal property (which might be a dwelling – e.g., manufactured homes, mobile homes)

• Fact Sheet for Compliance Officers.  In the CFPB’s prior releases, there have been Fact Sheets for consumers and Fact Sheets for the press.  It would be very helpful if the CFPB released a Fact Sheet for compliance officers. 

• Ask CFPB & Prior Q&As.  Compliance officers should have an avenue to ask questions about the applicability and requirements of the new regulations.  The CFPB would then be able to post these questions and answers on their website to provide guidance to other compliance officers.  Very similar to the process the CFPB already uses to provide information to consumers. 

• One-Page Document with Compliance Dates.  It would be very helpful if the CFPB created and released a one (or two) page document that contains the compliance dates for all the new requirements.

• Webinars and Small Entity Guides.  These are very helpful to credit unions.  However, in order to have the greatest impact – they need to be released in a timely manner and clearly explain the applicability of the new rules.

• Citations.  Whenever possible, the CFPB should use citations when discussing new requirements so that credit unions can conduct further research and analyze the underlying regulatory text, any staff commentary and the preamble to the new regulatory requirement. 

• Annotated Model Forms.  The CFPB’s proposed model forms for the TILA-RESPA Integrated Disclosures included annotated model forms which allowed users to click on various sections of the model form and see the underlying citation and a link to the proposed rule.  Including this feature with the final rules would be extremely beneficial to credit unions – especially as they work with third-party forms providers.  The annotated model forms will allow credit unions to show their vendors the underlying regulatory requirement and why the particular language or formatting is required. 

• Break Up Topics/Changes Into Manageable Sections.  One of the aspects that NAFCU has found most effective in explaining large changes to regulations (such as from the Credit CARD Act or prior RESPA reform) has been to break up the new requirements in manageable pieces.  For example, the mortgage servicing sections could be clearly broken up in the following sections: (1) adjustable-rate notices; (2) periodic statements; (3) error resolution procedures; (4) information requests); etc.  This allows credit unions, who have very limited compliance staffs, to focus on certain changes initially and move on after implementing those changes rather than trying to comprehend the entire regulation at once."   

We'll have to wait and see how they do overall, but they certainly didn't make educating compliance officers a focus of their new rules. Instead, they worked the media angle and touted the past abuses by certain mortgage lenders and servicers while simply dumping the new rules and forcing everyone to wade through the 3507 pages.

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And, I must include your Moment of Zen (or at least mine) for today. Go Blue!

Read the Playbook - NCUA's Examination Focus for 2013

Written by Steve Van Beek

My colleague Anthony Demangone had a great blog post yesterday on NCUA tipping their hand on their Examination Focus for 2013. Anthony showed two slides from NCUA which highlighted:

• Ten Red Flags for Examiners

• Ten Things Your Examiner Will Like to See

I encourage you to view the slides on Anthony's blog post.

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Those slides are very helpful to credit unions, but don't stop there. NCUA has provided tons of information on what their focus will be in 2013. NCUA has given you the playbook, be sure you read it!

Below are four resources from NCUA that you'll want to review:

• Letter to Credit Unions 13-CU-01 on NCUA's Supervisory Focus for 2013

• Capacity, Clarity and Consistency Guide NCUA Exams in 2013 (from January NCUA Report)

• NCUA's Examination Issues in 2013 Webinar (aired initially on March 27, 2013)

• NAFCU’s May 1^st Webcast on NCUA’s National Supervision Policy Manual

Have a great weekend and Go Blue!

NCUA Fair Lending Webinar; Additional Research Tip - Internet Explorer

Written by Steve Van Beek

Note: NAFCU's compliance team will be out of the office the next two days at a training conference in DC. NAFCU members, if you have a compliance question - the best way to contact us via email: [email protected]. Keep in mind our responses will be delayed a little longer than usual.

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NCUA Fair Lending Webinar. Today is NCUA's free Fair Lending Webinar. You can sign-up for the webinar here. The announcement is located here. The webinar is today at 1 p.m. - register here.

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Yesterday, I blogged about saving certain blog posts to your desktop. I used Chrome as my browser but the same process works for Mozilla Firefox. For Internet Explorer, the instructions are below along with screenshots.

Saving Important Blog Posts to Your Desktop - Internet Explorer.

1. Click on the Title of the blog post to be taken directly to the blog post site.

2. After clicking the Title, you'll be taken to the blog's main webpage - showing the blog post you clicked on. Your screen should look similar to below.

3. On this page, right click and choose "Create Shortcut" and choose Yes to the question of whether you want to create a "shortcut to this website on your desktop."

4. Go to your Desktop and look for the new shortcut. You should see something similar to below.  Double-click on this shortcut and you'll be taken directly to the blog post on the internet.

Using Internet Explorer, there is a direct shortcut created rather than the separate files stored locally on your desktop. Both work and should help ensure you have quick access to important blog posts to increase your efficiency when researching the new mortgage regulations.

Research Tips - Saving Blog Posts; NAFCU's Mortgage Rules Webpage

Written by Steve Van Beek

Last Tuesday, we linked to a series of past blog posts which contain links to the new regulatory text as well as other research tips for finding, reading and understanding the new mortgage regulations. Especially helpful is the February 22 blog post on Finding the New Reg Z & Reg X Requirements in the Electronic Code of Federal Regulations which contains direct links to the new regulatory text, official staff commentary and the new model forms.

One of the problems is that in today's fast-paced environment, those blog posts tend to get lost in the shuffle and it may be hard to find the information when you need it. However, there is an easy solution that keeps those blog posts (and any others you want to refer back to in the future) at your fingertips.

Below is a step-by-step process to save important blog posts to your desktop.

1. Click on the Title of the blog post to be taken directly to the blog post site.

2. After clicking the Title, you'll be taken to the blog's main webpage - showing the blog post you clicked on. Your screen should look similar to below.

3. From this page, right-click anywhere on the page and choose "save as."

4. Be sure to select your Desktop as the preferred location to save the file. After you've saved the file, you should see a copy of the file (along with a folder containing additional files) on your Desktop.  It should look similar to below.

5. When you want to refer back to the blog post you've saved, double-click on the file and you'll be taken to a copy of the blog post as shown below. And, yes, that is screen shot of my current desktop (the only part of the Appalachian Trail I've done).

6. If you look really closely at the screenshot above you can see that the browser actually references the file on my desktop rather than the actual blog post on the internet. However, all the links on the blog post that you've saved will continue to work and that is the key point.

Hope this helps and you find it useful!

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NAFCU's Mortgage Rules Webpage. Don't forget to visit NAFCU's Mortgage Rules webpage which includes resources on all of the new mortgage regulations. Recently added were the following resources for NAFCU members:

• Q&As from NAFCU's February 13 Webcast on the CFPB's Final Mortgage Regulations

• Q&As from NAFCU's March 6th Webcast on the CFPB's Ability-to-Repay/Qualified Mortgage Requirements

• New Compliance Monitor article on Mortgage Loan Originator Requirements for Qualification, Screening, Training and Disclosures

• New Compliance Monitor article on New Homeownership Counseling Disclosure Requirement

Be sure to refer back to page on regular basis as we'll continue to add resources throughout 2013.

Outstanding Article on Reg E Error Resolution Procedures; Upcoming NAFCU Webcasts

Written by Steve Van Beek

Last Wednesday, I blogged on an article from the Fourth Quarter 2012 Philadelphia Federal Reserve's Consumer Compliance Outlook on Vendor Risk Management. Today, I wanted to share another outstanding free article on Error Resolution Procedures and Consumer Liability Limits for Unauthorized Electronic Funds Transfers.

The article is an absolute must read  - especially the examples which demonstrate the timeframes and liability limits. I strongly suggest passing this around to others at your credit union and consider using for training.

Reg E error resolution procedures has been mentioned by NCUA's Office of Consumer Protection in the past as an area where they see numerous member complaints and technical violations by credit unions (for example, by missing the timeframe requirements).  Again, take a look at the full article and be sure to share liberally at your credit union to ensure everyone is on the same page.

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Upcoming NAFCU Webcasts.  We have another full slate of webcasts for the next month or so. Registration is open for all the webcasts listed below:

• Which New Requirements Apply to HELOCs? - April 10, 2013.  Register by COB Wednesday to Save $100!
  • Unfortunately, the new requirements applicability to HELOCs are scattered throughout the 3507 pages of mortgage information released by the CFPB. I'll be explaining which requirements apply to HELOCs and, just as importantly, which do not. If your credit union makes HELOCs, be sure to sign up!

• Preparing for New Mortgage Servicing Notices - April 17, 2013
  • Suzanne Garwood of Venable, LLP will explain new mortgage servicing notices including the mortgage periodic statement, interest rate adjustment notices (ARM notices) and force-placed insurance notices. Keep in mind that the small servicer exemption only applies to the periodic statement requirement and all credit unions servicing closed-end mortgages would need to comply with the ARM notices and force-placed insurance notices. Sign up by April 10 to Save $100!

• A Look Inside NCUA's National Supervision Policy Manual - May 1, 2013
  • Hear from experienced credit union attorney David Reed and Larry Fazio, Director of NCUA's Office of Examination & Insurance, on NCUA's new National Supervision Policy Manual. You'll receive an overview of the examination process - including recent (and future) changes by NCUA. Sign up today!

• NCUA's Office of Consumer Protection: Function, Role and Objectives - May 8, 2013 - Free to all credit unions!!
  • Keeping an eye on NCUA's Office of Consumer Protection was a key takeaway from NAFCU's Regulatory Compliance School. The webcast will feature Gail Laster, Director of NCUA's Office of Consumer Protection, and Moisette Sweat, Director of Consumer Compliance Policy & Outreach, as they explain the role of NCUA's Office of Consumer Protection. Because of the importance of this information, we are making this webcast available for free to all credit unions.  Sign-up here (look to the right for the "Register Now" button).

You can find additional information on NAFCU's live and on-demand webcasts here.  

Interagency Statement on Flood Insurance; NAFCU's April Compliance Monitor; Go Blue!

Written by Steve Van Beek

On Friday afternoon, the Office of Comptroller Currency posted an Interagency Statement on the impact of the Biggert-Waters Act. NCUA is a part of the interagency group and I expect that they'll issue an announcement early this week. According to the statement, "this guidance discusses the effective dates of certain provisions of the Biggert-Waters Flood Insurance Reform Act of 2012 (the Act), enacted July 6, 2012, and the impact of the Act on the Agencies’ proposed Interagency Questions and Answers."

Specifically, the Interagency Statement discusses:

• Force Placement
• Civil Money Penalties
• Private Flood Insurance
• Escrow of Flood Insurance Premiums
• Interagency Q&As

The full Interagency Statement is here.

***

April Compliance Monitor. The April 2013 NAFCU Compliance Monitor is now available for download (NAFCU members only). The April issue includes a detailed article on new Mortgage Loan Originator Requirements as well as an article outlining the New Homeownership Counseling Disclosure Requirement. If you've missed any Compliance Monitors in 2013, head to this link where you can find the 2013 issues as well as direct links to the main articles.

Additionally, the April 2013 edition of NAFCU's Compliance Calendar & Pending Regulations Chart is also available.

***

Final Four Bound. In case you missed Michigan's domination of Florida yesterday, I've conveniently included a link to the highlights here. And, who can forget Friday's outstanding comeback against Kansas. If you were wondering my reaction to Trey Burke's three-pointer late in regulation, this video pretty much sums it up (if you need a refresher on the 1998 World Cup and Dennis Bergkamp, I've got you covered).

Go Blue!

Mortgage Periodic Statements & The E-SIGN Act; Key Takeaways from NAFCU's Webcast

Written by Steve Van Beek

One of the issues discussed last week at School and again on yesterday's webcast was the ability of credit unions to send mortgage periodic statements electronically without going through the full E-SIGN Act consent process.

Here is the language from new 12 CFR 1026.41(c):

"(c) Form of the periodic statement. The servicer must make the disclosures required by this section clearly and conspicuously in writing, or electronically if the consumer agrees, and in a form that the consumer may keep. Sample forms for periodic statements are provided in appendix H-30. Proper use of these forms complies with the requirements of this paragraph (c) and the layout requirements in paragraph (d) of this section." (Emphasis added).

The official staff commentary to 12 CFR 1026.41(c) has additional information:

"41(c) Form of the periodic statement.

1. Clear and conspicuous standard. The “clear and conspicuous” standard generally requires that disclosures be in a reasonably understandable form. Except where otherwise provided, the standard does not prohibit adding to the required disclosures, as long as the additional information does not overwhelm or obscure the required disclosures. For example, while certain information about the escrow account (such as the account balance) is not required on the periodic statement, this information may be included.

2. Additional information; disclosures required by other laws. Nothing in § 1026.41 prohibits a servicer from including additional information or combining disclosures required by other laws with the disclosures required by this subpart, unless such prohibition is expressly set forth in this subpart, or other applicable law.

3. Electronic distribution. The periodic statement may be provided electronically if the consumer agrees. The consumer must give affirmative consent to receive statements electronically. If statements are provided electronically, the creditor, assignee, or servicer may send a notification that a consumer's statement is available, with a link to where the statement can be accessed, in place of the statement itself.

4. Presumed consent. Any consumer who is currently receiving disclosures for any account (for example, a mortgage or checking account) electronically from their servicer shall be deemed to have consented to receiving e-statements in place of paper statements."  (Emphasis added).

As you can see, the commentary is extremely important. It clarifies that simple consent to electronic statements is sufficient (as opposed to the electronic consent required by the E-SIGN Act). It also clarifies that members who have consented to receive other disclosures electronically "shall be deemed to have consented" to receiving their mortgage periodic statement electronically.

Of course, the new periodic statement requirement only applies to credit unions that service 5000 or more mortgage loans (NAFCU log-in required). However, credit unions below the threshold - and, thus, not required to the new periodic statement - can still use the commentary as a guide to the delivery of any mortgage servicing information they currently send to members.

***

Two Important Notes.  

1. Limited Scope. This does not open the flood gates with regard to the E-SIGN Act. This flexibility applies solely to closed-end loans secured by a dwelling. It does not extend to HELOC statements which must follow 12 CFR 1026.7. The flexibility also does not extend to other products (checking accounts, credit cards, etc.). 
2. Training Staff. The E-SIGN Act has already caused numerous headaches for compliance officers. This flexibility for mortgage periodic statements (simple consent versus full E-SIGN Act consent) has the potential to amplify this confusion.

***

Yesterday's webcast included a detailed discussion of this issue as well as many of the other "under the radar" issues in the new mortgage regulations. Below you can find the Key Takeaways from the webcast (click on the photo of the slides):

Of course, the webcast is available for on-demand purchase. If you are following the Key Takeaways from School and putting together a mortgage implementation team at your credit union, this would be a good webcast to watch together to ensure everyone is on the same page.

Vendor Risk Management - Compliance Considerations

Written by Steve Van Beek

Back in May 2012, the Philadelphia Federal Reserve's Consumer Compliance Outlook webinar series discussed Vendor Risk Management - Compliance Considerations (the slides are available here). The Fourth Quarter 2012 Consumer Compliance Outlook publication included an article that provides highlights of the main themes. As you can see from the headings and subheadings, this article is a must read:

Vendor Risk Management - Compliance Considerations

QUESTIONS ABOUT THIRD PARTIES

What Are Common Types of Third-Party Relationships?

What Are the Risks of Using Vendors?

PRACTICES THAT INCREASE THE RISK OF VIOLATIONS

• Overreliance on third-party vendors.
• Failure to train new staff or retain knowledgeable staff.
• Failure to adequately monitor the vendor.
• Failure to set clear expectations.

EXAMPLES OF VENDOR RISK MANAGEMENT COMPLIANCE ISSUES

Flood Insurance Monitoring

Loan Modifications

Credit Card Administration

Disclosure Software

Revenue Enhancements

BEST PRACTICES

• Due diligence.
• Risk assessment.
• Clear contractual expectations.
• Comprehensive monitoring program.
• Board oversight.

CONCLUSION

Vendors provide value in the expertise and experience they offer; however, financial institutions must still maintain active oversight. It is important to remember that when a vendor performs a service or function, the institution bears ultimate responsibility for compliance. Because varying levels of risk remain with the institution that offers the product or service, a strong vendor risk management program is key to maintaining compliance and avoiding claims of improper treatment of bank customers. With good vendor management, banks can minimize the risk of less direct oversight or control and maximize the benefits gained through a well-managed vendor relationship. Specific issues about vendor risk management should be raised with your primary regulator.

Again, I recommend reviewing the full article and passing it along to your colleagues.

***

I also wanted to highlight the subsection on board oversight - which states:

"Board oversight. Keeping the board of directors properly informed about the vendor management program is key to ensuring that they can provide proper oversight and that the bank’s management process addresses the risks inherent in third-party relationships. The board should review the vendor management policy, due diligence reports, risk assessments, and monitoring results."

Board of Directors & Risk Management. Risk management and the role of the credit union's board of directors will be the focus of my colleague Anthony Demangone's presentation at NAFCU's upcoming Board of Directors and Supervisory Committee Conference.

Additionally, I'll be presenting on How the CFPB Impacts Your Credit Union and will include a discussion of the CFPB's latest actions related to "unfair, deceptive or abusive acts or practices" (UDAAP) - including how the actions of third-parties resulted in liability for the financial institutions. If your board is considering attending, sign up by Friday, March 29th to Save $100.

***

NAFCU's Online Training Program also includes 14 courses for credit union boards - including one on Risk Management.  

Research Tips for the New Mortgage Rules; NAFCU Webcast on New Rules

Written by Steve Van Beek

Over the past two months, we've written numerous blog posts on the new mortgage regulations. Included a few posts which contain research tips on how to track and find the new requirements. Below is a consolidated listing of those blog posts so that you have them in one central location:

• February 5th - CFPB Rules in the Federal Register; NAFCU Rule Summaries

• February 11th - Finding the New Requirements in the Electronic Code of Federal Regulations

• February 13th - NAFCU's Scope & Applicability Charts for the New Mortgage Rules

• February 22nd - Finding the New Reg Z & Reg X Requirements in the Electronic Code of Federal Regulations

• March 4th - Research Tip: Tracking Rulemakings in the Federal Register

Hopefully you find the above useful. We're always looking for blog ideas - so just let us know if there is something you'd like to see us cover in a future blog post.  

***

NAFCU Webcast on Mortgage Rules. NAFCU's compliance team will be conducting a webcast tomorrow on a few of the "under the radar" issues from the CFPB's new mortgage rules. We'll discuss:

• Details on homeownership counseling requirements;

• Mortgage loan originator qualifications, certifications and training requirements;

• New appraisal disclosure and delivery requirements;

• The small creditor exemption for the escrow requirement for higher-priced mortgage loans; and

• Other frequently-asked-questions regarding the new rules.

We'll also provide a "look ahead" at what other issues the CFPB is targeting in 2013.  

Registration is still open - Sign Up Today!  Remember, NAFCU's webcasts are available to anyone and everyone.  

Five Takeaways from Regulatory Compliance School; Earn your NCCO!

Written by Steve Van Beek

Last week was NAFCU's 2013 Regulatory Compliance School, and we had an outstanding class. Great questions, great speakers and great networking opportunities.  

Here are five takeaways from School:

• The role of compliance is changing and credit unions need to make sure their compliance function is three-dimensional

• Credit unions need to establish a mortgage rule implementation team to manage the numerous changes

• The actions of the CFPB and NCUA's Office of Consumer Protection have the potential to increase reputation risk at credit unions

• Compliance officers need a seat at the table during product development and rollout

• No one can do it alone - compliance officers should reach out to colleagues (both internal and at other credit unions) to ensure their CU is keeping up with all the new requirements

Congratulations to the Class of 2013 - it was truly a pleasure to spend the week examining the existing (and future) regulatory environment facing credit unions.  

***

Compliance Seminar. If you missed Compliance School, consider joining us in October for our Regulatory Compliance Seminar in Nashville where we'll be reviewing the latest compliance issues facing credit unions. We're building the agenda now, so if you have any suggestions of "must cover" topics - just shoot us an email.

***

Earn Your NAFCU Certified Compliance Officer (NCCO) designation. Compliance School offers the ability for attendees to sit for four examinations and earn the NCCO designation. We also offer a self-study approach that allows anyone seeking a thorough understanding of the laws and regulations impacting credit union operations. 

The NCCO exams track NAFCU's Credit Union Compliance GPS (the 2013 version) and interested persons can purchase all four exams and have them proctored by a colleague at the credit union. If you are interested in earning your NCCO exam, take a look at the following resources:

• What is on the NCCO exams?

• NAFCU's 2013 Credit Union Compliance GPS*

• 2013 NCCO Exam Study Guide (opens as a PDF)

• NCCO Program Frequently-Asked-Questions

The FAQs include this one making it clear the NCCO designation is open to everyone:

Does my credit union or organization need to be a member of NAFCU for me to pursue the NCCO designation? 

No, the NCCO program is open to everyone. Any credit union professional who desires to improve their overall comprehension and skills in the compliance arena may pursue the NCCO designation.  Currently, there are CEOs, compliance officers, internal auditors, attorneys, lending officers, risk managers, vendors and numerous other individuals who have successfully passed the exams to become NCCOs.    

*The GPS is not required to take the NCCO exams. However, it is strongly recommended as it serves as the primary text for the NCCO exams. In other words, the information needed to answer each exam question is covered in the GPS text. Additionally, keep in mind that the GPS is one per credit union (or organization). If your credit union sent one person to our 2013 Compliance School (or you've purchased the 2013 GPS), you would not need to purchase another copy.  

***

Or, budget to join us for our 2014 Regulatory Compliance School where you'll receive in-person training and the opportunity to sit for the NCCO exams!  

CFPB Issues Final Rule to Remove ATM Fee Disclosure; The Cost of Compliance

Written by Steve Van Beek

Yesterday, the CFPB announced - via blog post - that they were issuing a final rule to amend Regulation E to remove the federal "on the machine" requirement for ATM fee disclosures.  Kudos to the CFPB for reading our blog post from last week and taking action to remove this unnecessary regulatory burden (the CFPB's inaccurate regulation; Congress had removed the requirement from the Electronic Funds Transfer Act three months ago).

Of course, it wouldn't be a CFPB blog post without a plea for consumers to submit a complaint.  Here is how the blog post ends:

"Congress recently amended the law about ATM fee disclosures to eliminate the sticker requirement. Now the CFPB is following the law by changing these rules. While this change means that consumers may no longer see a sticker on the ATM telling them that the ATM owner may charge a fee, the information about these charges, including the amount of the charge, will still appear on the ATM screen or a printout. The consumer will be able to cancel the ATM transaction without paying a dime.

At the CFPB, we work to ensure that consumers have the information they need to make informed decisions about their financial products and services. If you have had a confusing experience with ATM fees, you may contact the CFPB to tell us your story or submit a complaint."

Importantly, the final rule will be effective immediately upon publication in the Federal Register. While it took the CFPB three months to follow Congress' command, at least they took the appropriate step and made the rule effective immediately.

***

Cost of Compliance.  Earlier in the week, the CFPB issued a blog post indicating they were studying the cost of complying with consumer financial regulations.  Below is the language from the post:

"We’re studying the costs of complying with consumer finance regulations

Banks, credit unions, and other financial services providers are concerned with compliance costs – how much it costs to comply with financial regulations – and we’re interested as well. Regulations can have many benefits for consumers, but the benefits sometimes come at a cost.

What we want to know
What are the extent and nature of compliance costs?

So, what are we doing?
Our Research, Markets, and Regulations team is studying the costs related to rules we inherited from other agencies. We want to increase public understanding of compliance costs. As a first step, we will talk to banks across the country about the costs they incur to comply with consumer regulations for deposit products and services. These include products like checking accounts and debit cards, which nearly all banks offer and most consumers use. Through our research, we hope to become better and smarter regulators."

Now, you may be thinking - with all the new regulatory requirements - the last thing we have time to do is spend time and resources quantifying the time and resources we're expending on complying with regulations!!

A completely understandable point. But, keep in mind that you don't need to respond directly to the CFPB or conduct a full analysis of your information.  NAFCU's research division collects information on a monthly basis from NAFCU members and uses this information to help inform NAFCU comment letters, letters to the Hill and outreach to the media.

Each month, NAFCU's research division sends out an Economic and CU Monitor survey which is summarized and reported in the Economic and CU Monitor.

So, if you don't have the time or resources to provide a full "compliance cost" evaluation - consider going to NAFCU’s Economic and CU Monitor page and complete the online survey each month. It only takes 15 minutes and you don't need to answer questions that aren't applicable or that you where you don't have the information at hand.

***

Have a great weekend!  And for all those at Compliance School this week - thanks for an outstanding week!  

CFPB Publishes Preliminary List of Rural and Underserved Counties for Escrow Requirement

Written by Steve Van Beek

Programming Note: NAFCU's compliance team will be in and out of the office next week for NAFCU's Regulatory Compliance School. Fear not, my colleagues from our Government Affairs team will have you covered with guest blog posts - which will give you a glimpse at the world from their point of view (which I think you'll like as it revolves around preventing and reducing regulatory burden).

***

Rural and Underserved Counties List. On Wednesday, the CFPB issued a Letter to Regulated Entities wrote a blog post announcing a preliminary list of rural and underserved counties. This list is important as amended escrow requirement for higher-priced mortgage loans includes an exemption for small creditors that meet a four-part test. The first part of the test is whether the credit union has made - in the preceding year - more than 50% of their first lien mortgages in rural or underserved counties. While the list issued Wednesday is preliminary, it should give your credit union an idea of where you relative to the 50% threshold.

It also looks like there will be some technical corrections to the escrow rule and the final rural and underserved counties list will be available at the time those corrections are finalized. Here is from the CFPB's blog post:

"As provided in the rule, the Bureau will publish a list of such counties. The Bureau will be publishing in the near future some proposed minor technical changes to the rule. You can download a preliminary list based on the proposed revisions in CSV, XLS, or PDF format. We expect to finalize that rule before June 1, 2013, and will publish the official list of “rural” and “underserved” counties for 2013 at that time." 

Unfortunately, it doesn't appear the CFPB is looking at pushing back the June 1, 2013 deadline. Given the uncertainty they've created, that would be a great idea. But, we can't even get them to update regulations when Congress explicitly tells them to reduce the burden on credit unions.

***

Additional Resources.  NAFCU members can find additional information on the "small creditor exemption" by checking out our detailed article on the Escrow Rule from our February Compliance Monitor as well as our Scope & Applicability Chart. Both of these resources are located on our special Escrow subsection of our Mortgage Rules webpage. They are also available at the bullets below (NAFCU log-in required).

• Escrow subsection of Mortgage Rules webpage

• February Compliance Monitor:  Escrow Requirements for Higher-priced Mortgage Loans (including a discussion of the small creditor exemption)

• NAFCU's Scope & Applicability Chart for the Escrow Requirements (including the full 4-part test for the small creditor exemption)

• Amended regulatory text of 12 CFR 1026.35 (effective June 1, 2013)

Upcoming NAFCU Webcasts. NAFCU's Mortgage Reform Webcast Series includes the following three webcasts (the March 27th webcast will feature a discussion of the small creditor exemption under the escrow requirement):

• March 27 - Digging Deeper: CFPB's Mortgage Rules with NAFCU's Compliance Team

• April 10 - Which New Requirements Apply to HELOCs? with Steve Van Beek (yeah - it is Friday - I'm going 3rd person!!)

• April 17 - Preparing for New Mortgage Servicing Notices with Suzanne Garwood of Venable, LLP

***

Have a great weekend!  And, if you'll be at School next week in National Harbor, Maryland - be sure to come by and say Hi!

Regulatory Burden: Update the Regulations, Please!

Written by Steve Van Beek

I have an irregular blog post series where I highlight specific examples of unnecessary regulatory burden.  You can see past blog posts at the bullets below:

• Regulatory Burden: Piles of Old Guidance

• Regulatory Burden: Short-Term

Regulatory Burden - Update the Regulations, Please!  Today I want to look at another form of regulatory burden. And, I'm going to use three different regulators as examples (equal opportunity!) The general gist is that when credit unions look at the regulations - they should be accurate. When Congress changes the law, regulators have an obligation to update their regulations so that entities they regulate - including credit unions - can rely on those regulations. If the regulations aren't updated promptly, the result is a textbook case of unnecessary regulatory burden.

***

Example 1 - Consumer Financial Protection Bureau. The CFPB has certainly been busy. However, I'd be shocked if they didn't notice that President Obama signed H.R. 4367 on December 20, 2012. This law removed the federal requirement for the "on the machine" ATM fee disclosures under the Electronic Funds Transfer Act (and implemented by Regulation E). If the CFPB did miss this, they should subscribe to the blog as they would see we were "hopeful" they would take swift action:

"Regulation E implements the EFTA and hopefully the CFPB will move very swiftly to amend Regulation E to ensure that everyone is aware of the change.

...

Note:  The removal of the requirement will occur after President Obama signs the bill and enacts it into law.  Thus, credit unions' litigation and compliance risk will reduce at that point.  The CFPB moving quickly to amend Regulation E and clarify the remaining requirement will be the icing on the cake.  Hopefully we don't have to wait too many birthdays."

Well, here we are on March 12, 2013 and a look to Regulation E - 12 CFR 1005.16 - clearly shows the CFPB hasn't updated Regulation E to implement the amendments to the Electronic Funds Transfer Act.

Where is the Burden? The burden lies in the fact that if a compliance officer was reviewing Regulation E they would come to the conclusion that federal law still requires the "on the machine" disclosure. Which is wrong. The Electronic Funds Transfer Act was amended by H.R. 4367 to remove the federal requirement and the CFPB just hasn't found the time to update Regulation E.

An isolated incident?  Must be due to the unique situations related to a new regulatory agency who was given so many mandates by Dodd-Frank.  Keep reading, it gets worse.

***

Example 2 - Federal Reserve Board. Dodd-Frank adjusted the "next-day availability" requirement under Regulation CC from $100 to $200. We blogged on this issue three times in 2011 and wondered why the Federal Reserve didn't issue a proposal to amend this one section of Reg CC:

"So, the Dodd-Frank change to Regulation CC - the one that bumps the $100 next day availability amount to $200 - when does it become effective?  July 21, 2011.  Some of you are thinking that you can wait, however, until the Fed finalizes its current Regulation CC rulemaking to comply.  Wrong.  Surprise, surprise, but the Fed buried this detail into its Reg CC proposal. 

Section 1086(e) of the Dodd-Frank Act increases from $100 to $200 the minimum amount of funds deposited by check or checks on a given business day that a bank must make available by opening of business on the next business day pursuant to § 603(a)(2)(D) of the EFA Act. That provision of the EFA Act is implemented in § 229.10(c)(1)(vii) of Regulation CC, and the increase is expected to take effect on July 21, 2011, regardless of whether the Board and the Bureau have amended Regulation CC. See, 76 Fed. Reg. 16,869."  [May 9, 2011 Blog Post]

***

"Regulation CC.  A change in Regulation CC from $100 to $200 for next-day availability.  The Federal Reserve has proposed changes to Reg CC that have not been finalized.  This change to $200 becomes effective though the Federal Reserve has not changed the language of Reg CC.  

....

Reality Check: Why didn't the Fed propose two different rules?  Rather than confuse the entire financial industry, the Fed could have easily issued one rule to implement the Dodd-Frank change and a separate rule to propose its other changes to Reg CC." [July 20, 2011 Blog Post]

***

"The letter is dated August 15.  Which is interesting because the change to $200 became effective July 21, 2011.  

Dodd-Frank was signed on July 21, 2010.  The Reg CC proposal was released March 3, 2011.  I'm still puzzled why the Fed did not propose two separate rules - with one proposal solely implementing the $200 change.

These are the types of headaches that do not get captured in any data on regulatory burden." [August 21, 2011 Blog Post]

A brief amendment to that last statement - these headaches do get realized by credit unions. Now, we need the regulators to realize the impact of their actions (or inactions).

Where is the Burden? A credit union searching the requirements for next-day availability under 12 CFR 229.10 of Regulation CC would find this:

"(vi) A check deposited in a branch of the depositary bank and drawn on the same or another branch of the same bank if both branches are located in the same state or the same check processing region; and,

(vii) The lesser of—

(A) $100, or

(B) The aggregate amount deposited on any one banking day to all accounts of the customer by check or checks not subject to next-day availability under paragraphs (c)(1) (i) through (vi) of this section."

And, if they followed that language - they would have a regulatory violation.  Let me repeat that - if a credit union followed the language of Regulation CC - as published by the Federal Reserve in the Electronic Code of Federal Regulations - they would have a regulatory violation as the regulation is incorrect.  If that isn't regulatory burden, I don't know what is!

***

Example 3 - National Credit Union Administration. By now, everyone is aware that the unlimited share insurance coverage for noninterest-bearing transaction accounts expired on December 31, 2012. We blogged on this issue on December 18, 2012 and then again on January 2, 2013. We also had discussions with NCUA about updating 12 CFR 745.14 of their regulations to prevent confusion by credit unions - which we discussed in our February 7, 2013 blog post.

So, here we are on March 12, 2013 and the language of NCUA's 12 CFR 745.14 still hasn't been removed. Granted, this example isn't as egregious due to the inclusion of this language "(a) Separate insurance coverage. Through December 31, 2012, a member's funds in a 'noninterest-bearing transaction account' (as defined in § 745.1(f) of this part)" - however, it still makes a credit union researching 12 CFR 745.14 follow-up with whether this has been unlimited share insurance has been extended or not. It hasn't and NCUA should make that information clear by removing 12 CFR 745.14 from their regulations.

Where is the Burden? There were so many back-and-forths on the unlimited share insurance issue - including Footnote 1 of NCUA's Letter to Credit Unions 12-CU-14 - that it is understandable that credit unions would be unsure whether or not the unlimited coverage was extended. NCUA could ease this burden by updating their regulations.

***

But, Regulating is Difficult. I'm sometimes told that I'm too harsh on regulators. That they have very difficult jobs. I get that. I'm not denying that fact (my wife works at a federal financial regulator and I know how hard she works). However, a basic job of a regulator is to make sure their regulations are clear and understandable. And, accurate.  This last part is extremely important. Credit unions need to be able to rely on the regulations that are published by the regulators. If they have to second-guess whether the regulations are accurate, they cannot perform other tasks - such as serving their members.

***

Summary.  If you are ever looking for an example of regulatory burden to show your Congressman - this blog post is a good start. We have the following:

• One example where a federal regulator failed to promptly update their regulations after Congress explicitly amended the law to remove an unnecessary regulatory burden from financial institutions.

• One example where a federal regulator failed to promptly update their regulations after Congress explicitly amended the law to provide further protections to consumers.

• One example where a federal regulator failed to update their regulations after Congress failed to extend a provision that was explicitly designed to "sunset" after a specific period of time.

I've been in the Washington D.C. area almost nine years and if I've learned one thing it is that Congress does not like to be ignored. 

The Importance of Informed, Decisive and Strategic Board Members

Written by Steve Van Beek

Yesterday, we blogged on the latest The Federal Credit Union magazine - including an article on The Vital Life of the CU Director.

Well, that article isn't the only one focusing on the role of the credit union's board of directors.  The NCUA Report has included detailed articles in both the January and February issues.

The January issue had an article from Region V titled Strong Board Leadership is Essential for Successful Credit Unions.  The article includes this summary:

"We found the most successful directors display three overarching and essential characteristics.

• They have a clear understanding of their role.
• They are engaged in critical decisions.
• They have a strategic mindset."

You can find the full article here.

The February issue includes an article from NCUA Chairman Debbie Matz titled Volunteer Directors Play Critical Role in Safety & Soundness (continued on page 6).

The article focuses on the board's duties to oversee the direction of the credit union as well as their risk management duties - including:

• Interest Rate Risk
• Third-Party Risk - including

1. Credit Risk; and
2. Reputation Risk

• Aging Membership

The article ties risk management back into overall safety and soundness.  

Read together - these articles provide a compelling case for informed, decisive and strategic credit unions boards.

***

With the above in mind, I wanted to share two NAFCU resources to help ensure your credit union's board is informed, decisive and strategic.  

NAFCU's Board of Directors & Supervisory Committee Conference.  NAFCU's 32nd Board of Directors Conference will be held May 15 - 17 in beautiful Asheville, North Carolina.  You can view the conference agenda here, which includes the following:

• Bank Secrecy Act and Risk Management with NAFCU's Anthony Demangone

• Fiduciary Duties and Ethics: The Top 10 Things Credit Union Directors Need to Know with NAFCU's Carrie Hunt

• Strategic Succession Planning

• How the CFPB Impacts Your Credit Union with Yours Truly

• Regulatory Update with NAFCU's Carrie Hunt

And, much more - including the opportunity to earn Bank Secrecy Act and Financial Literacy training certificates.  You can find additional information here (including the full conference brochure).

Sign up by March 22nd to get the early-bird rate!

***

NAFCU's Online Training Program.  NAFCU also offers an affordable online training program for credit unions.  The program includes 14 modules for board members - including two on the Bank Secrecy Act and one on Financial Literacy (training certificates are available for board members who view those modules).  You can find FAQs here and pricing information here.  If you have any questions - just shoot me an email and I'll help in any way I can.     

***

Be sure to pass the articles and the training opportunities along to your management and board.  And, remember that all of NAFCU's educational events - including our Board of Directors conference and Online Training Program - are open to all credit unions regardless of NAFCU membership.

***

Have a great weekend!  

The Federal Credit Union Magazine; Upcoming NAFCU Webcasts

Written by Steve Van Beek

The March-April edition of NAFCU's The Federal Credit Union magazine is now available.  I thought you'd enjoy the following articles:

• Rules, Rules and More Rules: How the CFPB is Impacting CUs

• The Vital Life of the CU Director

• NAFCU Expands Regulatory Team

• NAFCU's Legislative Priorities

• Management, Gen Y Style - including these five great tips:

1. Hire those who know more than you.
2. Work thoroughly and slowly.
3. Mentor and be mentored.
4. The art of woo.
5. Think of others first.

• Learning from Noncompliance

• What Bankers Worry About

As you can see, there is a little bit for everyone - be sure to pass along to others at your credit union that might be interested.  

***

Upcoming NAFCU Webcasts.  We have a full slate coming up.  Remember - NAFCU's conferences and webcasts are open to anyone and everyone (NAFCU members receive preferred pricing). 

• An Inside Guide to CU Board of Directors - March 13

• BSA Compliance Update: Citations, Investigations and Criminal Activity - March 19

• Digging Deeper: CFPB's Mortgage Rules with NAFCU's Compliance Team - March 27

• Which New Requirements Apply to HELOCs?  - April 10

• Preparing for New Mortgage Servicing Notices - April 17

• A Look Inside NCUA's National Supervision Policy Manual - May 1

I'm biased - but that is a great slate of upcoming webcasts.  If you're thinking - I want them all - we got you covered.  You can still purchase NAFCU's Unlimited Webcast Subscription - including access to the six webcasts we've already held in 2013.  

Cyber Threats; SCRA; Fannie Mae Resources; Economic Update; Mortgage Servicing Transfers

Written by Steve Van Beek

Below are couple of tidbits for your Tuesday.

***

NCUA Risk Alert on Cyber Threats.  NCUA issued Risk Alert 13-Risk-01 on steps credit unions should take to protect against Distributed Denial-of-Services (DDoS) attacks.  In recent months, these attacks have ticked up at financial institutions – including credit unions.  Be sure to pass this Risk Alert along to those in charge of risk management and information technology at your credit union.    

***

CFPB “Hit or Myth” on SCRA.  The CFPB had a recent blog post on various confusing issues related to servicemember protections under SCRA.  These “Hit or Myth” questions and answers might be useful for internal SCRA training.  For more CFPB information on servicemembers, check out this page.    

*** 

Fannie Mae Loan Quality Resources. If your credit union sells loans to Fannie Mae, be sure to check out their new resources regarding Loan Quality.  The webpage includes resource guides as well as free webinars to help understand Fannie Mae’s procedures.  Be sure to pass along the resource page to others at your credit union. 

***

NCUA’s February Economic Video.  NCUA’s latest economic video is now available for viewing on YouTube.  Each month, NCUA’s Chief Economist John Worth provides an overview of the economic market and how it impacts credit unions.  These are great videos to include in strategic planning or board sessions as NCUA comes directly to you – via YouTube – each month with an economic update.  

***

CFPB Bulletin on Mortgage Servicing Transfers.  In addition to changing nearly all the mortgage servicing requirements in January, the CFPB has mortgage servicing transfers in their crosshairs.  In mid-February, the CFPB announced their intent to “closely monitor transfer activity” by mortgage servicers.  In conjunction with the announcement, the CFPB issued Bulletin 2013-1 which provides specific information regarding the CFPB’s detailed focus on mortgage servicing transfers.  

Research Tip: Tracking Rulemakings in the Federal Register

Written by Steve Van Beek

We often get questions about the status of certain rulemakings.  For example:

• Has NCUA finalized their Emergency Liquidity proposal?

• Has the CFPB finalized (for the third time) the Remittance Transfer proposal?

• What about NCUA's CUSO proposal?

• Loan Participations?

You get the picture.  To help with this, we created a Pending Regulations Chart which can be found at the end of our Compliance Calendar.  You do not need to be a NAFCU member to view the Compliance Calendar; however, some of the linked resources are for members-only.  

***

Federal Register.  There is also a great way to track the rulemakings in the Federal Register automatically.  You can subscribe to the topic "credit unions" to be sure you are emailed whenever a credit union-related rulemaking is published in the Federal Register.  This is especially important as - we are all aware - rulemakings impacting credit unions do not come from just NCUA.  Of course, this isn't a perfect science as some rules might not be coded with the "credit union" topic.  But, I've found it works pretty well.

To subscribe, start out be going to the "credit union" topic page.  Click the "Subscribe" button on the right-hand side.

From here, you'll get a pop-up box that you can enter your e-mail address (or subscribe via RSS feed).

You can choose to receive all "credit union" topics or only those labeled as "significant actions."  For me, I'm not one to trust the self-labeling of "significant" by the regulators - so I subscribe to the broader group.

Have a great week!

Bozo's Grand Prize Game & Share Insurance; NAFCU's March Compliance Monitor

Written by Steve Van Beek

NAFCU's Compliance School is only a couple of weeks away and we are busy putting together the final details - including our presentations.  One of the sessions is on NCUA's Share Insurance and I wanted to share my favorite slide:

To me, Bozo's Grand Prize Game contains lessons for understanding share insurance coverage.  An account can only fit in one "bucket" at a time.  Understanding this helps explain share insurance coverage and how members can structure their accounts to maximize share insurance.  

***

NAFCU's March Compliance Monitor.  The March issue of NAFCU's Compliance Monitor is now available for NAFCU members.  The March issue highlights NAFCU's Scope & Applicability Charts and includes two main articles:

• Understanding the Small Servicer Exemptions

• NCUA's Final Credit Ratings Rule Impacts Credit Union Investments

There are also numerous Q&As on the CFPB's new mortgage requirements - including ones submitted during our webcast on the CFPB's Final Mortgage Regulations (available for on-demand purchase).

NAFCU Members:  If you click on the article links above you'll notice a new feature - we are publishing our articles in HTML format (in addition to the PDF).  This means the articles are fully-searchable on NAFCU's website.  And, we have more enhancements in the works as well - so stay tuned!

Have a great weekend!

CFPB Focusing on Students (and Private Student Loans); Free UDAP Webinar

Written by Steve Van Beek

The CFPB recently reiterated their focus on financial products offered to students.  A brief discussion of two current efforts is below. 

***

CFPB Inquiry into Campus Products.  In late January, the CFPB launched an inquiry into the financial products marketed to students through colleges and universities.  If your credit union has a relationship with a local college or university (or if you CU is sponsored by one!), be sure to keep an eye on this issue.   

***

CFPB Focusing on Private Student Loans.  The CFPB has not been shy when indicating they will be focusing heavily on private student loans.  If your credit union makes private student loans, be sure to track the CFPB’s actions and ensure you are ready for future changes.  On February 21, the CFPB penned two blog posts on student loans.  The first looked at student debt and schools.  The second was titled “Help Stop the Student Debt Domino Effect.”  The CFPB also announced a new Notice and Request for Information on the student loan market.  NAFCU’s Regulatory Affairs team will be providing a Regulatory Alert on this request for information and will also be drafting a comment letter to the CFPB. 

***

Free UDAP Webinar.  On March 5, The Philadelphia Federal Reserve’s Consumer Compliance Outlook will feature a free webinar on UDAP - Analysis, Examinations, Case Studies, and Emerging Risks.  The webinar will look at:

• Consumer Financial Protection Bureau (CFPB) UDAAP and Federal Reserve Bank UDAP legal authorities

• UDAP legal analysis and examination procedures

• UDAP and bank holding company risk

• Case studies and emerging areas of risk

• Recommendations for implementing an effective UDAP compliance program

The webinar will start at 2:00 p.m. EST on March 5th.  With the CFPB’s future actions in this area unknown, be sure to tune in.

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)

***

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!  

***

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.      

***

NAFCU's Five-Point Plan for Credit Union Regulatory Relief

Written by Steve Van Beek

We mentioned last week, NAFCU's letter to Congressional leaders calling for regulatory relief for credit unions.

Below, I'll outline the five-point plan and why regulatory relief is needed (nevermind - no need to preach to the choir!).

I did want to share this paragraph which does a great job of explaining the issue to Congress:

"Our nation's credit unions are struggling under an ever-increasing regulatory burden that must be immediately addressed.  A survey of NAFCU members late last year found that 94% have seen their regulatory burden increase since the passage of the Dodd-Frank Act in July 2010.  The regulatory onslaught continues to compound as credit unions now have over 5,000 pages of rules from the Consumer Financial Protection Bureau (CFPB) that they must understand, interpret, and ultimately comply with - despite the fact that Congress has widely acknowledged that credit unions were not the cause of the financial crisis.  Credit unions, many of which have very small compliance departments, must comply with the same rules and regulations as our nation's largest financial institutions that employ armies of lawyers.  The impact of the ever-increasing regulatory burden is even more sobering, as the number of credit unions continues to decline.  There are nearly 700 fewer credit unions today than there were before the passage of the Dodd-Frank Act."

Read that last line again:  There are nearly 700 fewer credit unions today than there were before the passage of the Dodd-Frank Act.  

That is why NAFCU is pushing so hard for regulatory relief.

***

Five-Point Plan. NAFCU's five-point plan for credit union regulatory relief covers these five major issues (we'll discuss each in more detail in later blog posts):

• Administrative Improvements for the Powers of the NCUA

• Capital Reforms for Credit Unions

• Structural Improvements for Credit Unions

• Operational Improvements for Credit Unions

• 21st Century Data Security Standards

You can find the full letter and details here.  As indicated, we'll expand on each point in future blog posts.  

Appraisal Disclosure Model Language; Confused Members

Written by Steve Van Beek

During last week's webcast we received numerous great questions from credit unions - including one on the model language of appraisal disclosure requirement under Regulation B.  Below is the Q&A that we've drafted on the question.  Note: Attendees of the webcast should receive the Q&As in the next day or two.  

Question:  The model language for the appraisal disclosures tells the member “You can pay for an additional appraisal for your own use at your own cost.”  Isn’t this going to lead to member confusion because it implies a lender might consider the member’s own appraisal (which we cannot do)?

Answer:  You are exactly right – the model language has the potential to cause confusion.  This was brought to the Consumer Financial Protection Bureau’s attention during the rulemaking process but there were no changes in the final language of the disclosure.  However, the CFPB did include a comment to official staff commentary indicating that the disclosure does not alter any existing prohibitions on using a borrower-ordered appraisal:

“14(a)(2) Disclosure.

1. Appraisal independence requirements not affected.  Nothing in the text of the disclosure required by § 1002.14(a)(2) should be construed to affect, modify, limit, or supersede the operation of any legal, regulatory, or other requirements or standards relating to independence in the conduct of appraisers or the use of applicant-ordered appraisals by creditors.”

Of course, the comment in the staff commentary does nothing to prevent member confusion. 

Thus, we have the potential for applicants to infer - from the required notice - that they can obtain their own appraisal and provide it to their lender for consideration.

***

Confused Members.  So, here is one way this could play out.  

• Credit union provides the appraisal disclosure to the applicant.

• Applicant reads "You can for an additional appraisal for your own use at your own cost" and reasons that "for your own use" obviously means to help them get a loan from the institution who provided the notice.

• Applicant obtains an additional appraisal.

• Applicant brings the appraisal to the credit union for use in connection with their application.

• Credit union informs the applicant that it is not allowed to use borrower-provided appraisals.

• Applicant is furious and waives the credit union's disclosure in front of the loan originator.

• The credit union explains that the notice is required by the Consumer Financial Protection Bureau and the credit union cannot modify the language.

• Applicant is not satisfied.

• Applicant calls the Consumer Financial Protection Bureau to file a complaint.

Of course, this won't happen often - but it will happen.  Hopefully, the CFPB's implementation plans include educating consumers on the appraisal process.  And, credit unions and other commenters brought this up to the CFPB and they declined to address this in the model language.

***

If you are curious, the industry's concerns are located here in the Federal Register and the CFPB's decision is here.

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.

***

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!

***

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.

***

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.

"All-in APR" Decision Delayed; HELOCs Next?

Written by Steve Van Beek

One of the biggest issues from the CFPB's mortgage proposals was their completely voluntary proposal to amend the definition of "finance charge" under the Truth in Lending Act.  Keep in mind that their proposal was not mandated by the Dodd-Frank Act.  In fact, the plain language of the existing Truth in Lending Act provides a clear definition of "finance charge" (which was not changed by Dodd-Frank).  This definition includes a clear description of which fees and charges are specifically excluded.

With that background, it was very welcome news in the final regulations to see the CFPB delay any decision on the "All-in APR" until the TILA/RESPA Integrated Disclosures are finalized (most likely this fall).  Here is from the CFPB's High-Cost Final Rule:

"The Bureau's 2012 TILA-RESPA Proposal sought comment on whether to finalize the more inclusive finance charge proposal in conjunction with the Title XIV Rulemakings or with the rest of the TILA-RESPA Proposal concerning the integration of mortgage disclosure forms.  Upon additional consideration and review of comments received, the Bureau decided to defer a decision whether to adopt the more inclusive finance charge proposal and any related adjustments to regulatory thresholds until it later finalizes the TILA-RESPA Proposal."

Good news on the delay - but the CFPB didn't provide any hint of which way they were leaning (or where they obtain the authority to override the clear language Congress adopted over 20 years ago). 

***

Consumer Group Comments.  You can bet that credit union and other financial institutions were not the only ones submitting comments on this issue.  Consumer groups have been very active and the final rule indicates they are expanding their calls for an "All-in APR" to open-end home equity lines of credit (HELOCs).  The CFPB's original "All-in APR" proposal was limited to closed-end mortgage loans.  This meant that non-mortgage closed-end loans (i.e., auto loans) and open-end loans - including HELOCs - would not have been impacted.  But, the CFPB has been getting comments on expanding this to HELOCs:

"One consumer group commenter urged the Bureau to make the APR coverage test more consistent between closed- and open-end credit by adopting a more inclusive APR calculation for HELOCs.  The commenter argued that, under the Bureau's proposal, a creditor could impose astronomical closing costs on a HELOC without meeting the APR coverage test, because such charges are not included in the APR calculation for HELOCs.  The commenter expressed concern that the difference in the APR for HELOCs versus closed-end transactions will unduly encourage creditors to steer consumers toward HELOCs, and particularly to HELOCs with excessively high closing costs.

The Bureau acknowledges that Regulation Z requires a different calculation of APR for closed-end transactions (interest rate plus other charges) than for HELOCs (interest rate only) for disclosure purposes.  Using these existing APRs for HOEPA coverage necessarily means that non-interest charges will be reflected in the APR for closed-end, but not for open-end.  The Bureau declines at this time, however, to adopt a different APR for HELOCs........Thus, the Bureau believes that comments concerning the disparity between the APR for closed- and open-end credit transactions are better considered as part of a broader reevaluation of the HELOC provisions of Regulation Z, rather than in the context of this rulemaking to implement section 1431 of the Dodd-Frank Act."

As they say, stay tuned.

Finding the New Requirements in the Electronic Code of Federal Regulations

Written by Steve Van Beek

On Friday, I inquired as to whether the CFPB would make available a full version of Reg Z and Reg X as they would be in January 2014.  The seven new regulations are very much related and, in fact, cross-reference each other.

Luckily, the Electronic Code of Federal Regulations links to amendments - including the new mortgage rules. If you are researching a particular regulatory section, you are alerted that there are upcoming changes and the effective date of those changes.  

An example may work best to explain.  Section 1024.20 of Regulation X (RESPA) includes the new Homeownership Counseling Disclosure Requirement that must be provided to any applicant of a "federally related mortgage loan" (don't be fooled by the fact that this requirement was part of the "high-cost" final rule).    

Note: The rules need to be published in the Federal Register before they'll start showing up on the Electronic Code of Federal Regulations.  As we indicated in last Tuesday's blog post, all but one of the rules will be published by the end of this week.

***

On to the screen shots.  The main Regulation X - 12 CFR 1024 - in the e-CFR is below.  You can see the 1024.20 followed by XXX which simply means there will be a future requirement placed in this section.

If you click on the 1024.20 link you'll be taken to the place holder page below.  This means there is not a current requirement under 1024.20 but there is an amendment - the Homeownership Counseling Disclosure Requirement - that will be effective in the future.

If you click the link to the the amendment - you'll be taken to future text of 1024.20 as well as a reminder of the effective date.

The same approach will work for Regulation Z - provided the rules have been published in the Federal Register - and this also works for the Official Staff Commentary (click here and you can see two amendments to the OSC of Reg Z). 

Hope this helps - have a great week!

NCUA's Annual Regulatory Review; Noninterest-Bearing Transaction Accounts & 12 CFR 745.14

Written by Steve Van Beek

A couple weeks ago, NCUA announced the list of their regulations they'll review in 2013:

• 12 CFR 711  Management Official Interlocks
• 12 CFR 712  Credit Union Service Organizations
• 12 CFR 713  Fidelity Bond and Insurance Coverage for FCUs
• 12 CFR 714  Leasing
• 12 CFR 715  Supervisory Committee Audits and Verifications
• 12 CFR 716  Privacy of Consumer Financial Information
• 12 CFR 717  Fair Credit Reporting
• 12 CFR 721  Incidental Powers
• 12 CFR 722  Appraisals
• 12 CFR 723  Member Business Loans
• 12 CFR 724  Trustees and Custodians of Certain Tax-Advantaged Savings Plans
• 12 CFR 725  National Credit Union Administration Central Liquidity Facility
• 12 CFR 740  Accuracy of Advertising and Notice of Insured Status
• 12 CFR 741  Requirements for Insurance
• 12 CFR 745  Share Insurance and Appendix
• 12 CFR 747  Administrative Actions, Adjudicative Hearings, Rules of Practice and Procedure, and Investigations

The list is available here.  This regulatory review time is a great time to bring ongoing issues to NCUA and demonstrate the regulatory burden from the existing regulations and, importantly, how the existing regulatory burden needs to be reduced as there are new burdens being piled on - from multiple regulators - on a daily basis. 

***

Initial Thoughts.  Looking at the list, a couple items jumped out at me.  First, it will be interesting to see how NCUA handles 716 and 717 now that the CFPB has taken over authority for Privacy and a supermajority of FCRA.  Second, is NCUA going to look at providing additional exemptions to the "official advertising statement" - such as for use in social media?  Looks like a natural fit for 12 CFR 740.5(c)(9).  My third thought is below.

***

Noninterest-Bearing Transaction Accounts.  As of December 31st, the unlimited share insurance coverage for noninterest-bearing transaction accounts expired.  Now would be a good time to make sure you've removed any notices from your branches and your website.  Also, if you haven't already - be sure to provide impacted members with a notice (you have flexibility as discussed in this December 18th blog post).  

NCUA issued Letter to Credit Unions 12-CU-14 to help inform credit unions in advance of the expiration.  After the expiration was finalized, NAFCU talked with NCUA staff about updating Section 745.14 to remove the outdated language for noninterest-bearing transaction accounts and it looks like it is in the works.  

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.  

                     

Challenges (Surprise!); New NAFCU Resource - Mortgage Rules Webpage

Written by Steve Van Beek

My colleague Anthony Demangone (you may remember him as "the Compliance Guy") put together a great blog post a few weeks back based on input from his blog readers.  The blog post is here.  

The first question was: What are the biggest challenges facing credit unions in a negative way?  The answer:

The second question: What are the biggest challenges facing credit union leaders on a personal level?  The answer:

And, that was before the mortgage regulations were finalized.  And it was mostly managers/executives responding - imagine the response from compliance officers!  Here is to hoping the regulators (and, just as important, Congress) are listening.  

Note:  You can subscribe to the Musings from the CU Suite blog emails here.

***

New Mortgage Rule Webpage.  We are very excited about our new webpage to help organize compliance resources related to the CFPB's new mortgage regulations.  Be sure to check it out!  And, this page will be evolving as we add new resources.  

For example, we'll be adding articles from future Compliance Monitors - for now, check out the February article on Escrow Requirements for Higher-Priced Mortgage Loans (NAFCU members-only).

Of course, if you have feedback - please let us know!

CFPB Issues New Credit Card Requirement for Certain CUs - Only Gives 10 Business Days to Comply

Written by Steve Van Beek

Hopefully that headline got your attention!  Unfortunately, this seems to be a real requirement for certain credit unions and it shows how out of touch the Consumer Financial Protection Bureau (CFPB) is with how credit unions operate.  It also shows how the CFPB says one thing - we understand the regulatory burden on credit unions - but then does another.

The Surprise from the CFPB.  On Wednesday evening (January 30th), the CFPB sent an email to 160 credit card issuers requesting information for their credit card survey under Section 136 of the Truth in Lending Act (which was added by the Fair Credit and Charge Card Disclosure Act of 1988).  The email indicated that responses needed to be returned 10 business days after January 31, 2013 (no firm date was included - institutions will have to count for themselves). 

Where do Credit Unions Fit In?  The CFPB took over responsibilities for Section 136 of TILA after the transfer of authority in July 21, 2011.  Historically, this credit card survey was performed by the Federal Reserve and credit unions were not part of the survey.  This all changed on Wednesday evening, when the CFPB sent the email to the 160 credit card issuers - including approximately 20 credit unions (the CFPB has not provided the list of the 160 institutions).    

The CFPB's Confusing Language.  The CFPB's email did not make clear that responding to the survey - for those lucky card issuers - was a legal requirement.  The CFPB stated: "Your institution was selected to participate a [sic] semiannual survey on the terms of credit card plans as mandated by the Fair Credit and Charge Card Disclosure Act of 1988."  Ok, we have the terms "selected" and "mandated."  That naturally causes confusion.  Credit unions aren't used to having regulatory requirements apply on a "selective" basis.  So, it would make sense to go to the link included in the email, right?

The credit card survey information is on the right hand side of the page - including this language:

"Survey of credit card plans

The CFPB began to survey semi-annually the terms of credit card plans (FR 2572) offered by financial institutions on January 31, 2012, and publishes a report of the findings. The report includes information from the largest credit card issuers in the country, as well as other financial institutions that wish to participate in the survey."

Read that line again - "other financial institutions that wish to participate in the survey."   Seems like a voluntary issue, right?  That clears up the "selected" versus "mandated" issue, doesn't it?  

Well, a good compliance officer is sure to check additional sources - such as the Form 2572 - which the CFPB hyperlinks.  That page includes this information:

"Background: The Fair Credit and Charge Card Disclosure Act of 1988 required the Federal Reserve Board to develop a credit card survey. The Board published the first report in March 1990, outlining credit card plans available on January 31, 1990.

Respondent Panel: The panel consists of the 25 largest issuers of bank credit cards and 125 additional institutions, based upon the outstanding amount of revolving credit reported on the Call Report. Respondents include commercial banks, savings and loans, savings banks, and finance companies that issue credit cards through a bank or thrift. Participation is required of the 25 largest issuers; other financial institutions participate voluntarily."  (emphasis added).

Case closed - right?  There can't possibly be more.  This is so clear - on its face - that this is an optional, voluntary, selective survey, right?  

Wrong. Wrong. Wrong.  The language of Section 136 of TILA includes:

"§ 136.  Dissemination of annual percentage rates; implementation, etc.

(a)  ANNUAL PERCENTAGE RATES.--The Bureau shall collect, publish, and disseminate to the public, on a demonstration basis in a number of standard metropolitan statistical areas to be determined by the Bureau, the annual percentage rates charged for representative types of nonsale credit by creditors in such areas. For the purpose of this section, the Bureau is authorized to require creditors in such areas to furnish information necessary for the Bureau to collect, publish, and disseminate such information.

(b)  CREDIT CARD PRICE AND AVAILABILITY INFORMATION.--

(1)  COLLECTION REQUIRED.--The Bureau shall collect, on a semiannual basis, credit card price and availability information, including the information required to be disclosed under section 127(c) of this chapter, from a broad sample of financial institutions which offer credit card services.

(2)  SAMPLE REQUIREMENTS.--The broad sample of financial institutions required under paragraph (1) shall include--

(A)  the 25 largest issuers of credit cards; and

(B)  not less than 125 additional financial institutions selected by the Bureau in a manner that ensures--

(i)  an equitable geographical distribution within the sample; and

(ii)  the representation of a wide spectrum of institutions within the sample.

(3)  REPORT OF INFORMATION FROM SAMPLE.--Each financial institution in the broad sample established pursuant to paragraph (2) shall report the information to the Bureau in accordance with such regulations or orders as the Bureau may prescribe.

...."

Notice the highlighted text in Section 136 of TILA.  I'm not an English major but I'm pretty sure "shall" and "required" are not synonyms for "wish to participate" and "voluntary."  Shame on the CFPB.

Voluntary or Required?  The statutory language and NAFCU's discussion with CFPB staff point toward a requirement, but the clear language on both the CFPB and the Federal Reserve websites indicate this is voluntary for all but the largest 25 credit card issuers.  Chalk another one up to regulatory uncertainty.

The End Result.  Those 20+ credit unions who received the CFPB's credit card survey have 10 business days after January 31, 2013 to respond to the survey.  Ultimately, the uncertainty regarding the required/voluntary nature of the way the CFPB communicated this issue means that credit unions receiving the survey will need to make a business decision regarding how to proceed (including, perhaps, calling the CFPB for additional clarification). 

Those lucky credit unions who did not receive the survey (by the way, what if the point person the CFPB sent the survey to was on a 2-week vacation, or mandatory leave, or just left the CU?) would not be required to submit the survey.  But, this should be a wake-up call to all credit unions that the CFPB may be talking the talk when it comes to regulatory burden - but it is more important that they walk the walk.   

What Should the CFPB have Done?  The rationale behind including credit unions in the survey is not the issue.  It probably makes sense to include credit union card issuers in the survey to get a better sense of the overall credit card market.  But, 10 business days to comply - come on!  A much more appropriate roll-out of this survey requirement would have been to send the survey to the 20+ credit unions and inform them that their participation in this first survey (due 10 business days after January 31st) was truly voluntary to help them get familiar with the process. After that, the CFPB could include those credit unions in the required portion of the survey in the future.  But, right off the bat - out of the blue - a new regulatory requirement with 10 business days to comply.  That is simply shocking in this regulatory environment and it speaks to a lack of coordination and communication inside the CFPB.  

As an alternative - the CFPB could have (but didn't) provide a "30-day notice" to these selected credit unions letting them know they would be included in the upcoming survey and to contact the CFPB if they had any questions on the process.  

But, the CFPB didn't take that approach.  Instead, the CFPB seems to have imposed a new regulatory requirement on 20+ credit unions with only 10 business days to comply.  I'm at a loss of words (not really, as I wrote about 1300 words on the issue) - but you get my point.  

***

Note:  The above is a separate requirement from the Credit Card Agreement Submission required by 12 CFR 1026.58 of Regulation Z - which we blogged on January 22nd.  

We've also heard from many credit unions that the CFPB has been unresponsive to their efforts to submit their credit card agreements by yesterday's deadline.  At this point, the CFPB still hasn't provided clear instructions for the process and the best course of action is to document, document, document your efforts to comply.  If the CFPB isn't responsive and you can show a good faith effort to comply, you'd have a pretty good argument against an auditor or examiner.  

***

Also, I included this blog post under the blog's UDAP category as the CFPB's action here is pretty unfair.  

CFPB's Project Catalyst & Trial Disclosure Programs

Written by Steve Van Beek

Project Catalyst. The CFPB established Project Catalyst in order to foster "consumer-friendly innovation and entrepreneurship in markets for consumer financial products and services."  There is quite a bit of information on Project Catalyst here.

Unfortunately, there is a serious design flaw.  And, that is the existing regulations and the non-stop changes to them.  Credit unions and other providers of financial products and services are spending ever-increasing time and money keeping their existing products compliant that there is little or no time for innovation or entrepreneurship.  While Project Catalyst may end up being an avenue where innovators can work with the CFPB to have their products, services or approaches deemed compliant with the CFPB's interpretation of the regulations, I seriously doubt it will have a large impact for credit unions who are trying to weave through the complex maze of regulations to fill the demands of their members.  

***

Trial Disclosure Program.  As part of Project Catalyst, the CFPB is allowing companies to run trial disclosure programs.  You can find the CFPB's press release of the this program here and their proposed policy here (NAFCU has a Regulatory Alert (13-EA-03) with additional details).     

In short, credit unions could design and test new disclosure documents - provided they receive approval up front from the CFPB.  The CFPB would give credit unions a safe harbor for compliance with the existing regulations as they test their new forms for consumer understanding, cost effectiveness and minimizing consumer harm.

Is your credit union likely to invest in a trial disclosure program?  Probably not.  There would be huge upfront costs to design a new disclosure and then you'd need to receive the CFPB's blessing.  Then, test the disclosures and share the results with the CFPB.  Hopefully, your new disclosures would help improve the existing requirements - but there would be no guarantee the CFPB would listen.

As mentioned above, credit unions are spending huge amounts of time and resources to comply with the existing regulations.  Developing their own disclosures isn't exactly on the top of the list.  

So, why I'm I spilling ink over this?  To demonstrate how backward the CFPB has the process.  The CFPB is the only entity with authority over the consumer regulations.  They also have a mandate to protect consumers and improve consumer understanding of disclosures.  So, they should be the ones creating multiple disclosure options and testing them with actual consumers in real-world situations.  Their Know Before You Owe program was similar but it included a shockingly low number of tests with consumers.  And, even worse, it hasn't been tested on any actual mortgage loans.  

If anyone is going to be creating numerous approaches to disclosures, it should be the CFPB.  And, they should partner with entities offering financial products and services to provide a safe harbor for using the CFPB's testing forms with real customers/members and the CFPB will get real feedback.

Example - Remittances.  If the CFPB had taken this approach with their remittance transfer regulation, they would have realized very early on that their approach to the regulation was going to be a huge headache for institutions who utilized an open network.  And, they would have been able to determine which disclosures were meaningful to consumers and which weren't.  That would have resulted in a better regulation in the end.  Instead, we've been through numerous ups and downs as the CFPB tries to adjust and amend a rule that was not initially designed with the real world in mind.

NAFCU's Fred Becker to Retire; ADA Lawsuits; NCUA-CFPB Town Hall Webinar

Written by Steve Van Beek

NAFCU’s Fred Becker to Retire July 31^st.  NAFCU’s President and CEO Fred Becker recently announced his decision to retire after 13 very successful years leading NAFCU.  Becker will be replaced by Dan Berger who has led NAFCU’s Government Affairs department – including NAFCU’s Compliance team – since 2006.  The motto at NAFCU is “business as usual.”  Looking at the transition through the compliance lens, we’re excited because, like Fred before him, Dan has detailed experience with the compliance issues facing credit unions (as does NAFCU’s Chief Operating Officer Anthony Demangone).  To see more about Fred Becker’s retirement and his future plans, check out this interview with CU Broadcast.  

***

ADA Lawsuits.  There has been an uptick in new ATM lawsuits – this time alleging noncompliance with the Americans with Disabilities Act.  The new speech output requirements became effective in March 2012 and the lawsuits started soon after.  Now is a very good time to audit and document your compliance with the new ADA requirements.  Past blog posts on the ADA can be found here.   

***

NCUA-CFPB Town Hall.  On Tuesday, February 5^th, NCUA Chairman Debbie Matz and CFPB Director Richard Cordray will be on a free Town Hall webinar.  The webinar starts at 3:00 p.m. on February 5^th and registration is open.  You can also submit questions in advance by using this link.    

Potential Credit Card Surcharges; Legal Hurdles in 2013; NAFCU Member Call-In; Save $100 on NAFCU Conferences; NCCO Exam Info

Written by Steve Van Beek

I'm sure everyone has plenty of reading to do with the mortgage regulations (I sure do!), so here are a few small items that should be on your radar.

Potential Credit Card Surcharges.  As part of a recent settlement, merchants gained the ability to surcharge for credit card purchases on January 27, 2013.  While this won’t directly impact your credit union, it has the potential to impact your members.  It is unknown how prevalent merchant credit card surcharging will be, but it might be a good idea to put an article in your credit union newsletter or some information on your website.  For more information, visit VISA’s website – which includes a list of state laws that still prohibit surcharges.  

***

Legal Hurdles in 2013.  The Credit Union Times ran a great article from Andy Keeney of Kaufman & Canoles on Legal Hurdles Facing Credit Unions in 2013.  Be sure to take a look and pass along to your colleagues.

***

NAFCU Members:  Don’t miss NAFCU’s first Member Call-In of 2013 – February 12 at 3:30 p.m. EST.  NAFCU’s President and CEO Fred Becker and NAFCU’s Government Affairs team will provide updates on the legislative, regulatory and compliance landscapes.  The call is free, but you must register.  New to 2013: You can submit questions in advance using the form here.  Of course, if you have a specific compliance question you can always email NAFCU’s Compliance team directly.   

***

Extra Savings for School & Seminar end on Thursday.  NAFCU is offering $100 off any conference through Thursday, January 31st.  This includes NAFCU's Regulatory Compliance School (March 18-23 at National Harbor, MD) and NAFCU's Regulatory Compliance Seminar (October 22-25 in Nashville, TN).  

Use the promo code NEWYEAR when your register to get the $100 off. 

***

School & NCCO Exams.  For those of you registered for School (or considering it), we've put together some FAQs on the process for taking the NAFCU Certified Compliance Officer (NCCO) exams.  We'll also have a NCCO Exam orientation on Sunday, March 17th (optional) as well as quick NCCO Study Sessions at the end of each day to help you keen in on which issues to study for the Exams.  

CFPB's Authority Without a Director - Redux

Written by Steve Van Beek

A ruling by the U.S. Court of Appeals for the District of Columbia (WashingtonPost.com) on the recess appointments of 3 National Labor Relations Board (NLRB) appointments caused quite a stir on Friday afternoon.  Especially, considering CFPB Director Richard Cordray was appointed at the same time.

You are probably going to read quite a bit in the upcoming weeks (and months) about what this means for Cordray's appointment and - more importantly - the CFPB's recently released final mortgage regulations (and, the remittance transfer regulation).  For credit unions, I want to point you back to one of my blog posts from June 2011 on the CFPB's Authority Without a Director.  In that post, I looked at what the CFPB could do if it did not have a "Senate-confirmed director:"

Even without a Director, the CFPB can (among other powers):

• Write rules, orders and guidance regarding any of the consumer laws that transfer to the CFPB.  This includes proposing new regulations as well as finalizing regulations (both its own and proposals it inherits from other agencies);

• Conduct examinations of and issue and enforce orders against banks, savings associations or credit unions with assets of greater than $10 billion; and

• Take over consumer protection issues related to RESPA and certain consumer rules previously under the authority of the Federal Trade Commission. 

That post relied on a January 11, 2011 joint letter from the Inspector Generals of the Federal Reserve and Treasury Department - especially Question & Answer #5.  

***

So, What Should Credit Unions Do?  Continue working on understanding and complying with the CFPB's regulations.  The CFPB had authority to issue regulations under Regulation Z (TILA), Regulation X (RESPA) and Regulation E (EFTA - remittance transfers) even without the Senate-confirmed Director.  Thus, if Cordray's recess appointment were overturned - the new requirements would still be mandatory.  Now, there would likely be numerous nuances and intricacies that would pop up - but the best course of attack is to continue to work toward understanding and complying with the CFPB's regulations.  

***

Ironically, nonbank mortgage originators and servicers would be in a slightly different boat (as would nondepository providers of remittance transfers) as the CFPB wouldn't have authority over those entities without a proper Director.  Of course, that isn't to say they would get off scot-free (in fact, it could turn out worse) - but it is a different analysis than for banks and credit unions who were already regulated at the federal level. 

***

Now is also a good time to remind readers of this blog's legal disclaimer:

LEGAL DISCLAIMER

This website is intended to provide general compliance information in regard to the subject(s) covered. It is provided with the intent and understanding that the publisher is not engaged in the act of rendering legal, accounting or any other professional advice. The information provided in this website is not intended nor should be used as a substitute for legal advice or other expert opinions and services in specific situations. NAFCU is not responsible for the content of comments and reserves the right to delete or block comments that it finds inappropriate.

Ah, that feels better.  Have a great week everyone!

Cordray Nominated for Full 5-Year CFPB Term; Scope of Mortgage Servicing Exemptions; NAFCU Mortgage Reform Webcast Series

Written by Steve Van Beek

Cordray Nominated.  Yesterday, President Obama nominated current CFPB Director Richard Cordray for a full 5-year term as Director of the CFPB.  Under Cordray's current recess appointment, his term expires at the end of 2013.  This full appointment - if confirmed by the Senate - would result in Cordray having a full 5-year term.  For additional information, check out the NAFCU Today (you can sign-up for the NAFCU Today here).    

***

Mortgage Servicing Exemptions.  Last Friday, we blogged a little bit on the mortgage servicing exemptions.  Today, I wanted to help clarify which of the new requirements the 5000 or less mortgages exemption will apply to and, more important, which will not be eligible for the exemption

There are nine major requirements in the new mortgage servicing requirements (and tons of minor requirements).  Of the nine, the "small servicer exemption" will apply to five (and, only in limited situations, to a sixth):

• Mortgage Periodic Statements - Eligible for Small Servicer Exemption

• Interest Rate Adjustment Notices (for ARMs) - Not Eligible

• Prompt Crediting of Payments & Payoff Statements- Not Eligible 

• Force-Placed Insurance - Not Eligible (except in very limited situations)

• Error Resolution Procedures & Information Requests - Not Eligible

• General Servicing Policies & Procedures - Eligible for Small Servicer Exemption

• Early Intervention with Delinquent Borrowers - Eligible for Small Servicer Exemption

• Continuity of Contact with Delinquent Borrowers - Eligible for Small Servicer Exemption

• Loss Mitigation Procedures - Eligible for Small Servicer Exemption (but there are certain requirements that still apply)

Additionally, keep in mind that the "small servicer exemption" only applies to the CFPB's mortgage servicing regulations.  The other six regulations do not have similar exemptions.  

***

NAFCU's February 13th Webcast.  On Wednesday, February 13th, I'll be presenting a 2-hour webcast on The CFPB's Final Mortgage Regulations.  Specifically, I'll be providing an overview of the scope and applicability of each of the new regulations and how your credit union's products will be impacted.  I'll run through which requirements apply to first mortgages, which to just principal dwellings, which to subordinate liens, which to HELOCs.  I'll also go in more detail about the mortgage servicing exemptions above and explain which transactions you need to consider when you "count to 5000."  You can find the additional key takeaways here.

For the full description and information on registering, click here.

***

NAFCU's Mortgage Reform Webcast Series.  Also, be sure to check out our full listing of webcasts for our Mortgage Reform Webcast Series.  My February 13th webcast will be followed by Andy Keeney's March 6th webcast on the CFPB's Qualified Mortgage/Ability-to-Repay regulation (registration will be available soon - if you want to be notified when registration is open, just shoot us an email).   

Resources for the CFPB's International Remittances Regulation

Written by Steve Van Beek

A Wild Ride.  The evolution of the CFPB's international remittances regulation has been confusing to everyone.  First, we had the rule proposed by the Federal Reserve.  Then, the CFPB took over on July 21, 2011.  The CFPB finalized the rule but also proposed amendments to the rule at the same time.  Then, realizing the rule was not workable, the CFPB issued a delay of the effective date while it proposed additional changes.  So, that is where we are - trying to figure out where we are at.  And, how your credit union will be able to comply.  The CFPB has indicated the new effective date will likely be 90 days after they finalize the latest proposed changes (although they are taking comments).  That doesn't leave much time if your CU has made a business decision to continue offering remittance transfers to your members.

Below are a variety of resources that may be helpful to understand the new requirements and what steps your credit union will need to take to comply.

• The CFPB's Main Remittance Regulation Webpage

• Small Entity Compliance Guide

• Safe Harbor Countries List

• The CFPB's October 2012 Webinar on the Remittances Rule (also available here)

• Presentation Slides from October 2012 Webinar

• CFPB Bulletin 2012-08 Announcing Delay of Implementation Date

• Proposal to Amend Certain Provisions of Remittance Rule (but not the 100 transaction safe harbor level)

NAFCU also has these resources available to NAFCU-member credit unions:

• Regulatory Alert on Latest Remittance Proposal (13-EA-01) - Covers the Latest Proposed Changes

• Final Regulation on Remittance Requirements (12-EF-10) - Covers the Rules after the Concurrent Proposal was Finalized

• Final Regulation on Remittance Requirements (12-EF-02) - Covers the First Remittance Regulation Finalized by the CFPB

Throughout the process NAFCU has sent numerous comment letters to the CFPB on the remittance requirements.  Recently, we sent a letter urging the CFPB to further delay the requirements to ensure the rules do not unnecessarily burden credit unions trying to comply:

“First, NAFCU requests that the CFPB further extend the 90-day delay of the effective date to allow credit unions sufficient time to comply with the proposed rule and to make the required disclosures of fees, taxes, and exchange rates. Second, NAFCU continues to believe that the CFPB should exempt federally regulated credit unions, or, alternatively, small entities consistent with the Small Business Regulatory Enforcement Fairness Act, from the purview of the final remittance transfer rule. The regulatory burden that the remittance transfer rule places on credit unions will lead to a significant reduction in consumers’ access to remittance transfer services. Many credit unions already facing an enormous compliance burden have or will be forced to discontinue their remittance programs, and those that continue to offer remittances will be forced to significantly increase their members' fees.  

Further, NAFCU would like to reiterate the necessity for the CFPB to respond to credit union concerns during the rulemaking process, rather than implementing remedial measures after the fact. Although NAFCU appreciates the CFPB’s responsiveness to reconsider the remittance rule, proactive efforts by the CFPB to address potential problems and reduce the future compliance costs and regulatory difficulties faced by credit unions would be far more effective when conducted prior to and during the rulemaking process.”  (Emphasis added).

The last paragraph is especially important.  The process this regulation has taken has left everyone's head spinning.  The CFPB had opportunities to listen to industry feedback and make changes upfront.  Instead, they finalized the rules and only then did they realize they were not workable.  Unfortunately, the lack of operational experience and background at the CFPB was on full display.  They had a rule and were going to finalize it no matter what the consequences.  

***

NAFCU Remittances Webcast Today.  We also have a webcast on the Remittances Webcast today at 2:00 p.m. EST.  Be sure to tune in.  We've extended the early-bird deadline indefinitely, so you can purchase the webcast at any time (including after today) at the early-bird price.  To learn more about the webcast, click here.  

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.    

Economic Census Forms; Upcoming Webinars & Webcasts

Written by Steve Van Beek

Economic Census.  Your credit union may have gotten an Economic Census form (the forms were sent between October and December).  The deadline for completion is February 12th.  To help facilitate understanding of this form and the requirement, the Office of Business Liaison at the Department of Commerce has put together information, numerous FAQs and is hosting a webinar on Wednesday, January 24th at 1:00 p.m. EST.  Note: There was a prior webinar on October 11th, 2012.  The slides from that presentation are here (very large PPT file) and a transcript is available here.

There are additional help resources available here.  

The FAQs include specific information for different industries - including credit unions.  The credit union FAQs are here and forms are here.  Remember, the deadline is February 12th, 2013.  

Note:  Not every credit union will receive a form.  But, be sure to check with folks and see if your CU has and make sure it is completed by February 12th. 

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There are also numerous other webinars and webcasts this week.  

NCUA Webinar on Serving Low-Income Members.  NCUA is hosting a free webinar on Strategic Issues for Servicing Low-Income Members.  This webinar is Wednesday, January 23rd at 2 p.m. EST.  If your credit union recently received your low-income designation, this might be a useful webinar.  Here is from the announcement:

"Staff from [NCUA's] OSCUI and NCUA’s Office of Consumer Protection will discuss ways low-income designated credit unions may improve and increase service to low-income members. In addition, the staff will present sample products and services designed to meet the needs of these members."

You can register here. 

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NCUA HMDA Webinar.  NCUA will also be offering a free webinar entitled HMDA: Accuracy and Timeliness.

The webinar will be Thursday, January 24th at 2 p.m. EST.  You can register for the webinar here and you can also send any questions to [email protected].  

NCUA also recently issued Regulatory Alert 13-2 which highlights the March 1, 2013 deadline for submitting HMDA data.  Earlier, they had sent Regulatory Alert 13-1 which discusses the $42 million asset threshold for 2013 HMDA reporting.

Does anyone know how these Regulatory Alerts are delivered?  Why don't they go through NCUA Express?  Another one they buried on their website was Regulatory Alert 12-4 on the CFPB's Remittance Rule. 

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Upcoming NAFCU Webcasts.  NAFCU will be offering a very full slate of webcasts in 2013.  And, you can be assured that quite a few will be focusing on compliance - especially the new mortgage requirements.  Below are our next couple webcasts:

• The CFPB's International Remittance Transfer Disclosure Rules - Thursday, January 24th from 2:00 - 3:30 p.m. EST.  Mary Lou Heighes will walk attendees through the final rule as well as aspects of the proposed rule that you need to know.  Mary-Lou has been very involved in the remittance transfer rule from the start and gave a great presentation at our Compliance Seminar in October.  And, because of the importance of this rule - we are extending the early-bird registration price indefinitely.  You can sign-up for this webcast any time and receive the early-bird price.  

Remember: All of NAFCU's webcasts are available on-demand as well.  If you can't make the live webcast (perhaps because you need to watch the HMDA webinar or the Census webinar live), you can always watch the on-demand webcast at a later date.

• Top HR Compliance Issues Affecting Credit Unions in 2013 - Wednesday, February 6th from 2:00 - 3:30 p.m. EST.  Margaret Fiester from the Society of Human Resource Management (SHRM) will discuss how credit unions will be impacted by various future reforms - including tax reform and health care reform.  Register by January 30th to Save $100.  

NCCOs:  Both of the webcasts above will earn credits toward renewing your NAFCU Certified Compliance Officer (NCCO) designation.  If you see this logo -  - you'll be sure the webcast will be offering NCCO credits.

New NCCO Affidavit Process:  We also have a new, streamlined NCCO affidavit.  You can find the fillable-form located here.  If you are an NCCO and attend a NAFCU webcast with this symbol -   - be sure to use this form.   

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.  

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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).  

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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.  

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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.  

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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).  

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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!