ATLANTIC CITY, N.J.—The Consumer Financial Protection Bureau is ready for action, attendees at the New Jersey Credit Union League meeting this week were told.
The question, according to Rob Rutkowski who’s a partner in the law firm of Weinberg & Reis Co. in Cleveland, is whether credit unions are really ready for it.
The mortgage loans standards outlined in Dodd-Frank, which also established the CFPB, adds provisions to the Truth in Lending Act to ensure that mortgage loans reflect borrowers’ ability to repay and that are understandable and not unfair, deceptive or abusive.
Changes to TILA could see fees redefined as part of APR, which could push otherwise good rates at credit unions up around 30%, Rutkowski explained in a session on Monday. However, federal credit unions are held by usury regs to a maximum of 18%.
“Is it possible that January 1, you can’t make mortgage loans? I don’t know,” he admitted, and said neither does anyone else at this point.
Among other things, it also requires that mortgage loan originators must be “qualified” and if required, licensed or registered in accordance with the SAFE Act.
Rutkowski explained that the rules implementing these are still coming out and no one’s quite sure who will have control over who determines what qualified is—whether it will be the institution or the Federal Reserve, which is charged with writing that particular regulation.
While mortgages are key on the NCUA front as well, the recent murmur among credit union executives has been concerns regarding multi-featured open-end lending as put forth in the NCUA’s Letter to Federal Credit Unions (12-FCU-03). Rutkowski recommended that credit unions have policies and procedures in place to differentiate open-end lending from closed-end lending, including specific processes for opening MFOEL plans, performing verification, issuing advances within open-end policies, and establishing specific credit limits for each feature within the plan.
Also make sure your data processor can support these policies and procedures as well as ensuring your member service representatives and call center personnel are properly trained on these, he said.
It is appropriate to verify collateral value when secured as such and to complete periodic portfolio credit scoring across the portfolio but not in conjunction with a member’s advance, Rutkowski said.