There are not many credit unions that service more than 5,000 mortgages, and therefore must comply with the Consumer Financial Protection Bureau’s new servicing rules – 131 credit unions by CUNA’s count.
However, CUNA Chief Economist Bill Hampel said the rule may affect more credit union mortgages than the numbers suggest.
“I suspect most of those loans are actually serviced by subservicers, and since servicing is a scaled business, they most likely will be covered by the rule,” Hampel said.
However, that doesn’t mean credit unions that contract servicing out will be tasked with compliance. That burden will fall on the subservicer, Hampel said, who will have to change procedures and bear the brunt of costs to ramp up compliance.
Subservicers may increase prices to recover those costs, but Hampel said he doesn’t anticipate any potential rate hikes to be big ones. But consolidation among loan servicing firms could result from the new rules, he said.
One aspect of the rule that could affect credit unions is the requirement that servicers provide borrowers with all available options to avoid foreclosure, and that servicers hold off on foreclosure until those options are exhausted.
“That could delay the time from the initial expectation of need to the actual execution of the foreclosure,” he said, which could increase foreclosure costs and reduce recoveries.
Such a situation would probably be rare, Hampel added, and will become even more uncommon as the housing market returns to normal and foreclosures “fade back into being as rare as they once were for credit unions.”
Hampel said his methodology for determining 131 credit unions fall under the servicing rule includes counting 1st mortgages held in portfolio, 1st mortgages sold but still serviced, and closed-end 2nd mortgages, which are also subjected to the rule. Those 131 credit unions represent just 2.6% of those that offer mortgage loans; however, they service 56% of total industry mortgages, $231 billion out of an industry total of $414 billion, he said. –firstname.lastname@example.org