The Consumer Financial Protection Bureau released final mortgagerules that restrict loan originator compensation methods andincrease the level of service loan servicers must provide toborrowers. However, due to the way credit unions already dobusiness, trade associations say neither rule will have a majorimpact on the industry.

NAFCU President/CEO Fred Becker even questioned the need toinclude credit unions at all in the new rules. In a statement,Becker said that while he appreciated the CFPB's servicing ruleexemption for those servicing fewer than 5,000 transactions, he wasnonetheless concerned about the regulatory costs of the rule “giventhat credit unions have been and continue to operate using solid,traditional lending practices and are second to none in servicingtheir members' mortgages.”

Under the servicing rules, borrowers must receive informationregarding options available to avoid foreclosure. The practice ofdual tracking, in which a servicer proceeds with foreclosure whilesimultaneously working with the borrower to avoid it, will also beprohibited. The rule also mandates new disclosure and statementinformation. 

According to the NCUA's Office of Examination and Insurance, the 5,000-loan thresholdmeans the new servicing rules will only affect slightly more than200 credit unions. 

Public Affairs Specialist John Fairbanks said another 40 areexpected to exceed the threshold by January 2014, based on theaverage number of real estate loans originated each year. Of theapproximately 6,900 federally insured credit unions, 6,700qualified for the exemption as of Sept. 30, 2012, Fairbankssaid.

However, CUNA Chief Economist Bill Hampel said the rule mayaffect 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, theymost likely will be covered by the rule,” Hampel said.

However, that doesn't mean credit unions that contract outservicing out will be tasked with compliance. That burden will fallon the subservicer, Hampel said, who will have to change proceduresand bear the brunt of costs to ramp up compliance. 

Subservicers may increase prices to recover those costs, butHampel said he doesn't anticipate any potential rate hikes to bebig ones. But consolidation among loan servicing firms could resultfrom the new rules, he said.

The CFPB's loan originator rules, in a nutshell, prohibitpayments that is based on loan terms. Bureau Director RichardCordray said in a release that the rule will ban the incentivesthat led originators to steer consumers into riskier, high-costloans prior to the mortgage market meltdown.

Effective January 2014, loan originators can't be paid more ifthe consumer takes a loan with a higher interest rate, prepaymentpenalty or higher fees. However, the CFPB did scrap a provision inits proposed rule that would have required lenders to offer a nopoints or fees mortgage if they were offering a mortgage withpoints.

Bonuses or higher pay for selling title insurance for a lender'saffiliate is also banned. Originators also are prohibited from dualcompensation in which they are paid by both the consumer and thecreditor.

Credit unions that sell mortgages to the secondary market shouldbe aware that the new rule may prohibit them from payingoriginators more for loans that will be held on the books.

CUNA attorney Mary Dunn said the CFPB included specific examplesin the final rule to demonstrate when the practice is prohibitedand said one example indicated that most credit unions won't beaffected.

That example assumes lenders hold in portfolio only loans thathave short terms with balloon payments, while selling 30-year termloans, which typically have higher interest rates, in the secondarymarket. The CFPB concluded that because the rates vary, and theoriginator could potentially steer borrowers into the portfoliomortgage, holding a mortgage in portfolio “is a proxy for a term ofa transaction.” Therefore, paying originators more for loans heldin portfolio, when accompanied by different rates “over asignificant number of transactions” is prohibited under therule.

The new rule also requires that all loan originators, even thoseworking at credit unions, meet the same character and fitnessrequirements, be screened for criminal backgrounds and undertakeongoing training about mortgage regulations. That requirement, Dunnsaid, will result in a significant compliance burden for creditunions.

The final rule also prohibits mandatory arbitration of disputesrelated to mortgage loans and the practice of increasing loanamounts to cover credit insurance premiums. While most of the finalrule takes effect in January 2014, these two parts will take effectJune 2013.

To help with compliance, the CFPB said it will, among otherthings, be publishing implementation guides.

Cordray will join NCUA Chairman Debbie Matz in a town hall webinar at 3 p.m. EST on Tuesday Feb. 5 to discussthe newly released regulations, as well as proposed rules and theCFPB's enforcement efforts.