According to the rule that governs loans that fall under the Home Ownership and Equity Protection Act Rule, borrowers must receive loan counseling from someone who is not affiliated with or employed by the lender.
Additionally, Capitini said, there is a prohibition against steering someone to a particular counseling agency. Instead, the CFPB has posted a list of approved counseling providers on its website, she said Wednesday during a webinar that addressed CFPB mortgage rule myths..
The majority of mortgage compliance myths presented during the event educated credit unions about the fact that they will have to make adjustments to their operations as a result of recent CFPB rules. Even credit unions that don’t offer mortgages could be affected, Capitini said.
“If you think you don’t do mortgage lending, you need to rethink that,” Capitini said. “Think more broadly. Many rules will apply to both open and closed-end transactions. And some secured by dwellings that include motor homes, RVs, trailers and boats may be covered by these rules as well.”
Other rules have triggers, like certain interest rates or loan structures, that could create additional compliance burdens, she said.
Capitini devoted a considerable amount of time during the webinar to detail how credit unions that serve rural or underserved areas may be affected by the rules. She stressed that despite exemptions for such institutions, plenty of rules still apply.
“Even if you’re a small servicer, or serve rural or underserved areas, you’re covered by rules, generally speaking,” Capitini said. “You will get some relaxed requirements to make compliance easier, but don’t think you’ll be exempt from one or all of the rules.”
Another myth busted during the webinar was what Capitini said was a common belief among many credit unions that they can only originate qualified mortgages.
While she said qualified mortgages provide better legal protection and will make exams easier, credit unions could still be in compliance if they underwrite mortgages that don’t meet QM standards provided they verify and document eight underwriting criteria. Those eight criteria take a closer look at the borrower’s debt and income, and may be something credit unions are doing already, she said. The documentation must be retained for at least three years, she said, which many credit unions already do.
The mortgage lending webinar was the first in a series of six that CUNA Mutual is offering to its customers through October.