Mortgage Rules Loom: Guest Opinion
By now, credit union leaders have become accustomed to new regulations coming down the pike. Less awareness exists, however, for the importance of moving early on the steps it takes to comply with these new regulations.
Most recently, mortgage regulations proposed and now finalized by the Consumer Financial Protection Bureau have taken center stage. But because these particular regulations that are made up of extremely complex rules requiring multiple changes to a credit union’s mortgage program are not set to go into effect until January 2014, some credit union lending teams may be putting off implementation.
Compliance professionals who have studied the thousands of pages of mortgage regulations will tell you this is not the best course of action. Two sets of mortgage rules in particular require immediate action due to their complexity. They are the ability to pay/qualified mortgage rules and the mortgage servicing rules. Each set calls for strategic, calendared planning to achieve comprehensive and on-deadline compliance by January.
A basic implementation strategy is composed of three main parts: 1) understanding what regulations apply to which of a credit union’s products; 2) acquiring, updating or creating the proper documents, disclosures, policies, procedures and other forms; and 3) training loan officers and other staff charged with complying with the rules. With a mere six months remaining until the mortgage rules become law, credit unions that have not begun at least these three basic steps should start today.
In terms of understanding the final rules, credit unions can find help by partnering with compliance experts who have digested the many pages of regulations and know how to apply them to individual financial institutions based on their size, mortgage products and operations, as well as other factors. Understanding which of the many complex exceptions of the mortgage servicing rules apply to a particular credit union, for example, can be an overwhelming task. Here again, the benefit of time is unmistakably huge for lending teams, particularly those who work for small credit unions.
Lending teams must consider, too, that the mortgage regulations are likely to impact their secondary market strategies. To continue successful mortgage selling programs, credit unions will need to demonstrate that their origination process is absolutely up to snuff. Otherwise, what had become a lucrative market essential to the cooperative’s lending initiatives could dry up fast. Most mortgage buyers issue selling guidance to the financial institutions they work with. If you have not yet received such a document from the partners your credit union works with, contact them soon to ensure you are meeting their requirements.
As credit union lenders are at it, it would be wise to devote some implementation resources to ensuring the credit union’s Fair Lending policies and procedures are up to date, and importantly, actually operating as stated. In visiting numerous credit unions each year, it’s not unusual for me to uncover clerical, software and human errors on the reporting of Home Mortgage Disclosure Act data. In most cases, the errors are unintentional and overlooked. But as we know, ignorance is no excuse in the eyes of examiners who have recently taken a hard line on fair lending compliance.
To reiterate, it’s important to start now. If you find yourself frustrated or even bolstered by the CFPB’s history of effective-date pushbacks, consider changing your perspective. It’s true the agency has developed somewhat of a pattern, but there is no guarantee it will continue. Working in the best interest of your cooperative, it’s smart to take published regulatory deadlines as gospel. The worst case scenario is extra time for you and your staff.
Jason Skemp is director of compliance solutions for PolicyWorks.
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