When Jan. 10, 2014 rolls around, credit unions and mortgageprocessors will be tested on how well they've prepared to implementthe new mortgage regulations from the Consumer Financial ProtectionBureau.

The new environment will require a more conscientious and costlyapproach for those institutions that want to enter or continuetheir mortgage programs, some experts have said.

CFPB's 2013 mortgage rules have already set forth six newguidelines for mortgage lenders under its direction from theDodd-Frank Act. A seventh guideline governing closed-end mortgages,expected in October.

Although many credit unions have been exercising the necessaryprudence all along, the need to document and verify thoseprocedures will make the process cumbersome as well as more costly,according to Jon Bundy, regulatory compliance manager for CUNAMutual Group in Madison, Wis.

“The effect of the regulations is that they will cause allcredit unions to reaffirm exactly what their mortgage goals are,”said Bundy, noting that the estimated 3,500 pages of new laws allsubject to updates and tweaks pose significant challenges for mostif not all credit unions.

“There is a lot to wade through, and it can be either a blessingor a curse depending on how it affects the industry,” Bundyadded.

Truity Credit Union in Bartlesville, Okla., said it will beready to comply with CFPB's new requirements. Due to policies andprocedures already in place, the final adjustments may not betraumatic for the credit union.

“We are well-positioned and well-prepared for the changes comingdown, but we've spent a lot of time getting to that point,” saidMark Wilburn, chief lending officer for Truity, known as 66 FederalCredit Union until early August. “We exercised our own goodjudgment, as did most credit unions, and weren't very far out on alimb, anyway.”

With $675 million in assets and 55,000 members, Truity hasadequate resources to do its mortgage loan processing in house,Wilburn said.

However, some smaller credit unions without the internalresources may not find things so easy.

“I imagine that smaller credit unions are doing thingsdifferently,” Wilburn said. “What's important for them is to makesure that whoever their third-party partner in this process may beis on top of all this.”

A key piece of the equation is the need to automate the variousrevised mortgage loan processes in order to comply with the newstandards while maintaining service levels to members. In the caseof smaller institutions, vendor support will be critical tocomplying with the January deadline, according to Kelly Graham,president/CEO of FICS, a mortgage loan origination and servicingsoftware provider based in Addison, Texas.

In 2012, FCIS started making changes to its mortgage servicesystem to assist users in complying with the CFPB mandates, Grahamsaid. Unfortunately, continued adjustments like those made in Julymay compromise some vendors' abilities to help their clients complywith the deadline.

“Any time there are additions or modifications toregulatory rules, we go through the same process of research,review, programming and testing, which makes itdifficult, especially in the current climate where weare inundated with regulatory changes that impact both ourservicing and origination software systems,” Graham said.

Despite the challenges, FCIS already has tools built within itssystem to help its credit union clients be compliant with therules, Graham said. While the adjustments may not be easy for some,the changes are required.

Next: What will membersthink?