When Jan. 10, 2014 rolls around, credit unions and mortgage processors will be tested on how well they’ve prepared to implement the new mortgage regulations from the Consumer Financial Protection Bureau.
The new environment will require a more conscientious and costly approach for those institutions that want to enter or continue their mortgage programs, some experts have said.
CFPB’s 2013 mortgage rules have already set forth six new guidelines for mortgage lenders under its direction from the Dodd-Frank Act. A seventh guideline governing closed-end mortgages, expected in October.
Although many credit unions have been exercising the necessary prudence all along, the need to document and verify those procedures will make the process cumbersome as well as more costly, according to Jon Bundy, regulatory compliance manager for CUNA Mutual Group in Madison, Wis.
“The effect of the regulations is that they will cause all credit unions to reaffirm exactly what their mortgage goals are,” said Bundy, noting that the estimated 3,500 pages of new laws all subject to updates and tweaks pose significant challenges for most if not all credit unions.
"There is a lot to wade through, and it can be either a blessing or a curse depending on how it affects the industry,” Bundy added.
Truity Credit Union in Bartlesville, Okla., said it will be ready to comply with CFPB’s new requirements. Due to policies and procedures already in place, the final adjustments may not be traumatic for the credit union.
"We are well-positioned and well-prepared for the changes coming down, but we’ve spent a lot of time getting to that point,” said Mark Wilburn, chief lending officer for Truity, known as 66 Federal Credit Union until early August. “We exercised our own good judgment, as did most credit unions, and weren’t very far out on a limb, anyway.”
With $675 million in assets and 55,000 members, Truity has adequate resources to do its mortgage loan processing in house, Wilburn said.
However, some smaller credit unions without the internal resources may not find things so easy.
“I imagine that smaller credit unions are doing things differently,” Wilburn said. “What’s important for them is to make sure that whoever their third-party partner in this process may be is on top of all this.”
A key piece of the equation is the need to automate the various revised mortgage loan processes in order to comply with the new standards while maintaining service levels to members. In the case of smaller institutions, vendor support will be critical to complying with the January deadline, according to Kelly Graham, president/CEO of FICS, a mortgage loan origination and servicing software provider based in Addison, Texas.
In 2012, FCIS started making changes to its mortgage service system to assist users in complying with the CFPB mandates, Graham said. Unfortunately, continued adjustments like those made in July may compromise some vendors’ abilities to help their clients comply with the deadline.
"Any time there are additions or modifications to regulatory rules, we go through the same process of research, review, programming and testing, which makes it difficult, especially in the current climate where we are inundated with regulatory changes that impact both our servicing and origination software systems,” Graham said.
Despite the challenges, FCIS already has tools built within its system to help its credit union clients be compliant with the rules, Graham said. While the adjustments may not be easy for some, the changes are required.