Credit unions and the software companies that support their mortgage loan programs have been laboring long and hard to comply with what will be seven new Consumer Financial Protection Bureau rules governing mortgage lending.
Passed down from the Dodd-Frank Act, the rules are designed to protect consumers but will those consumers know or care? More importantly, how much will it cost both members and their credit unions to comply?
Credit unions are ready to launch the new program, including $1.4 billion asset TruMark Credit Union in Trevose, Pa. In addition to helping the credit union better manage its loan program, the new laws have been cast in the right spirit, according to Tim Rawlinson, TruMark’s vice president or mortgage lending.
“The regulatory spirit is to provide full disclosure, but we go a step beyond that in the spirit of doing the right thing across the board,” said Rawlinson.“A lot of the bad players have exited the market, and the new regs allow good lenders to make sound loans so we don’t experience those types of things again.”
For some credit unions, addressing the new regulationss will be time consuming, costly and, in some cases, difficult to manage. Some rules will be more difficult to comply with than others, according to Vickie Black, compliance officer for $675 million Truity Credit Union in Bartlesville, Okla.
“The qualified mortgage rule and ability to repay are the more important ones we will have to manage,” said Black. “There’s an appraisal rule out there, but we’ve provided a copies of appraisals to our members for 20 years.”
Still, the new rules, designed to protect consumers, may have unintended negative consequences. Although constituting just a small portion of its portfolio, TruMark has ceased offering 40-year mortgages because the new rules don’t accommodate them, said Vincent Market, the credit union’s executive vice president and chief financial officer. Increased compliance requirements also may raise other issues, according to Jon Bundy, regulatory compliance manager for CUNA Mutual.
“The rules do increase the complexity level of having a mortgage program, which raises the bar to entry for those credit unions thinking of adding a mortgage program,” said Bundy. “But I don’t know if that’s truly preventing credit unions from getting into mortgage programs or spurring mergers with larger institutions.”
Some credit union executives agree that complying with the new regulations will make it more difficult and expensive to get a mortgage loan. More compliance means more checkpoints for the credit union and more documentation required from the borrower, both of which could mean added expense for both the institutions and its members.
"At some level, it will be more expensive to get a loan,” said Mark Wilburn, Truity’s chief lending officer. ”But we can’t quantify today what additional costs may get passed on to the borrower.”
TruMark’s Market also sees a somewhat ambiguous outcome from the new regulations. The question of whether the regulations designed to protect consumers’ interests will truly be perceived as a benefit has not been answered, he said.
“How are members going to react on Jan. 10?” Market asked. “Will they care? Is the process more challenging for them? Will the new regs drive people away? I really don’t know.”