Comments on Mortgage Purchasing and Clarification on Addresses Rule

Credit union representatives commented on a proposed rule on purchased mortgages and the Treasury has clarified it's address notification ruling.

A Federal Reserve proposal on notifying homeowners when their mortgage is purchased is well-intentioned but should be slightly modified, CUNA and NAFCU wrote in comment letters.

The proposal would require people or institutions that acquire more than one mortgage in a 12-month period to notify the borrower.

CUNA Assistant General Counsel Jeffrey Bloch wrote that the rule would have limited applicability to credit unions because most don't buy mortgages, though it will have a greater impact on CUSOs.

He suggested that participation loans should be exempted because “borrowers will be confused when they receive a notice that details the various parties who have purchased portions of these loans. In our view the confusion of borrowers outweighs the benefits.”

NAFCU Associate Director of Regulatory Affairs Dillon Shea wrote that only institutions that acquire more than five mortgages a year should be required to comply with the regulation. He suggested that this will help institutions and that “only acquire mortgages on a limited basis.”

He also suggested that the regulation's provision exempting mortgages held for less than 30 days should be expanded to 60 days. This will help financial institutions because title holders will sometimes take longer than 30 days to sell a mortgage. It will also help consumers because they “may become confused if they receive multiple notices in a short period of time.”

Separately, the Treasury Department's Financial Crime Enforcement Network ruled that a financial institution doesn't have to obtain a customer's residential or business address if the customer is part of an address confidentiality program.

Those customers “shall be treated as not having a business or residential address” and the secretary of state or other state official will act as a contact individual for purposes of complying with FinCen's rules, Jamal El-Hindi, the associate director of FinCen's regulatory policy and programs division, wrote recently.

He noted that the Bank Secrecy Act requires financial institutions to implement a customer identification program that includes “risk-based policies that enable it to form a reasonable belief that it knows the true identity of its customers” and the law also requires that the institution obtain an address. But he noted that the address requirement can be waived if a state has determined that the person's anonymity must be protected.

According to NAFCU's compliance blog, 31 states have set up address confidentiality programs, and they are used to protect victims of domestic violence, sexual assault and stalking.

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