With looming mandatory compliance dates of early- to mid-January 2014, one of credit unions’ greatest pain points is implementing the Consumer Financial Protection Bureau’s (CFPB) new mortgage rules.
To prepare, credit unions should address these five critical compliance issues now.
5. NMLSR IDs on documents
Pursuant to the Mortgage Loan Originator Rule, all covered loan applications, notes, and security instruments must reflect the Nationwide Mortgage Licensing System & Registry (NMLSR) ID of the mortgage loan originator as well as the loan originator organization.
This requirement applies to all closed-end loans secured by a dwelling. Therefore, your impacted portfolio includes first mortgages, home equity loans, as well as any consumer loans that may be secured with a dwelling.
Work with your documents provider to ensure these documents are updated.
4. Prepayment penalties
The new mortgage rules severely limit a credit union’s ability to charge prepayment penalties, including early closure and termination fees, and reimbursement of non-bona fide third-party fees paid on a consumer’s behalf.
Consider the following before charging pre-payment penalties:
3. Determine which mortgage servicing provisions require compliance
The changes to mortgage servicing are extensive—new practices and notices are now required for first mortgages, home equity loans and lines of credit, and consumer loans secured by a dwelling.
There are some exceptions for small servicers that service 5,000 or fewer loans that they or an affiliate originate or own. You must understand your relationships with credit union service organizations and subservicers to determine if you are a small servicer.
Even if you are a small servicer, you still must comply with many provisions under the servicing rule. Look closely at this rule to determine which provisions require your compliance.
2. Train, register and/or qualify mortgage loan originators
The mortgage loan originator rule under Regulation Z prescribes new qualification and training requirements for loan originators. The rule defines loan originator more expansively than the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act)—consequently, bringing more of your employees under these requirements.
Ensure all of your loan originators meet requisite requirements for registration under the SAFE Act, training, and qualification, which requires a criminal background check and credit report (among other things).
1. QMs, no QMs, or both?
A credit union can meet ability to repay/QM rule requirements in one of two ways: originate a QM, which comes in several different flavors, or follow eight specified underwriting criteria.
Credit unions may choose a mix of QMs and non-QMs in a mortgage portfolio. That said, your policies and procedures (and accompanying practices) should reflect your business decisions.