Credit unions face endless compliance challenges as the New Year approaches, particularly with new mortgage lending rules.
A flood of these regulations takes effect next month: “ability-to-repay” rules, nine mortgage servicing requirements, and the mortgage loan origination rule on Jan. 10, 2014; and new appraisal rules on Jan. 18.
These regulations, of course, stem from provisions in the Dodd-Frank Act of 2010. That law required the Consumer Financial Protection Bureau (CFPB) to issue most mortgage-related regulations by January 2013, with an effective date within 12 months.
Dodd-Frank was meant to address the “bad actors” within the mortgage lending space—not credit unions. CFPB Director Richard Cordray himself acknowledged the bureau recognizes credit unions weren’t the cause of the financial crisis. We’ve pressed that point, and had some success convincing the bureau to consider exemptions for credit unions from these requirements.
Even so, credit unions’ compliance programs will face incredible challenges. That’s why we’re not letting up in our efforts to obtain more preparation time and flexibility for credit unions.
We’re also raising concerns about broader issues such as the potential for disparate impact discrimination that could result if a lender originates only “qualified mortgages.” And, we’re urging regulators not to punish credit unions as they get up to speed dealing with the new regs.
It’s true that the bureau has been attentive to the concerns of smaller lenders about compliance with the rules and by the January dates. But as our compliance team has pointed out, the bureau in some cases has changed the final rules repeatedly—such as those for mortgage servicing—making it more difficult (if not impossible) for credit unions to comply.
That’s why we’re taking every opportunity to make our case for credit unions.
During our testimony before the Senate Banking Committee last month, CUNA Chief Economist Bill Hampel told senators that credit unions deserved a break.
The CFPB has finalized about 7,000 pages of mortgage regulations for credit unions and other community financial institutions, Hampel said—even though credit unions did not cause the mortgage crisis. In fact, credit unions over time consistently apply the very underwriting principles the new regulations now require.
But those 7,000 pages are simply overwhelming to many credit unions, he told the senators—and the tight timeframe for compliance puts the availability of mortgage credit at risk.
And the law carries a “private right of action,” he said, making credit unions and others vulnerable to lawsuits for noncompliance, even as they continue working—in good faith—toward compliance.
With the threat of lawsuits hanging over their heads, credit unions might be forced to pull back from mortgage lending.
He urged senators to pass legislation that gives credit unions and other community-based lenders a year to be clear of liability for noncompliance. He suggested the year would ensure that mortgage credit remains available as credit unions nationwide build understanding about how to implement the most sweeping regulatory changes to mortgage lending in U.S. history.
We’re also recommending the CFPB and NCUA give credit unions, in writing, assurance they won’t be subject to examiner sanctions. We’re asking the regulators to work with Congress to delay “private rights of action” so credit unions won’t have to worry about being sued for compliance issues during a reasonable period of delay.
Credit unions want to lend, and will do so, as they always have, safely and responsibly. But they deserve a break—and CUNA is working to make that happen.
BILL CHENEY is CUNA's president/CEO.