WASHINGTON (6/6/14)--The Credit Union National Association, in a letter to the Consumer Financial Protection Bureau, has outlined several suggestions to amendments to the 2013 mortgage rules, suggestions designed to help smaller credit unions benefit from the rules. CUNA believes these alterations will make it easier for small credit unions to serve communities, particularly low- and middle-income consumers.
CUNA asked the CFPB to expand its small servicer exemption through changes to its proposed alternative definition. The bureau currently proposes to allow nonprofit entities that are part of a larger association of nonprofits to fall under Regulation Z's small-servicer exemption.
This definition does not go far enough to exempt other nonprofit entities such as credit unions, CUNA noted. Comparing credit unions' role in housing finance for their members and local communities with similar 501(c)(3)-designated entities, credit unions should not be excluded from the small-servicer definition, CUNA maintained.
The CFPB's Title XIV mortgage rules names four exceptions to the rules that apply only to small creditors. To qualify for these exceptions, the creditor must have originated--together with its affiliates--500 or fewer first-lien loans and have less than $2 billion in assets at the close of the preceding calendar year.
"There are more than 200 credit unions in the country that have less than $2 billion in assets but originated more than 500 first-lien loans," said Jared Ihrig, CUNA's associate general counsel. "Raising the limit to at least 5,000 originations on first-lien loans will allow many more credit unions to take advantage of the exceptions available, which will allow more credit union lenders to provide an increased level of mortgage credit availability."
CUNA said it generally supports the CFPB's proposal to provide a cure mechanism for lenders that originate loans meant to be qualified mortgages (QM), but which have points and fees that are over the general 3% cap. The cure mechanism under consideration by the bureau proposes a period of 120 days after consummation of a loan in which the creditor can issue a refund to the consumer of the excess amount over the allowable 3% cap if the loan was made in "good faith" and meets other QM requirements.
However, the letter states CUNA's concerns that a 120-day cure period may not allow ample time for credit unions to refund the overage, particularly since many credit unions outsource their post-consummation mortgage loan reviews. CUNA requests at least a 180 days after consummation to give lenders an "adequate amount of time to issue a refund to affected consumers."
CUNA also requests clarification on the phrase "good faith" when referring to the loan requirement.
"While we appreciate the bureau's efforts in providing examples as to what would and would not constitute 'good faith' by way of examples contained in the proposed official staff commentary to the rule, CUNA would recommend that the CFPB consider providing additional details and examples to further clarify this term," the letter reads.