Watch for these NCUA exam ‘hot spots’
Pay close attention to mortgages and Fair Credit reporting.
Jared Ihrig, CUNA's chief compliance officer & counsel explored NCUA exam “hot spots” during the 2020 CUNA Operations & Member Experience Council and CUNA Technology Council Virtual Conference.
NCUA is focusing on error-resolution requirements, timelines, and issues concerning Regulation E, as well as overdraft opt-in disclosures for one-time ATM and debit transactions, he says.
Some credit unions continue to miss filing deadlines of the loan application register (LARs) as required by the Home Mortgage Disclosure Act, and some aren’t updated LARs quarterly.
Additionally, in some instances data fields are not being properly aggregated or captured across credit union loan origination systems, Ihrig says.
Examiners are also noting that in some instances, credit unions aren’t providing adverse action notices related to Regulation B to borrowers with enough reason specificity, resulting in some examination findings for credit unions.
Fair lending exams will likely increase in 2020 and 2021, he notes.
Under the Servicemembers Civil Relief Act, the annual percentage rate reduction must occur as of the effect date of active duty orders, not necessarily the date the member notifies the credit union.
Plus, Reserve and National Guard members are covered under the Military Lending Act and the Servicemembers Civil Relief Act, Ihrig says. Some credit unions misunderstand what constitutes a “covered borrower” under the Military Lending Act.
During CUNA’s discussions with NCUA, the agency reports the second highest number of complaints concern the Fair Credit Reporting Act, he says.
“It’s important to remember that if we contract with third-party vendors and there are mistakes made by our third-party vendors, that does not relieve the credit union from liability in this area,” Ihrig says.
In regard to Fair Lending, credit unions must look across all of their systems, including debt collection and credit scoring, to be sure they’re applied fairly.
Another exam hot spot for regulators is mortgages, Ihrig says. Specific concerns include misrepresentation of credit terms and annual percentage rate, misleading advertised rates and payments as fixed, misrepresentation of the “existence, nature, or amount of cash or credit available” to the consumer, misrepresentation of the “existence or amount of fees or costs to the consumer,” and number of time period of payments over the course of the full term of the loan.
Mortgage servicing is also a point of emphasis, with loss mitigation timing and disclosure requirements, notices and communications to delinquent borrowers, private mortgage insurance release requirements, escrow account calculations and disclosures, successors in interest, periodic statement requirements, and borrowers in bankruptcy disclosures under scrutiny, Ihrig says.
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