MADISON, Wis. – While many credit unions may be avoiding undertaking a full review of the Consumer Financial Protection Bureau's (CFPB) extensive mortgage lending regulation proposal, thinking the regulations only apply to first mortgage loans, CUNA Senior Vice President for Compliance Kathy Thompson has warned that portions of the regulations do apply to subordinate liens.
Thompson specifically cited regulations addressing ability-to-repay, appraisals for higher-risk mortgages and high-cost mortgages, as well as the CFPB's developing Truth in Lending Act (TILA)/Real Estate Settlement Procedures Act (RESPA) forms, as regulations that will likely impact credit unions that process subordinate liens. The CFPB's mortgage originator standards and mortgage servicing regulations will also apply to subordinate liens, she added.
In the September edition of CUNA's CompBlog Wrap-Up, Thompson said credit unions should think about the compliance costs these pending regulations could create and consider whether those potential costs should be built into their 2013 budgets. At least 20 new notices would be required under the proposed rules, and those notices will need to be developed and incorporated into policies and procedures, as appropriate, Thompson said. Information technology changes and additional staff training will also be necessary, she noted.
The CFPB has said the expected compliance date for many of these rules will be six to 12 months from when finalized regulations are issued. "A six-month compliance period would be insane—but remember the CFPB is oriented to the consumer and has even said that a short compliance period might help to calm the mortgage market," Thomspon said. No matter the final compliance date, these regulations will likely create a busy 2013 for credit unions.