March 14, 2013
The Honorable Richard Cordray
Director
Consumer Financial Protection Bureau
1700 G Street, NW
Washington, DC 20552
RE: Guidance on CFPB Mortgage-Related Rules
Dear Director Cordray:
On behalf of the National Association of Federal Credit Unions (NAFCU), the only trade association that exclusively represents federal credit unions, I am writing to you in regard to actions that the Consumer Financial Protection Bureau (CFPB) can take to reduce the great burden on credit unions associated with implementing the series of recently-issued mortgage-related rules.
NAFCU is aware of and appreciates the CFPB’s plans to provide implementation guidance on the various mortgage-related rules that were recently issued. As you stated in your announcement, dated February 13, 2013, the CFPB’s plan is “to work with the mortgage industry to ensure that the CFPB’s new rules are implemented accurately and expeditiously.” In this regard, we are particularly appreciative of you personally taking the time to meet with Martin Breland, President/CEO of Tower Federal Credit Union, as well as Barry Stricklin, Tower Federal’s Vice President of Real Estate and Lending to discuss the rules’ impact. We also thank you for your continued outreach with NAFCU to participate in the implementation guidance process.
As the CFPB moves forward with its plans to issue guidance, NAFCU would like to provide our initial recommendations to the CFPB.
NAFCU first requests that the CFPB issue guidance that combines all the mortgage-related rules into one uniform Regulation Z. As the rules currently exist, a credit union must consult each of the final rules, the related staff commentary, and the final rules’ preambles. This process has already proved to be arduous and will make compliance far more difficult than necessary. As the CFPB can hopefully appreciate, one of the challenges with implementation has thus far been and will undoubtedly be the difficulties with understanding the relationship between the provisions of the various regulations, both those issued under Regulation Z and Regulation X, and how the various provisions work in tandem in their application to various aspects of the mortgage transaction.
Next, we strongly encourage the agency to institute a process for credit unions to seek guidance on specific matters. Currently, other regulators have processes in place where a regulated entity can seek guidance or a legal opinion on issues that are either unclear or unresolved. Given the enormity and complexity of the rules that the CFPB has thus far issued, we believe it would only be appropriate for such a process to be established. A new process that would allow a credit union to seek guidance on specific matters would be very helpful not only in the immediate, short term phase of implementation but also in the long term as credit unions confront unforeseen issues related to complying with the rules.
NAFCU maintains that the host of mortgage rules, taken individually but more so in their cumulative effect, will significantly alter the mortgage market in unintended ways. In particular, the ability-to-repay and qualified mortgage rule, and the mortgage servicing rule, will undoubtedly require credit unions to make major investments, incur significant expenses and altogether rework nearly every aspect of their origination and servicing operations. Credit unions are of various sizes and complexities and are still determining how they will comply with the ability to repay rule. NAFCU remains concerned that smaller institutions will be unable to bear the legal risk of offering a loan outside of the safe harbor standard. Thus, we again call on the CFPB to use its broad discretionary authority under the Dodd-Frank Wall Street Reform and Consumer Protection Act to exempt federally-insured credit unions from the mortgage-related rules.
If you have any questions or concerns, please feel free to contact me at (703) 842-2215 or Tessema Tefferi at (703) 842-2268.
Sincerely,
Fred R. Becker, Jr.
President and CEO