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Survey reveals mortgage lending regulations may hurt consumers
Many Credit Unions Will Reduce or Discontinue Mortgage Loans as Result of CFPB Regulations
WASHINGTON, DC (October 21, 2013) — A new survey conducted by the Credit Union National Association (CUNA) found that new mortgage regulations from the Consumer Financial Protection Bureau (CFPB) may impact the willingness of credit unions to issue new mortgages. The survey, which polled credit unions across the country, revealed that most credit unions will not be ready to comply with the new rules, which take effect in January 2014, even though many of them have been diligently working throughout 2013 toward meeting the compliance deadline.
The survey showed that three in five of responding credit unions – 60% – have determined they will be forced to discontinue, delay or reduce their mortgage loan product offerings because of the regulatory changes. As a result consumers could be left with fewer options for home mortgage loans, at a time when America’s housing recovery finally seems to be gaining traction.
“These survey results are troubling for consumers,” CUNA President and CEO Bill Cheney said. “CUNA has urged the CFPB to allow more time for compliance, since seven rules will hit within a two-week period, which poses a monumental compliance challenge. This is a particularly daunting task for smaller credit unions, given their small staffing resources.”
“CUNA will continue to do all we can to help minimize the impact of these rules,” he added. We are aware that the CFPB has talked with prudential regulators such as NCUA and that examiners should allow several months after the effective date before instructions that are seeking to comply are cited for violations. We are also concerned about protecting credit unions from litigation, and we will continue to pursue that issue as well.”
The ability of third party vendors to redesign computer systems to meet the new requirements is a major concern to credit unions, the survey showed. Overall, 48% of vendors indicate they will complete programming changes to comply between November and December, and an additional 10% say they won’t be able to develop programming until after January 2014. 41% of credit unions indicate their vendor has not yet promised a delivery date. As programming changes must be made during tax reporting season, credit unions are worried that the changes may cause them to miss IRS deadlines, the CFPB compliance dates, or both. Overall, the survey showed that 86% of responding credit unions are using third party vendors to assist in implementing the rules, while 69% of this 86% are using multiple vendors. The CFPB has also indicated it has talked with vendors.
As part of the survey, credit unions detailed their concerns in their own words.
“I do not have a problem with the requirements however I would have preferred the rule dates to be staggered. It is difficult to comply with so many rules at one time. If they were staggered it would give me the time needed to ensure smooth compliance of these rules.”
“We will no longer offer mortgages as of that date until we have adequate time [to ensure compliance]. … Our members will lose.”
“Meeting periodic statement requirements … requires many hours of working with our statement and data vendors to design, map, and figure out a way to distribute statements to members. This is a completely new and different process than we’ve had to do before with the timing requirements of these statements. In many ways, it feels like we are starting from scratch. We are working diligently with our statement and data vendors, but there is some serious question as to whether we’ll have the data we’ll need in time to have these statements created by January.”
“We will suspend all mortgage products until we can get forms and networks in place to support the changes. I anticipate this will take until the end of the 1st quarter before we are ready.”
As for “qualified mortgages,” about half of credit unions still have not made a decision as to whether they will offer non-QM loans, write only QM loans – or reduce the number of non-QM loans being made to members. “This indicates that some credit worthy borrowers who would otherwise have qualified for a mortgage may not receive loans from their credit union,” Cheney said.