WASHINGTON (7/18/13)--Credit unions strongly support the regulatory relief provisions found in a new draft bill on housing policy reform unveiled last week by House Financial Services Committee Chairman Jeb Hensarling (R-Texas), and also back many other positive aspects of the legislation, according to the Credit Union National Association.
In a statement submitted today for the record of a hearing on that bill, called the "Protecting American Taxpayers and Homeowner (PATH) Act of 2013," CUNA President/CEO Bill Cheney wrote that credit unions' strong support includes a provision to delay the mandatory implementation of all Dodd-Frank Act mortgage rules for an additional year.
"The compliance obligations imposed by the mortgage rules are simply overwhelming to many credit unions, especially America's smallest credit unions, and the tight timeframe for compliance puts the availability of mortgage credit--and thus America's nascent housing recovery--at risk.
"Another year would ensure that mortgage credit remains available to millions of credit union members while credit unions all over the country continue to understand how to implement the most sweeping regulatory changes to mortgage lending in U.S. history, and would be welcome relief to credit unions," the CUNA leader wrote.
Cheney also said credit unions appreciate that the PATH Act recognizes that portfolio lending should not be treated the same for purposes of designing a regulatory framework for a housing finance system, a recognition that would provide "extraordinary relief for credit unions." Historically, credit unions have been portfolio lenders, holding 60%-75% of the mortgages they write on the books in most years prior to the financial crisis.
The PATH Act would exempt any residential mortgage held on the balance sheet of the originating creditor from the Home Mortgage Disclosure Act, eliminate the requirement to set up an escrow account for higher-priced mortgage loans held in portfolio, and relieve credit union portfolio loans of many of the requirements of the Dodd-Frank Act that will be very burdensome and costly to implement. This importantly includes the ability-to-repay and Qualified Mortgage requirements.
However, Cheney added, CUNA does have preliminary concerns on behalf of credit unions regarding some provisions of the PATH Act. For example, CUNA has serious concerns that the PATH Act may not provide credit union members with a sustainable secondary market that can provide the necessary liquidity and structure that will ensure the continuation of long-term fixed-rate mortgage products.
This is of particular concern for credit unions because more than 83% of credit union mortgages issued since 2008 have been fixed-rate mortgages; this signifies particularly strong member demand for a fixed-rate mortgage product.
The PATH Act hearing starts at 1 p.m. (ET) July 18. In general, the bill seeks to minimize government involvement in the secondary market, limit taxpayer liability, foster innovation and allow for more private-sector capital in the marketplace. Additionally, the bill strives to provide equal access to all financial institutions regardless of asset size.
Use the resource links to access the CUNA letter when it is posted to the CUNA website and to read more about today's hearing.