WASHINGTON (4/10/08)—The current Federal Reserve Board proposal to revise its Regulation Z would make significant changes to current mortgage loans rules, and that is particularly true in regard to the threshold for “high-priced” loans, the Credit Union National Association (CUNA) wrote in its comment letter. CUNA questioned the proposed threshold for determining whether a loan is "high-priced" and, therefore, subject to additional restrictions, and argued that under the current language the Fed could capture “significantly more loans than the Board intended.” “We also believe that the Treasury securities to be used should mirror the requirements under the Home Mortgage Disclosure Act,” wrote CUNA Senior Assistant General Counsel Jeffrey Bloch. CUNA endorsed other parts of the Fed plan and wrote in support of such provisions requiring:
* Lenders to consider a borrower’s ability to repay a loan’ * Escrow accounts, which CUNA noted are the “most appropriate means” in which to ensure that tax and insurance payments are made on a timely basis, and are “essential” for subprime loans. These accounts should not be canceled after a short period, such as twelve months as contemplated in the proposal, CUNA recommended; and * Restrictions on prepayment penalties, even ones that are more stringent than those currently proposed by the Board.
In its letter, CUNA also suggested that the required compliance date for the proposal be the same as the required compliance date for the final version of the additional closed-end lending changes that the Fed expects to propose later this year.