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Closed-end mortgage disclosure rule excessive--CUNA
WASHINGTON (12/28/09)--Commenting on the Federal Reserve Board’s proposed revisions to Regulation Z requirements for closed-end mortgage loans, the Credit Union National Association (CUNA) said it “generally supports disclosures that are helpful for consumers,” but added the disclosure requirements under this proposal are excessive and “would be overwhelming for consumers.” CUNA noted that providing more streamlined information “may actually be preferable if it is carefully targeted to the needs of consumers who apply for mortgage loans.” Portions of the new Fed rule would require changes in the format and timing of the required disclosures and would prohibit certain payments to mortgage brokers and loan officers that are based on the loan’s terms or conditions. However, CUNA argued, these rules should not apply to credit unions because “compensation systems for credit union employees have worked well, without abuse, and credit union employees were not the cause of the problems that these provisions are intended to address.” The Fed rules would seek to address many questionable lending practices, including instances where lenders have provided high-cost and abusive loans to unsuspecting borrowers. CUNA is also concerned about provisions that would require more finance charges and fees to be included within the annual percentage rate (APR) calculation. This would increase the overall annual percentage rate (APR) attached to a loan and may cause consumers to believe that the increase is due to a change in credit union business practices, rather than a change in how the APR of a given loan must be disclosed. “The preferable approach would be to require disclosure of the interest rate and disclosure of the finance charge in dollar terms, which will be easier for borrowers to understand and easier for lenders for purposes of complying with these requirements,” CUNA added. “Based on their relationships with their members, credit unions strongly believe these additional and enhanced disclosures are for the most part unnecessary, and the resulting confusion will actually thwart the goal of this proposal, which is to provide useful information for consumers,” the comment letter added. CUNA urged the Fed to “substantially revise the proposal” and “conduct additional consumer research as part of this process prior to issuing a rewritten proposal.” For the full comment letter, use the resource link.


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