WASHINGTON (4/26/12)--The Consumer Financial Protection Bureau (CFPB) should consider meaningful exemptions for credit unions and other small financial institutions as it develops new mortgage servicing rules, American Southwest CU CEO Brian Barkdull said at a CFPB Small Business Regulatory Enforcement Fairness Act (SBREFA) panel discussion held this week in Washington.
The CFPB earlier this month began working on a series of new mortgage rules that aim to increase transparency and accountability in the market. The SBREFA panels, which are required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, are intended to bring credit unions and other small financial service providers into discussions on any proposed rules that may have a significant economic impact on a substantial number of small providers.
The Credit Union National Association suggested that Barkdull take part in the panel. Tiffany Michel, vice president of lending at Omaha Police FCU, Omaha, Neb., and Victor Petroni, senior vice president of lending at First New England FCU, East Hartford, Conn., also joined representatives from the CFPB, the U.S. Small Business Administration (SBA), and the Office of Management and Budget at the panel discussion. Representatives from Services Center FCU, Yankton, S.D., Rocky Mountain Law Enforcement FCU, Denver, Colo., and community banks also took part in the discussion.
During the panel discussions, Barkdull noted that regulatory changes in mortgage servicing do affect and increase his credit union's costs in other areas, such as business loans.
He also said that he includes regulations alsongside other financial institutions when he thinks of the "competition" his credit union faces, because his Tuscon, Arizona credit union must address both concerns.
Panel participants also reviewed the CFPB mortgage servicer proposals under consideration, discussed the direct and indirect impact on businesses and consumers, responded to CFPB staff questions, and provided detailed examples from their experiences.
The panelists urged the agency to minimize duplicative regulations, consider the costs on small financial institutions, consider meaningful exemptions or multi-tiered approaches, and focus on targeting specific problem areas instead of developing overly broad rules.
The CFPB also plans to conduct additional outreach on the mortgage servicing project to gather feedback from consumer groups, industry, and other agencies.
Some of the rules under consideration would require mortgage servicers to provide regular mortgage statements covering the mortgage loan's principal, interest, fees, and escrow, the amount of and due date of the next payment, and, in some cases, information on financial and foreclosure avoidance counseling. Servicers would also be required to warn mortgage holders before interest rate changes are made to their adjustable-rate mortgages, to post mortgage payments promptly after they have been received, to increase mortgageholder ease of access to their own account information, and to quickly correct account errors.
Some of the rules would also address force-placed insurance, which can be purchased by mortgage servicers when mortgage borrowers do not maintain hazard insurance on their properties. Force-placed insurance can often be far more expensive than privately purchased insurance. Under one of the proposals, alternatives to force-placed insurance could be offered to consumers, and warnings and disclosures would need to be provided before force-placed insurance is purchased.
An advanced notice of proposed rulemaking on the mortgage servicing rules is scheduled to be released this summer, and the rules are scheduled to be finalized in January of 2013. The agency said it could provide an implementation period of up to one year, but has not decided how long of a transition period is necessary yet.
The CFPB also continues to work on revised mortgage applications and mortgage loan closing documents, and proposed forms of these disclosures are scheduled to be released in July.
CUNA will be following up with the CFPB on the mortgage servicer rules and other rulemaking efforts, and we will continue to work with the Leagues and credit unions on any further developments.