WASHINGTON (8/24/10)--The Credit Union National Association (CUNA) has said that while it does not advocate that specific, additional information be reported under the Home Mortgage Disclosure Act (HMDA), it agrees with a recent suggestion that the new HMDA reporting requirements apply “only to the largest mortgage lenders that make the vast majority of mortgage loans.” Such a plan would initially exclude credit unions and small community banks, but could be expanded as needed, CUNA said. CUNA recommended that the Federal Reserve take a “bright line” approach to HMDA reporting, limiting the need for HMDA reports to situations in which there is a lien on a given home. The Fed is considering whether certain data elements of HMDA should be added, modified, or deleted, and is holding a series of hearings to collect input from interested parties. CUNA in a comment letter filed to the Fed last week said that credit unions could support additional changes to the HMDA requirements if the Fed or the to-be-established Consumer Financial Protection Bureau (CFPB) “clearly demonstrates that the new information would further the goal of ensuring fair lending and anti-discriminatory practices” while minimizing the reporting burden on credit unions. CUNA said it opposes portions of HMDA that would require credit unions to disclose the existence of existing home equity lines of credit and to report the total income and credit scores of potential mortgage-holders. It also recommended that HMDA reporting requirements related to loan pre-approvals, unsecured home improvement loans, and whether the home is a manufactured home be removed from the final rules. The association also encouraged the Fed to hold additional meetings with affected financial institutions as the HMDA rulemaking process moves forward, and to give credit unions at least two years to adapt to the new HMDA requirements once they are imposed. For the full comment letter, use the resource link.
ALEXANDRIA, Va. (8/24/10)--Saying that an “improperly planned or loosely managed indirect lending program can lead to unintended changes in the risk profile and financial performance” of a credit union, the National Credit Union Administration (NCUA) released Letter to CUs 10-CU-15 providing credit unions with guidance on how best to build or review their indirect lending programs. Risks associated with indirect lending include material shifts in balance sheet composition and increased credit risks, liquidity risks, transaction risks, compliance risks, and reputation risks, the letter said. The NCUA “has seen seemingly healthy credit unions fail in a matter of months due to indirect lending programs that spun out of control,” it added. The agency recommended that credit unions mitigate these risks by properly establishing the goals and portfolio limitations for indirect lending programs, creating and following specific underwriting standards and vendor policies, and maintaining a “comprehensive, effective, and ongoing due diligence program.” Credit unions should also “determine the level of lending and collection staff sufficient to operate and monitor” indirect lending programs. They also should undertake periodic risk-reward or cost-benefit analyses “to determine if the net return to the credit union is sufficient for the risk” and “establish an exit strategy” that could be followed if the risks posed by indirect lending become too great. Examiners will be monitoring credit unions for high concentrations of indirect loans to total loans, “inadequate analysis of overall indirect loan portfolio performance,” and insufficient loan documentation, and those examiners may contact credit unions if these or other assorted “red flags” are noticed, the NCUA said. The NCUA has also recently provided credit unions with guidance on liquidity risk management and the Secure and Fair Enforcement for Mortgage Licensing Act. For the NCUA letters, use the resource links.