Because credit unions are unique among financial institutions, a study by the new Consumer Financial Protection Bureau on integrating mortgage lending forms should include at least one testing panel comprised entirely of credit union lending professionals, CUNA has written in a comment letter.

In the letter to the federal Office of Management and Budget and the Treasury Department, CUNA pointed out that credit unions’ unique not-for-profit, cooperative structure and regulation by the National Credit Union Administration Board (NCUA Board) make them fundamentally different from for-profit lenders and brokers.

“We believe that the quality and utility of the CFPB’s study would be enhanced if it included at least one testing panel comprised entirely of credit union lending professionals,” CUNA’s Michael S. Edwards, senior assistant general counsel, wrote.

Integrating lending forms required by the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA) into a single disclosure form was mandated by last year’s Dodd-Frank Wall Street Reform and Consumer Protection Act. The law requires that the CFPB integrate the forms into a single disclosure form that will “facilitate compliance with the disclosure requirements . . . and . . . aid the borrower or lessee in understanding the transaction by utilizing readily understandable language to simplify the technical nature of the disclosures.’’

CUNA also wrote that, once the form study is complete and the CFPB has developed a draft version of the combined mortgage disclosure form, the draft form should be subject to additional outreach to small financial institutions, including all credit unions.

The complete text of CUNA’s letter follows:

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Sent via first-class and electronic mail

May 5, 2011

Shagufta Ahmed
Office of Management and Budget
Room 10235, New Executive Office Building
725 17th Street, NW
Washington, D.C. 20503
shagufta_ahmed@omb.eop.gov

Treasury Department Clearance Officer
Attn: Dawn D. Wolfgang
Department of the Treasury
1750 Pennsylvania Avenue NW
Suite 11010
Washington, DC 20220

Re: Qualitative Testing of Integrated Mortgage Loan Disclosure Forms
         OMB Number 1505-XXXX

Dear Ms. Ahmed:

The Credit Union National Association (CUNA) appreciates the opportunity to comment on the Consumer Financial Protection Bureau (CFPB) and Treasury Department proposed qualitative testing of the integrated mortgage loan disclosure forms required by the Dodd-Frank Wall Street Reform and Consumer Protection Act.  Pursuant to sections 1032 and 1098 of the Dodd-Frank Act, CFPB will integrate the mortgage disclosure forms required by the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA) into a single disclosure form that will “facilitate compliance with the disclosure requirements . . . and . . . aid the borrower or lessee in understanding the transaction by utilizing readily understandable language to simplify the technical nature of the disclosures.’’  By way of background, CUNA is the largest credit union advocacy organization in this country, representing approximately 90% of our nation’s 7,600 state and federal credit unions, which serve 93 million members.

CUNA supports the general design of the proposed CFPB study on integrating the TILA and RESPA forms, including the CFPB’s outreach to credit unions and other lenders as part of the testing process.  We believe that this study will have significant utility with respect to understanding TILA and RESPA regulatory compliance burdens on credit unions.  However, we believe that the quality and utility of the CFPB’s study would be enhanced if it included at least one testing panel comprised entirely of credit union lending professionals.  Credit unions’ unique not-for-profit, cooperative structure and credit unions’ regulation by the National Credit Union Administration Board (NCUA Board) make them fundamentally different from for-profit lenders and brokers. 

Credit unions’ mission includes, among other things, the promotion of thrift and making loans to members for provident or productive purposes.[1]  Members own their credit union and therefore credit unions do not have an incentive to make predatory loans to or otherwise maximize profits at the expense of their member-owners.  In addition, Dodd-Frank Act section 1026 assigns direct consumer compliance examination responsibility for credit unions with $10 billion or less in assets to the NCUA Board, and all but the three largest credit unions fall under this $10 billion in assets threshold.  Credit unions are therefore different from banks, non-depository mortgage lenders, and mortgage brokers in terms of mission, profit motive (or lack thereof), ownership, and regulatory structure.  Specific outreach to credit unions by the CFPB would greatly facilitate the TILA-RESPA disclosure form study with respect to credit union regulatory compliance burden.

We believe that the CFPB’s information collection burden estimates regarding the study participants are reasonable.  Credit unions are currently subject to enormous and increasing regulatory burdens, and Congress’s intent in directing the CFPB to combine the TILA and RESPA mortgage disclosure forms was to decrease duplicative and unnecessary regulatory burdens on credit unions and other lenders, as well as to make those disclosures clearer to consumers.  The relatively small information collection burden on the participants in this study we believe will be vastly outweighed by the reduction in regulatory burden on all credit unions and other lenders once the integrated TILA-RESPA disclosure form is finalized.

In addition, CUNA believes that—after this study is complete and the CFPB has developed a draft version of the combined mortgage disclosure form—the draft form should be subject to additional outreach to small financial institutions, including all credit unions, pursuant to the Small Business Regulatory Enforcement Fairness Act (SBREFA) panel process.  Dodd-Frank Act section 1100G amended the Regulatory Flexibility Act to require the CFPB to conduct outreach to small financial institutions by convening a SBREFA panel whenever any CFPB proposed regulation “will have a significant economic impact on a substantial number of small entities . . .” pursuant to 5 U.S.C. § 609(b).  Each SBREFA panel includes a representative from the agency issuing the regulation (in this case the CFPB), a representative from the Office of Management and Budget, and a representative from the Small Business Administration Office of Advocacy.  The SBREFA panel solicits input from small entity stakeholders prior to the issuance of a proposed regulation and the panel makes recommendations to the issuing agency on how to reduce regulatory burden on small entities.

The combined TILA-RESPA form will in our view “have a significant economic impact on a substantial number” of credit unions, which the Regulatory Flexibility Act generally defines as “small organizations” regardless of asset size.[2]  The form should therefore be subject to additional credit union outreach under the SBREFA panel process prior to the CFPB’s issuance of a proposed regulation to implement the form.

Thank you for the opportunity to comment on the CFPB’s proposed information collection regarding qualitative testing of the integrated TILA-RESPA mortgage loan disclosure form.  If you have questions about our comments, please feel free to contact CUNA SVP and Deputy General Counsel Mary Dunn, or me at (202) 508-6705.

Sincerely,

Michael S. Edwards
Senior Assistant General Counsel
Credit Union Natl. Assn. (CUNA)
Washington, DC

cc (by electronic mail):

Pamela Blumenthal
CFPB Implementation Team
1801 L Street NW
Washington, DC 20036
Pamela.Blumenthal@treasury.gov