Source: http://nafcucomplianceblog.typepad.com/nafcu_weblog/lending/
Timestamp: 2016-02-11 21:03:27
Document Index: 546540057

Matched Legal Cases: ['§ 1026', '§ 1026', '§ 1026', '§ 1026', '§ 1026', '§ 1026', '§ 1026', '§ 1026', '§ 1026', '§ 1026', '§ 1026', '§1026', 'art 701', 'arts 701', 'art 701', '§ 701']

NAFCU Compliance Blog: Lending NAFCU Compliance Blog
It is almost upon us. On Saturday, the CFPB’s long-looming TRID rules actually go into effect. As credit unions prepare to use the new forms in actual transactions, the practical complexities and ambiguities of the rules are crystalizing before us. Your NAFCU Regulatory Compliance Team is fielding all your last-minute TRID clarifications, and one that keeps popping up again and again is lender credits. Below is a summary of the language in the comments and Preamble to clarify how to disclose lender credits.Lender Credits and the Loan Estimate
Section 1026.37(g)(6)(ii) requires that the amount of lender credits be disclosed as a negative number, but the details of disclosing lender credits are largely described in the Preamble and the Official Interpretations. In order to determine what might be considered a “lender credit” the commentary to 1026.37 points you to the commentary to 1026.19. Specifically, comment 1026.19(e)(3)(i)-5 describes that lender credits come in two forms: general and specific:
“Lender credits,” as identified in § 1026.37(g)(6)(ii), represents the sum of non-specific lender credits and specific lender credits. Non-specific lender credits are generalized payments from the creditor to the consumer that do not pay for a particular fee on the disclosures provided pursuant to § 1026.19(e)(1). Specific lender credits are specific payments, such as a credit, rebate, or reimbursement, from a creditor to the consumer to pay for a specific fee.
With that clarifying detour out of the way, we can return to section 1026.37(g)(6)(ii) on how to complete the form. Comment 1026.37(g)(6)(ii)-1 confusingly describes all lender credits disclosed in the form as general credits, but then Comment 1026.37(g)(6)(ii)-2 clarifies that specific credits should be disclosed in the same box as well:
For loans where a portion or all of the closing costs are offset by a credit or rebate provided by the creditor (sometimes referred to as “no-cost” loans), whether all or a defined portion of the closing costs disclosed under § 1026.37(f) or (g) will be paid by a credit or rebate from the creditor, the creditor discloses such credit or rebate as a lender credit under § 1026.37(g)(6)(ii). The lender credits disclosed under section 1026.37(g)(6)(ii) are disclosed in Box J of the Loan Estimate.
Lender Credits and the Closing Disclosure
So, after some circumnavigation through the commentary, we have determined the general credits and the specific credits are combined in your Loan Estimate. But what to do in the Closing Disclosure? Lender credits must be included in the Closing Disclosure under section 1026.38(h)(3). Comment 1026.38(h)(3)-1 clarifies what to do with specific credits:
When the consumer receives a generalized credit from the creditor for closing costs, the amount of the credit must be disclosed under § 1026.38(h)(3). However, if such credit is attributable to a specific loan cost or other cost listed in the Closing Cost Details tables, pursuant to § 1026.38(f) or (g), that amount should be reflected in the Paid by Others column in the Closing Cost Details tables under § 1026.38(f) or (g). For a description of lender credits from the creditor, see comment 17(c)(1)-19. For a discussion of general lender credits and lender credits for specific charges, see comment 19(e)(3)(i)-5.
So while both specific and general lender credits are entered into Box J on the Loan Estimate, only general lender credits are entered into Box J on the Closing Disclosure. Specific lender credits are itemized in the Closing Disclosure in the “Paid by Others” column. Of course removing specific credits from the lender credits will reduce the total in Box J as compared to the Loan Estimate. Regarding a good faith analysis, Comment 1026.19(e)(3)(i)-6 gives the following guidance:
For purposes of conducting the good faith analysis required under § 1026.19(e)(3)(i) for lender credits, the total amount of lender credits, whether specific or non-specific, actually provided to the consumer is compared to the amount of the “lender credits” identified in § 1026.37(g)(6)(ii). The total amount of lender credits actually provided to the consumer is determined by aggregating the amount of the “lender credits” identified in § 1026.38(h)(3) with the amounts paid by the creditor that are attributable to a specific loan cost or other cost, disclosed pursuant to § 1026.38(f) and (g).
Lender Credits and Revisions
Lender credits get zero tolerance for decreases under section 1026.19(e)(3) because both general and specific lender credits are negative charges to the consumer. Comment 1026.19(e)(3)(i)-5 states that decreasing the lender credit is the equivalent of increasing a charge to the consumer. Comment 5 also makes it clear that a lender can increase lender credits to compensate for higher fees as much as they desire, but they cannot lower it.
If a specific lender credit is given in a Loan Estimate, and the cost it is intended to compensate comes in lower than expected, the Commentary and Preamble, page 349 makes it clear that the borrower still must receive that credit somehow:
Under current Regulation X, the loan originator may only apply the amount of the excess lender credits to additional closing costs previously not anticipated to be included in the loan, apply the excess to a principal reduction to the outstanding balance of the loan, pay the consumer the excess in cash, or reduce the interest rate and the credit accordingly. Creditors will be able to take the same actions with respect to lender credits in streamlined refinancing programs under this final rule.
The inability to decrease a lender credit isn’t absolute though. Section 1026.19(e)(iv)(D) clearly contemplates revising a loan estimate with decreased lender credits which result from a rate lock. Further, the Preamble on page 348 states: “With respect to whether a changed circumstance or borrower-requested change can apply to the revision of lender credits, the Bureau believes that a changed circumstance or borrower-requested change can decrease such credits, provided that all of the requirements of §1026.19(e)(3)(iv), discussed below, are satisfied.” As long as the decrease in lender credits is related to a valid reason for a revised Loan Estimate under section 1026.19(e)(3)(iv), nothing indicates that loan credits cannot be decreased.
Do not forget NAFCU members, your NAFCU Regulatory Compliance team is here to help you hash out the last minute details as you implement these rules. Don't hesitate to email us at compliance@nafcu.org.
Posted by NAFCU on September 30, 2015 in CFPB, Lending, TILA/RESPA Integrated Disclosures | Permalink
Posted by NAFCU on September 14, 2015 in Indirect Lending, Lending, NCUA | Permalink
Posted by NAFCU on December 12, 2014 in DOD, Lending, SCRA | Permalink
Posted by NAFCU on November 21, 2014 in DOD, Lending, SCRA | Permalink
NAFCU will be studying the proposed rule carefully for any unintended consequences from the proposal that would prevent credit unions, particularly those operating on military installations, from providing those safe credit products that servicemembers have come to depend on from their credit unions. Comments on the proposed rule are due November 28, 2014. A Regulatory Alert with an analysis of the proposal will soon be available for NAFCU members here (NAFCU member login needed). Posted by NAFCU on October 01, 2014 in DOD, Lending, SCRA | Permalink
Posted by NAFCU on June 23, 2014 in Colombia, Free Kick, Lending, MBL, SBA, Sports, World Cup | Permalink
Posted by NAFCU on April 07, 2014 in Arsenal, Free Kick, Lending, MBL, NCUA, Payday Lending, Sports | Permalink
NAFCU Responds to FHFA on Increases to Fannie Mae & Freddie Mac’s Guarantee Fees and Changes to Loan-level Price Adjustments
Last week, in response to a directive from the Federal Housing Finance Agency, Fannie Mae and Freddie Mac announced increases to loan guarantee fees for all maturities and loan-level price adjustments for single-family loans with original maturities greater than 15 years. FHFA believes this will meet the conservatorship goal of “gradually contracting Freddie Mac and Fannie Mae’s dominant presence in the marketplace.” Here are the basic details of these releases:
The base g-fee for all mortgages will increase by 10 basis points;
Upfront fees in the Loan-level Price Adjustment (LLPA) matrices will be adjusted to “better align pricing with credit risk” (Fannie Mae announcement; Freddie Mac announcement);
The adverse market fee of 25 basis points that has been assessed on all of Fannie and Freddie’s mortgages since 2008 is being eliminated except in four states with higher than average foreclosure costs (New York, New Jersey, Connecticut, and Florida);
The FHFA expects the combination of fee changes to result in an average increase of 14 basis points for the typical 30 year mortgage. According to some in the mortgage lending industry, this will result in additional costs for borrowers, particularly because loan fee increases are typically passed along to borrowers through higher interest rates. To put this in perspective, an increase of just 10 basis points costs a borrower about $4,000 over the life of a 30 year, $200,000 mortgage. Also, the new LLPA fees will significantly increase initial costs for borrowers, even those with good credit scores.
In response, NAFCU’s President and CEO Dan Berger sent a letter to FHFA Acting Director Edward DeMarco about the negative impacts of these changes on credit unions and their members:
“NAFCU does not believe that these actions are appropriate because the cost of borrowing will greatly increase and lending will inevitably slow down. While we recognize that the housing market is recovering, it is important that the FHFA considers that there are many indicators showing a slowdown in the recovery. For example, applications for purchase transactions have decreased by 10 percent from the 3rd quarter in 2012 to the same time this year. During the same period, lenders have seen over 50 percent fewer mortgage applications, including refinancings. Further, and crucially, many lenders, including a vast majority of NAFCU member credit unions, do not plan to extend mortgages that do not meet the definition of ‘qualified mortgage.’” NAFCU is closely monitoring this issue. The FHFA will soon have a new director, current Representative Mel Watt, after he is sworn in. He would replace Acting Director Edward DeMarco.
After that news, I’m sure everyone could appreciate a pick me up, so I’ll introduce you to my 130 pound lovable American Mastiff, Lemmy—would you believe he’s a runt? As you can see, like all of us at NAFCU, he wishes you a safe and happy holiday!
Posted by NAFCU on December 20, 2013 in Lending | Permalink
Posted by NAFCU on September 27, 2013 in CFPB, Lending, SCRA | Permalink
NCUA Releases Supervisory Guidance on Loan Participation Waivers
Written by JiJi Bahhur, Regulatory Compliance Counsel With the effective date of the final loan participation rule right around the corner (September 23, 2013), the National Credit Union Administration (NCUA) released, just last week, supervisory guidance to assist with the loan participation waiver process. The Supervisory Letter, which is the enclosure to NCUA Letter to Credit Unions 13-CU-07, provides the process by which credit unions may obtain waivers, expectations for examiner review of waivers, and overall compliance with Part 701.22 of the NCUA Rules and Regulations. If your credit union buys participation interest in loans made by third parties, you are going to want to take a look at this Supervisory Letter. It is very detailed and includes, among other items, the types of waivers available; what information is required on the waiver applications; the considerations NCUA looks at when evaluating a waiver request; the timing of waiver responses and appeals; what loan participations are permissible for credit unions; loan participation policy requirements; and master agreement requirements. NCUA’s loan participation rule is designed to protect buyers of loan participations. If your credit union is in the business of buying participation interests, the rule applies to you and the Supervisory Guidance will be able to provide you with additional, explanatory information for the parts of the rule you may have been unsure about. To view the final loan participation rule, click here. To view Letter to Credit Unions 13-CU-07 and the Supervisory Letter, click here and here. Also, if you haven’t already, check out the September 2013 NAFCU Compliance Monitor – it features an article on NCUA’s final loan participation rule (NAFCU log-in required). Posted by NAFCU on September 23, 2013 in Lending, NCUA | Permalink
NCUA Approves the Loan Participation Rule
Written by JiJi Bahhur, Regulatory Compliance Counsel During the board meeting yesterday, NCUA considered and approved the loan participation final rule. Although NCUA made improvements to the rule as it was originally proposed, NAFCU still has some concerns that it will address after careful scrutiny of the final rule. The final rule amends Parts 701 and 741 of NCUA’s rules and regulations – the loan participation rule, eligible obligations rule and requirements for insurance rule. For those that read the proposal, you’d be delighted to know that NCUA created a chart comparing key provisions of the proposed rule versus the final rule. It’s a must-see. Once NAFCU examines the final rule more closely, we will have more details to share. In the meantime, listed in the Board Action Bulletin are the highlights of the final loan participation rule:
Purchasing credit unions will be subject to a single-originator concentration limit of $5 million or 100 percent of net worth, whichever is greater.
The risk retention requirement for originating federal credit unions will be 10 percent, as required by the Federal Credit Union Act. The risk retention requirement for other originating eligible organizations – including federally insured, state-chartered credit unions – will be five percent, consistent with the standard for securitizers under the Dodd-Frank Act (unless state law requires a higher percentage). Federally insured credit unions may establish different underwriting standards for loan participations than they use when originating their own loans. Credit unions will have the ability to apply for waivers on certain key provisions of the rule. The final loan participation rule is available here. The rule is effective 30 days from its publication in the Federal Register. Posted by NAFCU on June 21, 2013 in Lending | Permalink
*** I'd like to suggest that regulatory burden exists in many different forms and that one of biggest issues is that credit unions are regulated by numerous regulators, agencies, offices as well as Congress. Each regulator looks at an issue from their point of view without consideration for what burdens are being placed on credit unions by other parties. I like to call this regulatory "tunnel vision." ***
In this post, we'll look at a couple of recent issues that cause short-term regulatory burden. Short-Term Regulatory Burden. A good example of this would be NCUA's recent changes to the Equal Housing Lender Poster for FCUs. NCUA made the change to their poster in 12 C.F.R. 701.31(d)(3) to reflect NCUA's Office of Consumer Protection and their formal announcement indicated the change would become effective immediately. NCUA staff indicated that credit unions would have a reasonable amount of time to update their signs. Ok, that is fair. Would have been nice to have that in writing in the Technical Amendments - but at least it was some flexibility. The problem? As credit unions contacted NCUA for the updated posters they were told the signs would not be available for at least a month. This begs the question as to why the change was made effective immediately when NCUA wasn't prepared to provide credit unions with the updated posters. If you are looking for a non-fuzzy version of the Equal Housing Lending Poster, a blog reader passed along this clean PDF that might be useful.
Bonus: Inside of 12 CFR 701.31 is a citation to Regulation B. Unfortunately, it references 12 CFR 202.2(f) rather than the accurate citations of 12 CFR 1002.2(f). While this seems minor it does cause confusion and unnecessary headaches and really should have been addressed during NCUA's Technical Amendments to Part 701.31. "§ 701.31 Nondiscrimination requirements.
Hopefully NCUA's Annual Regulatory Review will include a thorough review of their regulations to ensure the citations accurately reflect the CFPB's authority over the consumer regulations. One can hope, can't he? Have a great weekend! Posted by NAFCU on March 30, 2012 in Lending, Regulatory Burden | Permalink
NCUA Report; Reg Alerts on Loan Participation & Reg Flex Proposals
Below are a couple of items for your Wednesday. NCUA Report - January 2012. The latest version of the NCUA Report is available. The following two articles definitely caught my eye:
A Frequently Asked Questions section on the FFIEC Online Authentication Guidance
A discussion on What is a Minority Credit Union?
The FFIEC discussion indicates that credit unions should keep an eye out for upcoming FAQs from the Agencies as well as updated examination guidance:
"NCUA and other FFIEC agencies are now developing a set of frequently asked questions and will issue the document when completed. In addition, NCUA will issue a Letter to Credit Unions with updated examination questionnaires covering NCUA’s expectations by customer authentication, layered security, or other controls in early 2012." In the discussion on Minority Credit Unions (MCU), NCUA indicates their collection of information via the call report is an interim process until an Interpretive Ruling and Policy Statement (IRPS) is issued and approved:
"NCUA must develop and approve an Interpretative Policy and Ruling Statement before it can implement the MCU Preservation Program. However, using the Call Report enables NCUA to identify potential MCUs so NCUA can assess the characteristics and/or unique structure to consider program and policy development. NCUA plans to disclose a list of all MCUs on its OMWI webpage. This list will enable organizations to initially identify minority owned institutions that they may wish to partner with or establish business relationships. For example, banks can now obtain Community Reinvestment Act credit for investing in minority-owned institutions."
The full NCUA Report is here.
NAFCU Members. Our Regulatory Affairs team has issued Regulatory Alerts on both the Loan Participation Proposal and the Regulatory Flexibility Proposal. As always, we are eager for your input to help us draft our comments to NCUA. Posted by NAFCU on January 11, 2012 in Lending, NCUA, RegFlex, Risk Management | Permalink