MADISON, Wis.-It's time credit unions make critical business decisions around mortgage lending and compliance, including staffing levels and reporting alignment, all due to new CFPB rules taking effect next year, urges one expert.
Lauren Capitini, regulatory compliance manager at CUNA Mutual Group, said the world of mortgage lending is changing dramatically, starting with all the new Consumer Financial Protection Bureau rules that take effect in January. Those rules include: Ability-to-Repay, High-Cost Loans and Homeownership Counseling, Mortgage Loan Originator Compensation, Mortgage Servicing and Reg B Appraisals and Higher-Priced Mortgage Loan Appraisals.
"The final rules will completely alter how credit unions go about their mortgage lending," she told Credit Union Journal. "It's a soup-to-nuts change-from which types of loans you originate to how you service them. I compare the changes that are coming to the shift in the financial services industry from paper to electronic. It's that big."
Saying she is concerned for the readiness of some credit unions with just a half-year left to make decisions and preparations, Capitini covered some of the adjustments CUs will likely make by January. "For example, you have to determine if you will do qualified mortgages. Are you exempt from some of these rules because you are a small creditor or you serve rural areas or the underserved? Are you exempt from any of the new escrow regs? A lot of business decisions need to be made."
The People Issue
Perhaps one of the largest decisions is around staffing, offered Capitini, saying mortgage and compliance staff time will be in great demand next year due not only to business changes credit unions make, but to understand what the "incredibly complex" rules say and how they apply to the credit union. "For instance, some staff originally not considered mortgage loan originators will be next year. They will need to go through the registration process and receive training."
Capitini said that CU staff, many of them in place for numerous years, will need to adapt, which she admits can be challenging for tenured employees. Capitini stressed that change has to come from the top down, creating a reporting structure that gives compliance staff greater flexibility and a voice straight to the top. She is concerned that sometimes compliance staff face a bottleneck in getting their plans and thoughts shared at higher levels due to a reporting alignment that places them below an individual either unschooled in compliance or with other concerns in the way.
Burst Balloons?
Outside of personnel, the new mortgage rules will impact documents and disclosure forms, reminded Capitini. "You also have to consider the types of products you will offer. The credit union may decide to no longer go after high-cost mortgages or balloon loans. There are a lot more restrictions next year on balloon loans."
Capitini has seen credit unions staffing up. "This is a capacity issue, which I realize is harder for the small credit union to address. When it comes to the new rules, this is not light reading. There are about 5,000 pages of regs issued since January 2013, and you have to read them more than once to understand what they say. Just so much is going on and there is more to come with the CFPB focusing on more mortgage rules, payday lending, overdrafts, and fair lending-especially with indirect. Credit unions will really feel this pressure next year and it will continue through 2015."
