LAS VEGAS-With eight months to go before new mortgage rules from the Consumer Financial Protection Bureau take effect, credit unions are struggling with how to respond-or even which rules to respond to.
Generally the new CFPB rules exempt lenders making fewer than 5,000 loans annually, but that's not true of all the rules. Some CUs have already banded together to form CUSOs that have hired attorneys to assist with compliance. Others are looking to outsource. And others still are working to build the expertise inhouse.
Judy Sandberg, president of Mortgage Liquidity Solutions, LLC, characterized the process of unraveling the double dose of CFPB regs as akin to "drinking out of a fire hose. Many credit unions are just trying to figure out how it all affects them."
In response to the pending regulations, the American Credit Union Mortgage Association (ACUMA) has set up three workshops in June and July. The group will have an attorney present a review of the regs, and a panel to talk about steps credit unions should be taking to comply. The dates and sites are June 5-6 in Memphis, Tenn., June 25-26 in Seattle, and July 8-9 in New York City.
"The change itself is as concerning as the details," said ACUMA President Bob Dorsa. "Our workshops will delve into the details, but having to do things differently means additional expense. Credit unions operate on such thin margins, additional expense means having to look for different solutions. I am hearing more credit unions are taking an outsourcing model a little more seriously, rather than hire an expert in house."
Although credit union trade groups are lobbying to have CUs exempted from some of the new CFPB regulations, Dorsa believes the tactic might backfire.
"Any time there is an exemption it can work against us in the marketplace, because it is used to say credit unions are not as smart or sophisticated as other lenders," he said. "The level playing field should be an advantage for CUs, as long as they get out and promote themselves."
Ready Or Not?
In Olympia, Wash., meanwhile, Mark Allen, SVP mortgages and investments for $1.8-billion Washington State Employees CU, told Credit Union Journal, "We are well prepared, as well as we can be at the moment, but there still is a lot of work to be done between now and January."
Allen said Washington State Employees CU is in a good state of readiness far in advance of the January implementation deadline, but he acknowledged it has a few advantages.
For starters, when it became clear the Dodd-Frank bill was going to pass in 2010, WSECU brought together several CUs in Washington to form a compliance CUSO. Allen said the CUSO helped bring in expertise, including hiring an attorney who had worked with one of the credit unions. In addition, WSECU's CEO, Kevin Foster-Keddie, was appointed by the CFPB to be a participant in the Credit Union Advisory Council.
"That gives us a heads up and an understanding of what [CFPB] Director [Richard] Cordray is thinking," Allen said. "There are 15 CEOs on the council, most of them from CUs with less than $100 million in assets."
Allen noted there are some rules related to mortgage servicing that take effect prior to January, and said WSECU's VP of mortgage operations is working on updating its policies and procedures.
Devil in the Missing Details
"It is hard to detail specifics, but for the most part a lot of the stuff we have seen in the new regs were things we already were doing based on best practices, either from settlements that have come out or from Fannie Mae," he said. "The challenge is going to be for those mid-sized credit unions that have not had the same volume and do not have as much compliance infrastructure. We are comfortable with the rules, but a little less comfortable with the uncertainty that surrounds Director Cordray."
Allen warned CUs there are going to be rules beyond mortgages that will be as or more important for credit unions, such as overdraft protection privilege.
"This is why we formed the CUSO-we could see there was going to be a lot of expertise needed that we did not have," he said.
