MADISON, Wis. — According to one analyst, the CFPB's new "Know Before You Owe" rule combining TILA and RESPA disclosures "is one of the largest and most impactful regulatory changes [credit unions] have probably ever seen."
That's the word from Lauren Capitini, regulatory compliance manager for CUNA Mutual Group, who noted that the new rule means CUs will need to toss out their current disclosure forms "and completely redo the way they go about mortgage lending."
Capitini's colleague Jonathan Bundy, also a regulatory compliance manager at CUNA Mutual, noted that CUs today still struggle with how HUD "tinkered with" RESPA disclosures in 2010, "and this is a revamping of the entire thing, as opposed to just a tinkering with one [disclosure]. In comparison, this is going to be retraining everyone who works on the mortgage team at a credit union to re-understand how they actually do a mortgage transaction."
The good news, said Bundy, is that CUs have until August of 2015 to deal with the new rule and figure out how to handle it, "so the CFPB has actually given us a fair amount of time to pull this together."
'Ignore This Rule'
Capitini offered a piece of what she called "bold" advice, noting that CUs should make the most of that time and "for the first few months... ignore this rule."
The reason for that, she continued, is that CUs are already dealing with six new CFPB mortgage rules that must be complied with beginning in January. "That's where their focus needs to be immediately," she said. "After they have implemented those rules they can then move to focusing their attention on actually reading the [new] rule."
Because not all CUs have in-house expertise when it comes to compliance, Capitini and Bundy noted that CUs will especially be reliant on third-party sources to navigate the new reg, including CUNA Mutual, CUNA and NAFCU.
Capitini said the rule will mean "short-term pain and long-term gain" for CUs, adding that "the real pain points will be in the implementation phase." CFPB was mandated by Dodd-Frank to combine TILA and RESPA, and both analysts praised the watchdog group not only for allowing a lengthy period leading up to its implementation, but for a long and thoughtful comment period, and taking the time to craft a rule that met the law's requirements while also leaving out certain elements of the original proposal that would have made the new rule more cumbersome for credit unions.
"Given the fact that it's going to cause a lot of pain and angst for credit unions in the short term, there were lots of concessions the CFPB made to make it less painful than it could've been," said Bundy.
One element of the rule that has raised concerns — such as from the National Association of Mortgage Brokers — is the relationship between mortgage brokers and mortgage lenders, along with who must provide the disclosures and who is liable for them.
"Under the new regime, brokers or lenders can actually provide the disclosures, but it looks to me as though lenders will still be on the hook for ensuring that those disclosures are filled out appropriately," said Bundy. "That wasn't necessarily true in the old regime, so that was a significant part of the comment process and the proposal — to make sure there's an understanding of who's responsible."
Three More Days
The new rule will largely not be visible to borrowers, with the exception that home buyers will receive a closing disclosure three days before the closing rather than on the day of the closing, meaning they will have extra time to better understand the debt before the loan closes, said Bundy.
He added that while some borrowers have in the past been quoted with attractive rates that then changed at closing, that has historically been less of a problem at credit unions, meaning CU members may see even less of an impact from the new rule.
