WASHINGTON — With the Oct. 1 effective deadline quickly approaching, credit unions across the country are bracing for major changes to Regulation Z that lay down new rules for high-priced mortgages, create new escrow requirements and restrict advertising for both closed and open-ended home loans.
"Credit unions have been working very diligently to work through the myriad of regulatory changes to their lending divisions," said NAFCU compliance director Anthony Demangone. "These changes that are coming are huge and if (CU execs) want to get on top of them they really need to marshal the right resources."
One of the key changes to the regulation is the new higher-priced mortgage threshold that, once broken, triggers a number of requirements by the financial institution including verifying the borrower's ability to pay, limiting prepayment penalties and establishing escrow accounts for property taxes and mortgage-related insurance. The latter is something that a number of credit unions will have to do for the first time, Demangone pointed out.
The new advertising requirements represent a major shift as well, as the regulations outline more than a half-dozen prohibited practices, set down a "clear and conspicuous standard" for all closed-end loans and change the way financial institutions advertise promotional rates for HELOCs. Though the new regulations are nothing new, the massive undertaking by many credit unions to comply with the CARD Act may have set some institutions back on their schedule to get into compliance with the Reg Z changes.
"People had an idea this was coming but the credit card act really disrupted some credit unions' strategic planning," said Demangone. "The CUs I've spoken to are taking it seriously but there's a lot of stuff being thrown at them."
