Posts tagged ‘guidance’
True to its word, the CFPB released a guide to implementing the qualified mortgage regulations. The guide is the first of several the Bureau plans to release to help lenders, particularly small lenders, comply with the myriad of mortgage regulations to be phased in over the next year. If Siskel and Ebert reviewed regulations instead of the latest movies, they would give it a posthumous two thumbs up. Here are some additional thoughts.
- The guide is intended to assist lenders in implementing the qualified mortgage regulations. It is not intended to be, nor is it a substitute for sitting down and struggling through the actual regulations. In other words, it’s a great document for someone who needs to get a general overview of the regulations and it is a useful supplement for the person responsible for implementing the regulations.
- The manual is filled with implementation suggestions, but I love the list of practical considerations at the very end of the guidance. For instance, if you haven’t already done so, you should be identifying the products and staff that will play a role in implementing the new mortgage regulations as a whole. As Pamela Stephens pointed out in testifying before Congress yesterday, many credit union staff persons wear several hats, so it is crucial to get everyone in the same room and start thinking about who is going to be responsible for implementing the new requirements. The CFPB also points out that you should be reaching out to vendors and clarifying in your contracts and policies precisely what it is they can provide you and what it is that they are guaranteeing. For instance, one thing I would ask your vendor is how quickly software can be adjusted to account for new calculations of points and fees.
- The manual also does a great job of laying out the underwriting steps that lenders should take when determining a borrowers ability to repay a mortgage loan. I was talking about this particular section with one of my compliance comrades in the office yesterday and the reality is that it isn’t just lawyers who have never done mortgage underwriting before. Because of technology and the prevalence of secondary market standards you have an increasingly large number of underwriters who have never underwritten so much as determined whether or not a loan meets these standards.
- One more thought before I let you get on with your day. If you look at the basic criteria that credit unions are expected to look at when determining whether or not someone has the ability to repay a mortgage, it is criteria that most credit unions have already been using. The most burdensome aspect of these new mortgage regulations for credit unions will be implementing and actually utilizing policies and procedures that document why it is you made the decision you did on a given loan. For instance, right now you may have a policy of underwriting to secondary market standards. However, do you have a policy explaining when you will grant a mortgage that doesn’t meet these standards? Is this policy consistently implemented? These are the types of questions you should be asking yourself and CFPB’s helpful document can help jumpstart that discussion.
Good morning folks! There is a lot of little news I want to get to, but I can’t resist a few comments on the lawsuit that was filed by a community bank in Texas challenging the Constitutionality of the CFPB. I haven’t been able to read the complaint yet, but one summary I read suggested that the lawsuit also challenges the legality of President Obama’s recess appointment of Richard Cordray as its Acting Director.
Listen, I can be as critical of the CFPB as anyone, but one of the reasons I’ve always been on the conservative side of judicial issues is because I believe the more judicial restraint you have, the more issues you leave to the elected branches of government. Like it or not, Congress passed Dodd-Frank. Congress did give the Bureau enormous powers, but the powers are no greater than those previously exercised by the bureaucracies whose powers it subsumed and there is a mechanism for its regulations to be overturned if enough other regulators believe they are inappropriate. Let’s face it, the CFPB is here to stay. Even if the Republicans managed to take over the Senate, they won’t have the votes needed to pass any legislation dissolving it. If people don’t like the CFPB, they should take it out on their legislators instead of running to the courthouse. By the way, this is not to say that there aren’t some legitimate issues surrounding the legality of recess appointments, but the Bureau itself is here to stay.
CFPB Updates Progress on Mortgage Disclosures
Not everything that the CFPB wants to do is bad for business. Yesterday at a House Committee meeting CFPB’s ubiquitous Deputy Director Raj Date provided an update on the Bureau’s efforts to consolidate Truth in Lending and RESPA mortgage disclosures. A proposed regulation will be out by July 21, but as many of you probably already know, the CFPB has gone through several rounds of testing of proposed new forms. There is no area of regulation that better exemplifies the need for regulatory streamlining than mortgage disclosures. As Mr. Date himself commented “[t]he information on these forms is overlapping and the language is inconsistent. Not surprisingly, consumers often find the forms to be confusing. It is also not surprising that lenders and settlement agents find the forms burdensome to provide and explain.” If the Bureau does a good job with this regulation it could go a long way toward showing people the value of having a CFPB with the authority to consolidate duplicative regulations.
Moody’s Downgrades Bank Debt
Moody’s yesterday downgraded the credit ratings of the nation’s largest banks, including Goldman Sachs, JP Morgan-Chase, and Morgan Stanley. The downgrade had been rumored for months so its practical impact is somewhat muted. Still, it’s another embarrassing blow to the banking industry.
Joint Guidance on Assistance for Servicemembers with Permanent Change of Station Orders Released
Federal regulators, including the NCUA, released a guidance on efforts that financial institutions should take in assisting members of the armed services subject to mandatory transfer orders. The guidance points out that servicers should work with affected individuals to make sure that they are aware of government programs that may assist them.
When it comes to trying to put a stranglehold on consumer choice in this country, banks sure don’t let the facts get in the way. Their ability to create a parallel universe where the financial needs of all Americans would be taken care of by earnest bankers both big and small if only those pesky credit unions started paying corporate taxes is beginning to remind me of the alcoholic who orders a rum and coke and tells the bartender to go easy on the coke because it upsets her stomach. Self-delusion is so much easier to cope with than the facts.
Fresh evidence of this nettlesome fact was provided by the NFIB, which released a survey/study reporting, among other things, that “a disconnect appears between lenders and small business owners. Lenders think credit standards have eased over the last year. Small business owners think that the credit market has tightened” in 2011 with more not less small business owners getting rejected for loans. Another interesting little tidbit is that, according to the NFIB, the number of small businesses getting loans from credit unions doubled, although the number remained relatively small.
In spite of the fact that small businesses need access to loans, in the world of bankers credit unions remain a threat to the survival of the free world. Take for instance a recent blog post by ICBA President Camden Fine, who argued that the push by credit unions to raise the member business lending cap reflects a long history of mission creep on the part of credit unions, which weren’t always the full-service institutions we see today. This is fairly typical rhetoric from an industry which blames all its problems on the tax code. What’s more telling about Mr. Fine’s blog is that even though he argues against MBL expansion, he never mentions small businesses once. Imagine if Apple computer could simply block the introduction of tablets by explaining to Congress that there’s really no need to give people even more choices.
Put this all together and you have an awfully sound policy argument for raising the MBL limit. Small businesses are continuing to look for sources of credit and credit unions shouldn’t have to choose between developing or expanding MBL product lines and running up against a legislative ceiling that benefits no one but the banks. Incidentally, there is no guarantee that credit unions would get more business simply because the cap is raised. It simply guarantees that small business owners have a more competitive marketplace from which to get loans to expand their businesses.
CFPB Issues Loan Origination Guidance
Regulations promulgated in 2010, as well as the Dodd-Frank Act, prohibit mortgage originators from being compensated based directly or indirectly on the terms or conditions of a mortgage. Since many employers base their contributions to 401(k) plans on the amount of revenue generated by mortgages, are they violating these provisions? In response to comments and concerns about this issue, the CFPB recently issued a guidance clarifying that this prohibition does not affect 401(k) or employee stock ownership plans. The guidance provided little explanation as to the basis for this determination and it sounds like we may be getting regulations that touch on this issue sometime in 2012, in advance of the 2013 effective date of the Dodd-Frank provision.
I heard an interesting story recently about a talented mom who wanted to return to the practice of law now that her kids were in school. Despite having an excellent professional pedigree, her attempts at re-entering the legal profession have so far been unsuccessful. She now takes off her wedding ring when she interviews and she makes a conscious effort not to mention her family.
This conversation came to mind this morning as I was reading about a hearing held yesterday by the Equal Employment Opportunity Commission highlighting issues of discrimination against caregivers and pregnant women in the workplace. It is not the type of hearing I would ignore since the EEOC seems to be signaling that it is going to be more aggressively taking legal actions in this area and employers would love more legal clarity on the issue.
The legal issues can’t be adequately addressed in the space of a blog posting. But the general idea based on EEOC guidance is this: federal law does not prohibit discrimination against caregivers but it does prohibit stereotypes based on caregiving. For example, it is ok to hold an employee responsible for not getting his or her work done, even if the reason is that they are taking care of a disabled child or a sick parent. However, let’s say that same employee has an excellent work record, you could not deny her a promotion because she also cares for a family member. Employment issues related to pregnancy are even trickier since federal law does explicitly prohibit discrimination based on pregnancy and the Americans with Disabilities Act could come into play.
This is an issue that is not going to go away. As the population ages, more of your employees are going to be taking care of their elderly parents and with economic struggles continuing, even those parents who might otherwise decide to be stay at home moms or dads are going to reenter the workforce in even larger numbers. I think we can all agree on the general principles, but their application to specific instances will always raise issues and the more aware you are of the legal parameters before they arise, the better off you will be.