Preparing for the Compliance Cliff

January 2, 2013 at 7:09 am Leave a comment

imagesCA1V9EEKI hope everyone had a nice break and you can be forgiven this morning for thinking that 2013 is shaping up a lot like 2012 with continued political uncertainty making legislative action that much more difficult to achieve and compliance requirements more burdensome.  One cliff that will not be averted is what I am dubbing the compliance cliff.  January 21, 2013 is the deadline by which the CFPB has to finalize some of the most important mortgage regulations mandated by the Dodd-Frank Act.  It is not an exaggeration to say that much of what you think you know about mortgages is about to become obsolete and that if you haven’t already budgeted more money for your mortgage related activities you should do so because costs related to legally providing mortgages will inevitably increase.  Among the most important regulations to be finalized in the coming weeks are:

  • A definition of what constitutes a qualified mortgage.  The federal government is essentially mandating minimum underwriting requirements.  The key issue for the industry is the extent of protection mortgage providers will receive for providing such mortgages.
  •  Integrated Truth-in-Lending and RESPA disclosures.  That’s right, you will now be required to provide new forms to homeowners making the new forms you provided to them just a few years ago obsolete.  The good news is that the integrated disclosures are in many ways an improvement over the existing HUD-1 and GFE.  The bad news is that this proposal goes far beyond what is required to integrate closing documents by, among other things, amending Regulation Z to expand the definition of a finance charge.
  • New servicing requirements that will mandate new disclosures and error resolution procedures.

These are just the highlights out of thousands of pages that will be implemented over the coming year.  They are all intended to make mortgages safer, but the danger is that they make mortgages so expensive to provide that only the biggest of financial institutions will have the staff and other resources necessary to cost effectively provide them in a timely manner.  Time will tell, but one way or another we are about to enter unchartered territory.

Speaking of cliffs. . .

Unless you somehow missed it, late last night Congress essentially averted the fiscal cliff for two months with the passage of a bill that, among other things, raises income tax rates on individuals making over $400,000 a year and couples making $450,000 a year.  The recognition that tax rates will have to rise is a major concession on the part of Republicans but since the agreement does nothing to deal with raising the Country’s $16.4 trillion debt limit, everyone is already talking about a second round of even more contentious negotiations to come.  If there is going to be a serious debate about fundamental changes to the tax code, this compressed period is probably when it is going to take place, so, as always, credit unions have to be ready with their best arguments for preserving our tax exemption.

In case you missed it. . .

The Friday before Christmas the CFPB proposed further changes to its remittance transfer rules.  These regulations were also slated to be finalized by January 21, 2013, but this new round of proposals means that these regulations won’t take effect until probably some time in the Spring.  The Association will be doing a survey for purposes of commenting to the  Bureau.

Finally. . .the Federal Trade Commission released a report last week concluding that credit unions and community banks exempted from the Debit Card Interchange Fee cap have been minimally impacted by changes to the debit card industry mandated under the Durbin Amendment.  Don’t shoot the messenger.

 

Entry filed under: General.

Vacationing until January 2nd. Do Foreclosures Cost Too Much?

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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