50 Million Shades of Mandate Relief

January 11, 2013 at 7:43 am Leave a comment

imagesCAQWSGOHA lot of public officials talk about the need for relieving smaller financial institutions from regulatory burdens but few of them actually do anything about it.  Yesterday, the CFPB coupled its announcement of the new qualified mortgage regulations with a proposal to exempt certain credit unions and community banks with assets of $2 billion or less and who meet certain other requirements from parts of the new regulation.  NCUA also surprised me by changing the definition of small credit union from one with less than $10 million to one with less than $50 million.  We ran some quick numbers and this means that approximately 74% of all New York credit unions will now be classified as small.  In another bit of good news, these “small” credit unions will not have to comply with NCUA’s new mandate that credit unions have interest rate risk policies.

All of this is great news and I don’t want to sound like the guy who opens up the gift on Christmas morning and can’t hide being a little disappointed because he got a Kindle Fire instead of an iPad (let’s face it the iPad is cooler), still when it comes to the qualified mortgage exemption, credit unions should understand that it comes with many strings attached and to maximize its effectiveness, the industry should push the Bureau to do away with some of these qualifications during the comment period.  Most importantly, the qualified mortgage exception would generally only apply to credit unions with $2 billion or less in assets that hold the mortgages for at least three years in their own portfolio and that make 500 or fewer mortgages a year.

I have been concerned that the qualified mortgage proposal would lead many smaller institutions to throw up their hands and stop providing mortgages and this exemption will be helpful for those credit unions and community banks that provide the occasional mortgage but for whom it is not a major part of their business.  This is a great step in the right direction, but it doesn’t go far enough.

The one bit of bad news for credit unions yesterday is that NCUA forged ahead with its proposal to give itself the power to classify state chartered credit unions as “troubled,” even when their primary state regulator doesn’t come to the same conclusion.  I guess federalism doesn’t mean much to the NCUA, but it should.

Entry filed under: Advocacy, Compliance, Regulatory. Tags: , , , .

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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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