5 Things You Really Need To Know For The Weeks And Months Ahead

November 22, 2013 at 8:15 am Leave a comment

You can tell we’re on the brink of the holiday season.  Our regulators and policy makers are rushing to get stuff out the door before things slow to a snail’s pace.  Here are the major things in descending order of importance that you should take a look at when you get a chance.

1.  NCUA announced that, barring unforeseen developments, there shall be no corporate stabilization fund assessments in 2014.  The announcement follows the Justice Department’s record settlement with J.P. Morgan over allegations of mortgage fraud which included $1.4 billion for NCUA.  Let’s give credit where it’s due, the NCUA deserves a lot of credit for leading the charge on this one.

2.  As you probably already know, on Wednesday afternoon the CFPB released its final regulations (http://www.consumerfinance.gov/blog/a-final-rule-that-makes-mortgage-disclosure-better-for-consumers/) replacing the Good Faith Estimate the “early TILA” and the HUD-1 with two new disclosures; one to be given at the beginning of the mortgage selection process, the other to be given three days before closing.  First, the good news.  The CFPB backed away from its initial proposal to increase the number of fees that would have to be included in calculating the APR on mortgage documents.  This means that we don’t have to worry about learning new calculations or explaining to prospective home buyers that their mortgages aren’t any more expensive than they used to be, they just look that way.  In addition, the CFPB has given us until August 2015 to fully implement these new disclosures.

The only really bad news I can find so far is that the CFPB didn’t back away from its requirement that closing notices be provided three business days before the closing, but even this has a silver lining.  The CFPB gave homebuyers much greater flexibility to waive the three-day requirement.

3.  Yesterday, the NCUA finalized its most controversial proposal in recent years.  (http://www.ncua.gov/about/Documents/Agenda%20Items/AG20131121Item3b.pdf)  CUSOs will now be mandated to file financial reports directly with the NCUA.  CUSOs that engage in activities that could systemically impact the industry such as those providing information technology support and mortgage servicing will be required to provide detailed financial reports to the agency.  In contrast, CUSOs that provide services such as marketing will only be required to provide basic pedigree information such as the name of the company and its tax identification number.

NCUA has no authority to directly regulate CUSOs so this new oversight power will be exercised by mandating that credit unions only contract with CUSOs that are willing to abide by these requirements.  In my ever so humble opinion, this is an extremely aggressive interpretation of its regulatory powers.  There is nothing that NCUA is going to accomplish through this regulation that could not have been accomplished by more aggressively holding individual credit unions responsible for lax due diligence.

4.  Nuclear fall out.  Yesterday’s news was dominated by the decision of Senate Democrats to exercise the so-called nuclear option (http://www.politico.com/story/2013/11/harry-reid-nuclear-option-100199.html).  Before the rules change, a minority party could require that three-fifths of the Senate (60 votes) be required to affirmatively vote in favor of Presidential appointments.  Reacting to Senate Republican attempts to categorically refuse to fill vacancies to the federal D.C. Circuit. the Senate majority rammed through a rules change yesterday under which presidential appointments to both the Judiciary and Executive Branch Offices can be approved by a simple majority.  As it stands right now, the rule change wouldn’t apply to Supreme Court nominations or legislation.  But now that the Rubicon has been crossed, it’s hard to believe you won’t see the 60 vote threshold eliminated for everything.

Several of the appointments have important consequences.  For instance, Congressman Mel Watt was nominated to be the head of the Federal Housing Finance Administration, which is a hugely important position as it oversees both Freddie Mac and Fannie Mae.  When Watt was nominated by the administration I blogged that it was a blatantly political choice as the Congressman had no chance of being approved by the Senate.  Now, he will most likely take the helm of this important post,

In addition, although no one really thought that Janet Yellen’s nomination to be the next Chair of the Federal Reserve was in danger, the Senate’s move eliminates any possibility of last-minute glitches for Yellen to become the Fed’s first female Chairman.

And remember, all this started because of Republican intransigence over nominations to the D.C. Circuit.  Don’t underestimate just how important this Circuit is.  It has aggressively moved to curtail the power of agencies to promulgate regulations that go beyond the plain reading of the statute.  The best example of this is, of course, the recent ruling on the Durbin Amendment.  The Court is also where future challenges to CFPB rulemaking will play out.

5.  Although it doesn’t directly impact credit unions, you should take a look at a guidance issued yesterday by the OCC and the FDIC (http://www.occ.gov/news-issuances/news-releases/2013/nr-occ-2013-182.html) cautioning banks against the use of so-called “deposit advanced products” without having proper underwriting procedures in place.  Critics of these types of loans argue that they share many of the same characteristics as pay-day loans.

Entry filed under: Compliance, Political, 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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