As 2013 came to a close, credit unions have reached the imminent effective dates of the CFPB mortgage rules. With the rules going into effect, credit unions and other financial institutions are wondering what examiners will be looking at relating to the rules and how heavily they will be scrutinized.
The NCUA issued Letter to Credit Unions 14-CU-02, Supervisory Focus for 2014, which details the examination focus for the coming year. In this letter, NCUA addresses an area that credit unions have expressed concern regarding the examination process: the CFPB’s Ability-to-Repay and Qualified Mortgage Standards, effective Jan. 10. NCUA indicates in the early stages of the CFPB’s newly effective mortgage rules, NCUA field staff will take into account each credit union’s good-faith efforts to comply. Whether a credit union originates Qualified Mortgages or non-Qualified Mortgages, field staff will evaluate credit risk, liquidity risk and concentration risk. The letter emphasizes that they will NOT subject a mortgage to safety and soundness criticism solely because of the loan’s status as a QM or non-QM.
During its bi-annual meeting with the NCUA and DIFS, MCUL inquired as to impact of the CFPB mortgage rules on the examination process. The responses from each agency were similar to that of the NCUA’s supervisory focus. DIFS indicated that it expects a “phase-in” process and credit unions will be expected to be actively working on revisions to policies and procedures to correspond with the newly effective rules.
Also, in a letter issued to credit unions and state banking agencies, CFPB Director Richard Cordray addresses the Ability-to-Repay and Qualified Mortgage rule and their effect on small creditors. Cordray acknowledges how credit unions have maintained a strong tradition of responsible lending and addresses resources the CFPB has developed to help credit unions continue this tradition while maintaining compliance with the rule. Included in the letter is also a link to the Federal Financial Institution Examination Council’s examination procedures for the new rules. The letter can be found here.
As we begin 2014, credit unions will need to continue to work through the rules and update their policies and procedures accordingly, while remaining mindful of the fact that as the CFPB continues to issue and update rules, the examination focus will evolve. Stay tuned.