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MCUA Files Comment Letter on Reg Z Mortgage Proposed Amendments

The Missouri Credit Union Association (MCUA)  filed a comment letter on June 5, 2014, with the Consumer Financial Protection Bureau (CFPB) outlining several suggestions to various proposed amendments to the 2013 mortgage rules. Among the items outlined, MCUA asked the CFPB to expand its small servicer exemption through changes to its proposed alternative definition. The bureau currently proposes to allow non-profit entities that are part of a larger association of nonprofits to fall under Regulation Z’s small-servicer exemption. MCUA commented to the bureau that this definition does not go far enough to exempt other non-profit entities such as credit unions, and when comparing credit unions’ role in housing finance for their members and local communities with similar 501(c)(3)-designated entities, credit unions should not be excluded from the small-servicer definition.

The CFPB’s Title XIV mortgage rules name four exceptions to the rules that apply only to small creditors. To qualify for these exceptions, the creditor must have originated--together with its affiliates--500 or fewer first-lien loans and have less than $2 billion in assets at the close of the preceding calendar year. CUNA’s analysis shows that more than 200 credit unions in the country have less than $2 billion in assets, but originated more than 500 first-lien loans. MCUA urged the CFPB to raise this first-lien origination amount to at least 5,000 originations on first-lien loans to allow many more credit unions to take advantage of the exceptions available under the rules.

MCUA also supported the CFPB’s proposed cure mechanism for lenders that originate loans meant to be qualified mortgages (QM), but which have points and fees that are over the general 3% cap. The CFPB proposes a period of 120 days after consummation of a loan in which the creditor can issue a refund to the consumer of any excess amount over the allowable 3% cap if the loan was made in "good faith" and meets other QM requirements. A 120-day cure period is not long enough and at least 180 days after consummation to give lenders ample time to issue a refund to affected consumers was requested.

Finally, MCUA requested the CFPB provide additional clarification for the terms "good faith," and "contemporaneously," when referring to the QM cure mechanism requirements.