WASHINGTON—NAFCU and CUNA have sent a number of comment letters on issues that include remittance transfers under the EFT Act, proposals related to TILA/RESPA, and concerns over multi-lender pools.
Here is an overview of some of the comment letters sent:
Remittance Transfers
Last month, the CFPB issued a proposal related to its remittance rule that included an increase to the safe harbor threshold from its current level of 100 transfers in the previous and current calendar year to 500 transfers. Previously, NAFCU had urged the Bureau to adopt an even larger change.
“NAFCU welcomes the Bureau’s decision to propose additional relief for credit union remittance providers by adjusting the rule’s ‘normal course of business’ safe harbor threshold,” NAFCU Senior Counsel for Research and Policy Andrew Morris wrote. “While we think the threshold should be set higher, it is a step in the right direction.” NAFCU has recommend a further increase in the remittance rule’s safe harbor threshold to at least 1,000 transfers.
NAFCU has shared concerns that the remittance rule's highly burdensome compliance costs have caused many credit unions to stop offering these services. Although the proposed amendments are positive, the association believes the Bureau should expand and simplify its proposal to provide credit unions greater flexibility to ensure that remittance services remain affordable and accessible.
“Credit unions have incurred significant costs to comply with the Remittance Rule’s complex disclosure requirements and error resolution framework, and many NAFCU members have reported that they ceased offering remittances as a result,” Morris explains. As noted in the letter, one fourth of NAFCU survey respondents indicated they would either reenter the market or process more remittances “if the current, 100-transfer safe harbor threshold was raised.”
CUNA’s Stance
Meanwhile, in its letter, CUNA said it “continues to believe remittances are an important member service and we support appropriate and tailored safeguards for consumers initiating remittances. The Remittance rule, as it stands, must be amended to reduce the overall cost of compliance and ensure consumers have access to remittance services from their local credit union.”
CUNA recommends the CFPB:
- Increase the “normal course of business” safe harbor threshold to 1,000 remittance transfers, up from the proposed 500 as proposed
- Increase the thresholds for both the proposed exchange rate exemption and third-party fees exemption to 2,000 or fewer transfers to reflect a “normal course of business” safe harbor threshold set at 1,000 transfers, as recommended
- Eliminate the 30-minute cancellation requirement or provide consumers the ability to opt-out of the mandated waiting period
CUNA said its analysis shows under the current 100-transfer threshold 96% of all credit union remittance transfers are covered by the rule and must comply with its requirements. Raising the threshold to 1,000 would provide relief to 300 credit unions, while still covered 84% of all remittances made by credit unions.
CUNA Letter to CFPB on TILA/RESPA
Separately, in a letter to the CFPB, CUNA said in a letter ongoing compliance costs from the TILA-RESPA Integrated Disclosure (TRID) rule continue to affect credit union lending.
The CFPB is currently assessing the TRID rule as required by statute.
“Because credit unions, as community-based lenders, are typically smaller in asset size and loan volume, complex regulatory requirements like the TRID Rule have a disproportionate effect…in many cases, credit unions are required to rely on vendors or pool resources through a CUSO to address the extensive list of laws and regulations their institutions must comply with,” the letter reads. “The reality is that when credit unions are burdened by the cost of regulation, consumers receive fewer options for financial products and services. Ultimately, when consumers are unable to access desired credit and services from their local credit union, they are often required to turn to higher-cost lenders that may not have their best interests and financial wellness in mind. “
CUNA’s study on regulatory impact on credit unions in 2018 found TRID rule compliance expenditures cost credit unions $563 million in 2018 alone, the trade association noted.
CUNA said it also conducted a survey of its Lending Council, which comprises senior lending professionals at state and federal credit unions this month.
Survey Results
Among the survey results:
- 83% reported “significant” or “very significant” initial costs related to the TRID rule’s implementation
- 63% reported “significant” or “very significant” ongoing costs associated with TRID compliance
- 57% reported the ongoing costs of TRID compliance diminished lending capacity due to longer timelines for borrowers and increased costs to offer and execute loans
- 52% of the survey group stated the TRID Rule has “somewhat” or “significantly” increased the price of loans
- 33%% acknowledged a “significant” or “somewhat” decrease in loan volume
“The TRID rule is by no means perfect and there are areas that should be addressed. But as the rule assessment progresses, CUNA respectfully requests the Bureau refrain from adopting broad, wholesale changes to the TRID rule’s structure,” the letter reads. “Dramatic changes to the TRID rule would only serve to create additional compliance costs and require credit unions to expend finite resources that could otherwise be applied toward serving their members. Rather, the CFPB should focus its efforts on providing clarity using targeted interpretive rules or official guidance that resolves ongoing compliance concerns.”
Other Changes Recommended
CUNA also called for the CFPB to make the following changes to the rule:
- Address the issue of closing delays and consumer waivers of mandatory waiting periods, which creates unnecessary friction in the process
- Permit creditors to cure any clerical errors in a loan file within a reasonable period after closing
- Allow for variances on closing costs not charged by the lender
- Expanding the official guidance available to clarify the treatment of second lien loans under the TRID rule
NAFCU Letter on TILA/RESPA
In its letter to the CFPB on TILA/RESPA, NAFCU is urging the Bureau to carefully consider the rule's impact – including associated compliance costs, the ability to sell to the secondary market, and products offered.
Kaley Schafer, NAFCU's regulatory compliance counsel, sent the letter in response to a request for information on the CFPB's proposed approach to the assessment.
In addition, Schafer repeated NAFCU’s call for additional guidance from the CFPB on outstanding TRID issues such as cure provisions and error corrections, negative owner’s title premium, calculating cash to close, second lien loans, pre-approvals, payoffs on a purchase money loan, and a consumer’s ability to waive the waiting period.
“NAFCU members appreciate the additional FAQs provided by the Bureau since implementation; however, additional guidance is necessary,” wrote Schafer. “In a recent survey, 75% of respondents reported that TRID guidance provided to date has not been helpful. Thus, NAFCU members are left seeking out additional compliance assistance incurring additional costs.”
NAFCU Concerns Over Multi-Lender Pools
WASHINGTON—In response to the Federal Housing Finance Agency's (FHFA) Request for Input on the pooling practices for the agency's To-Be-Announced eligible Uniform Mortgage-Backed Securities (UMBS), NAFCU is expressing concerns that excluding certain loans from multi-lender pools could harm credit unions and other responsible lenders.
"Credit unions aim to provide access to credit and liquidity for all of their members," wrote Director of Regulatory Affairs Ann Kossachev. "Credit unions do so while ensuring that members are fully informed of the process and potential risks associated with a certain product."
"Overcorrections in policies to address prepayment behaviors that hurt consumers and investors could lead to unintended consequences in the form of steering credit unions and other small lenders away from offering certain refinance options," she added.
The GSEs started issuing the UMBS in June 2019, after the rule was finalized by the agency. Under the rule, the GSEs are required to issue the UMBS – adopted in place of the GSEs' former to-be-announced-eligible mortgage-backed securities – as the single security.
Role of GSEs Emphasized
In the letter, Kossachev also details the importance of the GSEs to the credit union industry, sharing that "based on recent Home Mortgage Disclosure Act (HMDA) data, of the mortgage loans that credit unions chose not to hold in portfolio, 47% were sold to Fannie Mae and Freddie Mac."
"Credit unions are responsible lenders and follow strong underwriting practices that ensure their loans will perform well; the credit union industry, on average, has lower delinquency and default rates on loans than banks," she added.
Additionally, Kossachev shared NAFCU's support for the inclusion of certain loans with faster prepayment speeds in multi-lender pools and need for data analysis of the effects proposed changes could have on lenders and consumers.
"It is important that the FHFA comprehensively evaluate ways to align the pooling practices of the GSEs to enhance the performance of the UMBS, improve liquidity in the TBA market, and pave the way for potential new entrants into the housing finance system to also utilize the UMBS," wrote Kossachev.