From the Archives: November 2012

High-Cost Mortgage Proposal, TILA/RESPA Document Integration Proposal, TDR Call Report Changes, FATCA Compliance Date 

MCUL Comments on CFPB High-Cost Mortgage Proposal
On Nov. 6, MCUL & Affiliates submitted a comment letter to the CFPB in response to its high-cost mortgage proposal that was mandated by the Dodd-Frank Act. 
MCUL urged the CFPB to delay the effective date of the high-cost mortgage rule in order to enable credit unions to adequately adjust to the new mortgage lending framework and ensure their respective members have uninterrupted access to mortgage credit. MCUL also urged the CFPB to reduce the number of homeownership counselors required to be provided to potential borrowers from five to at least three, refrain from expanding on the provisions of the Dodd-Frank Act by amending the definition of a “finance charge,” and refrain from introducing a new “transaction coverage rate.”

MCUL disagreed with the proposal to expand the homeownership counselor list to be provided to applicants for refinancings, home-equity lines of credit, and purchase money transactions. MCUL believes this process would only serve to delay the process to obtain access to credit. MCUL is concerned that these proposed provisions will result in a reduced access to mortgage credit, as many creditors will decide to cease offering high-cost mortgages in an effort to avoid wading into the compliance minefield associated with these products.
MCUL Comment Letters can be found on the Home page of in the “Operation Grassroots” section.

MCUL Comments on CFPB TILA/RESPA Document Integration Proposal
On Nov. 6, MCUL & Affiliates submitted a comment letter to the CFPB in response to its proposal to integrate the Truth in Lending Act and Real Estate Settlement Procedures Act disclosures as required by the Dodd-Frank Act. MCUL supports the goal of streamlining mortgage disclosures, but fears the length of the rule and the level of detail provided will require an extensive amount of time and legal fees to ensure compliance – all in an effort to reduce the amount of paper provided to borrowers from an average of 10 pages to an average of six – a savings of just four pages.

MCUL is strongly opposed to the proposed provisions to amend the definition of “finance charge,” as well as the proposal to require creditors to adopt a machine-readable electronic format to retain mortgage loan records. The league does not support the justifications provided in the proposed rule, and believes further regulatory action would become necessary to rectify the unforeseen consequences of such requirements. Credit unions will be required to adhere to an overwhelming number of regulations mandated by the Dodd-Frank Act over the course of the next 12-18 months.  Given this, credit unions, especially small credit unions which make up a majority of the institutions in the industry, can ill afford any additional and unnecessary regulatory burden.

The CFPB requested comment on “whether the level of detail in the proposed regulations and guidance … will make compliance more, rather than less, burdensome and whether the bureau should adopt a less prescriptive approach in the final rule.” MCUL is hopeful that the CFPB will in fact adopt a less prescriptive approach and publish a final rule that does not compare in volume with the 1,100-plus pages contained in this proposal.

MCUL Comment Letters can be found on the Home page of in the “Operation Grassroots” section.

TDR Call Report Changes Detailed in NCUA Letter
The NCUA detailed several 5300 Call Report changes that will help implement requirements included in the NCUA's May 2012 Final Rule on troubled debt restructurings and loan-workout guidance.

As detailed in the Letter to Credit Unions 12-CU-12, credit unions will no longer need to report modified-loan information on their 5300 Call Reports, starting with the Dec. 31 call report cycle. Instead, they will be required to report information on their TDR loans.

In the letter, the agency, detailed pending changes to the March 2013 Call Report and profile. New sections for data on loans held for sale and unfunded commitments for business-loan categories were also added for the March 2013 Call Report period. Changes to sections addressing purchased credit impaired loans, investments, Equal Employment Opportunity Commission filing requirements, remittance transfers and grants have also been added, the NCUA said.

The NCUA also released revised delinquent loan schedules that will take effect beginning with the June 2013 call report cycle. Specifically, the NCUA said the changes clarify reporting requirements by changing delinquency categories from "months" to "days" in order to align the NCUA's reporting standards with those of other federal regulators, and eliminate confusion arising from differences in the number of days per month.

This letter can be found here.

IRS Pushes Back FATCA Compliance Date
The U.S. Internal Revenue Service and the U.S. Treasury have pushed back the compliance date for key aspects of the Foreign Account Tax Compliance Act until 2014 and, in some cases, as far as 2017. The rules were scheduled to apply to payments made on and after Jan. 1, 2013.

FATCA is designed to create a tax information reporting and withholding system for certain payments that are made to foreign financial institutions and other entities. The IRS's proposed regulations to implement FATCA would require FFIs, including credit unions, to register with the IRS and detect taxable account activity by U.S. citizens in foreign countries. The FATCA rules would also require U.S.-based credit unions and financial institutions to file Forms 1042-S for payments of deposit interest or dividends in amounts of $10 or more that are made to nonresident alien members and customers. These financial institutions must also conduct due diligence regarding whether credit union members' payments to overseas FFIs are to an FFI that is not FATCA compliant.

The compliance date for portions of FATCA that would require U.S. credit unions and other financial institutions to withhold 30% of any funds that are transferred to non-FATCA compliant FFIs will be pushed back until Jan. 1, 2017, the agencies added. Withholding on other types of payments is still expected to commence Jan. 1, 2014.

Portions of the rule that impact Form 1042-S filings will still become effective on Jan. 1, 2013.

The IRS/Treasury release can be found here.

NCUA Releases National Supervision Policy Manual to the Public
The NCUA released a public version of its new National Supervision Policy Manual. The document describes the agency’s internal operations and procedures for supervisory staff.

NCUA started training examiners on the procedures outlined in the NSPM in April and the training process continues. Certain sensitive parts of the new manual remain confidential and are not included in the released public version, as disclosure could impair NCUA’s ability to minimize losses to the National Credit Union Share Insurance Fund or negatively affect the agency’s ability to conduct effective supervision.

A copy of this document can be found here.

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