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Michigan Credit Union League

MCUL Leverages CFPB Comment Letter to Advocate for Regulatory Relief for Credit Unions

MCUL & Affiliates filed a comment letter addressing the Consumer Financial Protection Bureau’s proposed amendments to the Truth in Lending Act relating to small creditors and rural and underserved areas. While most of the proposed changes were positive, MCUL took the opportunity to raise ongoing concerns relating to the regulatory burden of CFPB’s regulations on the credit union industry.

MCUL continued to voice concern that the CFPB’s application of the Bank Holding Company Act regarding credit unions and CUSOs is contrary to public policy and does not align with the historical intent of the act. Gerald Hutto, president and CEO of Team One CU, said the proposal would be detrimental to credit unions that hold an interest in a CUSO. Team One is part owner of Neighborhood Mortgage Solutions.

“Our CUSO alone has over 10,000 first-lien mortgages they are servicing for other credit unions,” Hutto wrote in comments that were included in MCUL’s comment letter. “These loans are not portfolio loans but originated and sold to (Fannie Mae) and servicing retained. They are also doing first-mortgage underwriting for a number of other credit unions and wondering if they are going to include those if they eventually sell those as well. It would also seem as if the mortgages will be counted twice under that scenario since the credit union that actually did the mortgage would also have to count these.

“If we have to count the affiliate assets it would also be cause for concern since some of the affiliates do a lot of business with the CUSO and some are pretty sporadic. I don’t see the reason behind counting assets for affiliates or their first-lien mortgages. It would basically penalize credit unions for being involved in a CUSO arrangement and this may do away with the CUSO, which in turn will harm the smaller credit unions that do not have their own (Fannie Mae) ticket. If they were to quit making mortgages it would not be beneficial for the membership and they would also lose income from the origination as well as servicing. A lot of the credit unions our CUSO deals with do not have the expertise nor the manpower for their own in-house mortgage department.”

MCUL requested that the CFPB provide further clarification on its methodology of increasing the first-lien mortgage origination from 500 to 2,000 for “small creditor” status as well as why a higher limit would not have been more appropriate. MCUL also requested that the CFPB increase the asset limit threshold from $2 billion to $10 billion, adding that asset size alone is not a good indicator of consumer protection. Credit unions practice prudent lending because it is in the best interest of their members. This change would allow more credit unions to take advantage of the regulatory relief offered by the CFPB.

Additionally, while MCUL is generally supportive of extending the application deadline to April 1, 2016, for balloon payment mortgages, the league questioned whether the CFPB should be limiting such balloon-payment mortgage loans to small creditors operating in predominantly rural or underserved areas. Many small credit unions rely on balloon-payment mortgage structuring as a way to manage interest rate risk. The league believes that CFPB should not arbitrarily limit balloon-payment mortgage loans to specific areas. Rather, credit unions should have the autonomy and flexibility to offer the best products to its members that is commensurate with their risk profile.

MCUL acknowledged the CFPB’s ongoing efforts to continue to evaluate the impact of its regulations on small financial institutions in the post-mortgage crisis era. The league believes that CUSOs are vital to the credit union industry and encouraged the CFPB to be more aggressive in providing regulatory relief to the credit union industry.

Click here to read the MCUL comment letter.

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2015-04-06 00:00:00