JANUARY 25, 2013
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CFPB Roundtable with Georgia
Credit Unions

Richard Cordray, director of the Consumer Financial Protection Bureau, and other CFPB staff met with Georgia credit union representatives to discuss topics of concern to the industry.

  Speaking Up for All Credit Unions at CFPB Field Hearing
At a CFPB field hearing on mortgage-related issues, a Georgia credit union official testified that credit unions are concerned about new regulations, in light of the fact that credit unions didn't cause the problems the new rules address.

  State Legislative Session Under Way
The Georgia Legislature devoted this week to budget issues, but after only four days of the 40-day session, numerous bills that could affect the credit union industry have already been introduced.

  Those Who Have Direct Impact on You
There are new faces on the Legislature's banking committees, including a new chairman of the Senate Banking and Financial Institutions Committee and several new members of that panel and the House Banks and Banking Committee.

  Looking Ahead at Legislative Agendas
Credit union leaders were among the more than 1,000 in attendance at the Georgia Chamber of Commerce's annual Eggs and Issues breakfast, the unofficial kickoff to the legislative session.

  Loan 'Steering' Banned by CFPB
The Consumer Financial Protection Bureau issued new regulations designed to keep mortgage loan originators from steering borrowers into risky and high-cost loans in order to generate more financial reward for themselves.

  Free Appraisal Reports for All Borrowers
The CFPB adopted a rule requiring mortgage lenders to provide applicants with free copies of appraisals and all other home-value estimates; the rule is to take effect in January 2014 and applies to all first-lien mortgages.

  Social Media Regulations for FIs
The National Credit Union Administration and bank regulators asked for public comment as they prepare guidelines for the use of social media by financial institutions.

CFPBCFPB Roundtable with Georgia Credit Unions

While the Consumer Financial Protection Bureau (CFPB) was in Atlanta for a field hearing on mortgage policy and the release of their new servicing rules (see below related article), Director Richard Cordray and several of his top staff sat down at a roundtable with a group of Georgia credit union representatives on January 18th to discuss issues of concern to the industry. Director Cordray started the meeting mentioning the agency’s support of credit unions, and shared his understanding that credit unions were not part of the problems in the financial marketplace that resulted in the creation of CFPB. He hopes that others will learn from the success of credit unions. Cordray heard from credit union executives from all areas of the state, with varying assets and FOMs. The message from credit unions was straightforward: Ensure that the rules are clear, concise and easy to understand, and try to reduce the regulatory burden wherever possible on those that are not part of the problem.

Some concern was raised about the new qualified mortgage definition, and how balloon loans will fit into that model. While Cordray encouraged the idea of making adjustable mortgage loans as the preferred practice, the credit union participants laid out a compelling case that some members expressly want balloon loans. Concern was expressed by some of the participants that if the rules become too complex, instead of helping consumers, credit unions might stop offering the products. In the end, consumers will be harmed by having to find unregulated alternatives.

The credit unions also voiced their concern over possible restrictions on overdraft protection services that could limit the choices for this service that many consumers are using today. Once again, Director Cordray shared with the group that credit unions have not been a major source of concern to the agency regarding abusive practices in this area.

A special thank you to Atlanta Postal CU, CORE CU, Delta Community CU, GEMC FCU, Georgia’s Own CU, LGE Community CU, Peach State FCU, Robins FCU, Southeastern FCU and TIC FCU for participating in this roundtable meeting.

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Speaking Up for All Credit Unions at CFPB Field Hearing

On January 17th, the CFPB held its second field hearing in 2013 on mortgage policy related issues (specifically the mortgage serving rules). The hearing was held just after the CFPB released a final rule addressing mortgage servicing, and drew participants from all sides of the mortgage process, including credit unions. The rules require lenders to provide delinquent homeowners more information about ways to avoid foreclosure and time to pursue options. The provisions announced by the CFPB will keep mortgage servicers from going forward with foreclosure proceedings for 120 days if they are simultaneously working with homeowners to modify loans. This is designed to rein in a practice known as "dual-tracking," which happens when lenders foreclose on a homeowner in the middle of a modification effort.

Cordray and Davis
CFPB Director Richard Cordray and Pam Davis of Delta Community CU
Pam Davis, Vice President of Real Estate Services for Delta Community Credit Union, provided testimony on behalf of CUNA and GCUA. Davis said credit unions and their trade associations are concerned about the regulatory burden imposed on lenders, and will be reviewing the new rules from that perspective. She went on to say credit unions did not create the mortgage market issues that the CFPB seeks to address through its new regulations, and therefore should be shielded from regulatory burden where possible.

During the hearing, Davis said the CFPB's mortgage servicing regulations "do address a number of problem areas" and will be helpful for borrowers. The servicing rules will also address some of the problems associated with misaligned incentives in the servicing market. However, Davis noted, CUNA and credit unions "want to ensure that responsible lenders are not unduly burdened in the process."

Regarding the pending MLO final rules, Davis said, "There is absolutely no evidence that credit unions have engaged in abusive practices regarding mortgage loan originator compensation, and additional requirements will needlessly add to the regulatory burden credit unions already face." Through their trade association, CUNA, credit unions have recommended the CFPB eliminate the use of "proxy factors" to restrict compensation to loan originators, revise proposed restrictions on upfront points and fees, and provide credit unions with some flexibility on the use of arbitration clauses, Davis said.
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LegislatureState Legislative Session Under Way

The state Legislature reached day four of the 40-day schedule as of January 17th, with this week having no "recorded" session days to provide legislators time to devote to the state budgetary process. The budget has been the focus of much of the media attention and Governor Nathan Deal’s State of the State address; however, there has been no reprieve of bills that could impact credit unions. New bills/topics of note:

Ethics: A "hot" topic in the media; the press has placed much attention on state ethics reform. The Senate commenced the session by instituting a rule to forbid acceptance of anything valued in excess of $100. The House instituted a rule prohibiting communication between legislators and those who are possibly lobbyists but have failed to register, and there have been several bills introduced that would place limits, change procedures, and provide for funding for the Ethics Commission. Why is this of note to credit unions? These bills must be monitored to ensure that credit unions and their advocacy efforts are not negatively impacted.

ForeclosureForeclosures: In each recent legislative session there have been multiple attempts to alter the foreclosure process and/or change Georgia to a judicial foreclosure state. From a credit union perspective, any attempts to convert Georgia to a judicial system are opposed, as well as any broad lengthening of the foreclosure notice period (or sweeping changes to procedures!). This session has seen no shortage of bills already, as by just day four there were multiple foreclosure-related bills, with rumors of a study committee specifically on the foreclosure process. Of note:

  • HB 47 by Rep. Billy Mitchell (D) would allow a debtor to "cure" a foreclosure by making all past-due payments and paying late fees and charges up to five calendar days prior the sale of the property. This bill will be monitored closely as this topic has been a "vehicle" for attempts to increase the foreclosure notice period.
  • HB 49 by Rep. Billy Mitchell (D) would require the licensing of foreclosure rescue companies to prevent fraudulent players in the marketplace. Presently the bill exempts financial institutions and subsidiaries.
  • HB 83 by Rep. David Knight (R) corrects a current regulatory opinion that if a real estate agent is involved in a short sale, the agent is guilty of a felony. This bill, if passed, would reverse the regulatory language and allow the practice (that many real estate agents engage in presently) to be permissible.
  • SB 56 by Sen. Jesse Stone (R) would require the purchaser of property in a foreclosure sale to pay up to six months of unpaid condo or homeowners’ association assessments. In 2012 there were multiple unsuccessful attempts to assign the unpaid association assessments to the foreclosing party, and if this bill is any indication, the lobbying interests are taking a different approach to assign the fee to the purchaser.

Lending Practices: Often there are bills that seek to address issues not directed at credit unions or other financial institutions, but that indirectly could alter the lending practices in this state. These bills are lobbied consistently to ensure that access to reasonable credit for consumers is maintained, the ability to sell loan portfolios in the secondary market is ensured, and the priority lien status of a financial institution is upheld, and, of course to protect credit unions from undue compliance burdens. Of note to date there are:

  • HB 82 by Rep. Earl Ehrhart (R) would require a successor creditor to provide notice to a guarantor, and allow the guarantor 90 days in which to purchase the debt obligation. The bill states that it only applies to a successor credit or who is not a depository institution, or an affiliate that is federally insured. This issue was one that was debated up to the evening hours of day 40 within Republican leadership in 2012, and it is apparent the debate continues.
  • HB 66 and HB 80 by Rep. Tom Rice (R) amend motor vehicle bills that passed last year for technical corrections. These two bills address administrative procedures in how motor vehicle titles are filed, as well as when a title fee is to be assessed.

Want to learn more about the bills that are being considered by the state that could impact your credit union and the members you serve? The credit union legislative tracking system outlines all the bills being monitored on behalf of credit unions. For up-to-the-minute movement of key issues, please follow us on Twitter @GCUAGov!

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Gold DomeThose Who Have Direct Impact on You

Many of the bills that can impact the way Georgia credit unions operate are assigned to the banking committees at the state Legislature for potential hearings. As such, it is imperative for the legislative success of credit unions to have a strong working relationship with not just the leadership of these committees, but all the legislators who sit on them, as they can be the deciding vote on any issue. The 2013 state session brings some new members to the committees, and in the Senate new leadership; the new chairman of the Senate Banking and Financial Institution Committee is Sen. John Crosby (R-Tifton). While he is new to leading the committee, he has been an active member of this group since his first term in 2011, and we look forward to our continued working relationship with Sen. Crosby.

State Sen. John Crosby
State Rep. Greg Morris

Other members of the Senate Banking and Financial Institutions Committee are:

In the House, the Banks and Banking Committee remains largely the same with Rep. Greg Morris (R-Vidalia) continuing at the helm as chairman. Other members of the House Banks and Banking Committee are:

As one can see, the legislators who address issues of industry importance in the Senate and the House come from all across this state. And, they are likely near you or are your district legislator – so please take a moment to reach out to those in your area by clicking their names to gain access to their contact information. Write a note, send an email, or place a call to introduce yourself and create a credit union connection. Legislators are much less likely to make decisions that would “hurt” an industry they have a relationship with back home!

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Eggs and Issues
From left: Tim Bridges, Associated CU; Doug Foote, Georgia United CU; Mike Culbertson, GCUA; Andrea Shorr, LGE Community CU; Cindy Connelly, GCUA; Chuck Head, Atlanta Postal CU; Mary Olson, Delta Community CU
Looking Ahead at Legislative Agendas

On January 16th, credit union leaders joined more than 1,000 people attending the Georgia Chamber of Commerce's Eggs and Issues breakfast to hear firsthand the legislative agendas for both Washington, D.C., and Georgia. This early morning event is the unofficial kickoff to the state legislative session, with almost all state elected officials in attendance to hear remarks on legislative priorities for Georgia. This year's breakfast provided a bird’s-eye view of legislative agendas from multiple viewpoints:

Thank you to Associated CU, Atlanta Postal CU, Delta Community CU, Georgia’s Own CU, Georgia United CU, and LGE Community CU for participating in this annual event and being the "credit union face" to the hundreds of state officials in attendance.

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CatLoan 'Steering' Banned by CFPB

The CFPB announced it is issuing rules to prevent unscrupulous mortgage loan originators (MLO) from generating higher compensation for themselves by steering borrowers into risky and high-cost loans. The CFPB's final rules will:

  • broaden the application of prohibitions on compensation that varies with the loan terms. For example, an MLO should not be paid more if the consumer takes a loan with a higher interest rate, a prepayment penalty or higher fees;
  • prohibit "dual compensation": Under the CFPB's rules, the loan originator cannot get paid by both the consumer and another person such as the creditor; and
  • set qualification and screening standards: An MLO must meet character, fitness and financial responsibility reviews, pass a criminal background check, be screened for felony convictions, and undertake training to ensure they have sufficient knowledge of the rules governing the types of loans they originate.

The final rule also implements Dodd-Frank provisions that, for mortgage and home equity loans, generally prohibit mandatory arbitration of disputes related to mortgage loans and the practice of increasing loan amounts to cover credit insurance premiums.

One area in the proposal of possible concern was the use of proxy factors to determine whether the rules apply to compensation plans. While the final rules have not been issued yet, based on the agency's summary, the use of such factors remains in the final rule.

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Free Appraisal Reports for All Borrowers

AppraisalThe CFPB adopted a new rule that requires mortgage lenders to provide applicants with free copies of all appraisals and other home-value estimates. The rule was required under the Dodd-Frank Wall Street Reform and Consumer Protection Act, and is intended to ensure that consumers can receive information prior to a loan closing about how the property's value was determined. The final rule also requires creditors to:

  • inform consumers within three days of receiving an application for a loan of their right to receive copy of all appraisals; and
  • provide copies of appraisal reports and other written home-value estimates to consumers promptly, or three days before closing, whichever is earlier. 

The requirements go into effect in January 2014 and will apply to first-lien mortgages. The new rule, issued under Regulation B, eliminates an exemption for federal credit unions that were included in the Federal Reserve's 1993 rule because the NCUA had a similar rule requiring that free reports be provided only when requested. The CFPB, with several other federal regulatory agencies, also adopted a new rule that establishes special requirements concerning appraisals for higher-priced mortgage loans.

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Social mediaSocial Media Regulations for FIs

NCUA and bank regulators have asked for comment as they prepare guidelines for social media use by financial institutions. The regulators released proposed guidance on January 22nd addressing how consumer protection and compliance laws, regulations and policies could be applied to the use of online social media platforms by credit unions, financial institutions and certain nonbank entities. Credit unions and other parties can now comment on the pending social media guidance. Read the proposed guidance.

The joint agency guidance "is intended to help financial institutions understand potential consumer compliance, legal, reputation, and operational risks associated with the use of social media, along with expectations for managing those risks," said the Federal Financial Institutions Examination Council (FFIEC). Poor due diligence, oversight or control of social media platforms can create increased risks for financial institutions and their members or customers, the FFIEC noted. The guidance will not create new obligations for financial institutions, the FFIEC said, but financial institutions will be expected to manage risk "as they would with any new process or product channel."

Credit unions and others may comment on any aspect of the guidance, but the FFIEC is specifically seeking information on:

  • any type of social media use that should be added to the guidance;
  • any other consumer protection laws, regulations, policies or concerns that may be implicated by financial institutions' use of social media that are not discussed in the proposed guidance but should be discussed; and
  • any factors that may impede compliance with laws, regulations, and policies that address social media use.

Comments will be accepted for 60 days after the notice is published in the Federal Register. The FFIEC is composed of the leaders of the NCUA, the Federal Reserve Board, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, the Federal Deposit Insurance Corporation and the Consumer Financial Protection Bureau. NCUA Chairman Debbie Matz has served as head of the FFIEC since 2011. Her two-year term is scheduled to end in March.

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