By now, most credit unions have seen the statistic 1,888 – the number of pages of the Consumer Financial Protection Bureau’s latest mortgage regulation. Of course, the 1,888 pages include the preamble to the final rule as well as the actual regulatory text and the Official Staff Commentary. And, the one-page signature page by CFPB Director Richard Cordray. So, we’ll call it a clean 1,887. Either way, the new rules will require credit unions to completely overhaul their mortgage disclosures (again) by August 1, 2015.
Fortunately, the CFPB has provided two Small Entity Compliance Guides that provide an overview of the new requirements. The Compliance Guide clocks in at 89 pages and the Forms Guide runs a smooth 96 pages. Credit unions should use these Guides as their starting point for the new requirements, but they should also remember that the devil is in the details.
While using the Guides as a starting resource is a great idea, below are three additional actions credit unions should take as they work toward compliance by August 1, 2015.
While the CFPB’s Forms Guide does a good job breaking down the new Loan Estimate and Closing Disclosure, there is another resource that credit unions should be sure to use: the CFPB’s Annotated Forms. The annotated Loan Estimate and Closing Disclosure highlight the regulatory requirement for each line of the new disclosures. This allows credit unions to pinpoint and research the underlying regulatory text of each requirement.
The CFPB put tons of time, effort and consumer research into creating these new mortgage disclosures. Credit unions should be very confident these are the final versions and should begin working through the disclosures and finding their “pain points.”
Speaking of “pain points,” based on past implementation experiences we know there will be many areas of confusion and issues that do not have clear answers. The key for credit unions is to clearly document their decisions – both the ultimate decision and the why. Having the underlying documentation of each decision not only helps demonstrate good faith efforts to comply but also helps streamline the audit and quality control process. While August 1, 2015 seems far away, credit unions won’t have time to review and reanalyze each implementation decision.
Perhaps the most important step for credit unions is to team up with trusted partners. This includes forms providers, third-party settlement providers, and outside counsel. While completing the new Loan Estimate and Closing Disclosure will be difficult, the regulations also amend key definitions and tighten the tolerance levels for estimated charges. And, there is a new Escrow Closing Notice that must be sent to members whenever their escrow account will be cancelled (even if the member makes the request).
While the CFPB’s Guides provide the “big picture” and outline the new requirements, as is often the case: the devil is in the details. Credit unions that take these three additional steps will be in a better position as the August 1, 2015 compliance deadline approaches.