Time To Start Implementing Those Pesky Mortgage Requirements
by. Henry Meier
Summer unofficially ended on Tuesday morning so I figured I’d give you yesterday to go through your email before pointing out the obvious. It’s time to start getting serious about preparing for the Dodd-Frank regulations that kick in in January. My biggest concern for credit unions isn’t that they are going to have trouble complying with these new mandates, but that they won’t take the time to put down in policy and procedure what it is they already do and how that meets these requirements. Obviously, you should scrutinize the regulations, but there are some very basis steps that will go a long way toward complying with some of the core mortgage responsibilities.
For example, New York law already requires credit unions and banks to make a good faith effort to work with delinquent homeowners in the hopes of avoiding foreclosure. Do you make any of these mistakes? Do you misplace a member’s paperwork for several months, making it impossible to explain to the court whether or not the member qualifies for modification programs such as HAMP? Do you repeatedly waste the court’s time by sending employees to settlement conferences who aren’t authorized to sign off on mortgage modifications? And, do you continually make these mistakes while going forward with the member’s foreclosure? There actually are cases out there in which a member is approved for a modification one day only to be served with foreclosure papers the next.
Now let’s stipulate that credit unions don’t do this type of nonsense and that it is a shame we have to comply with any of Dodd-Frank’s mandates, but the time for complaining is done. Simply take the time to put down in policy and procedures the steps you take when dealing with a lender and you will actually find that you are in compliance with much of what Dodd-Frank is requiring. By the way, the examples of shoddy servicing practices are taken right from recent New York State cases. Lenders keep on reminding people of why we needed at least some of Dodd-Frank’s protections in the first place.
Another, slightly more complicated example has to do with the dreaded Qualified Mortgage. If you are like many credit unions, you underwrite to secondary market standards, but decide on a case by case basis whether or not to give a member a mortgage when he or she does not meet that underwriting criteria. Now’s the time for putting down in writing the criteria that the credit union uses for determining when a non-QM mortgage it is going to be given to members. Remember, the CFPB isn’t saying that you should only do Qualified Mortgages; it is requiring that all mortgage loans be based on a determination of a borrower’s ability to repay the loan. I guarantee you that you all take into account the criteria the CFPB wants you to consider. But given the potential defenses to be available to delinquent borrowers, it is absolutely crucial that someone could randomly pick up one of your mortgage files and determine from the documentation it cited why the credit union felt a member had the ability to repay the mortgage. Again, you all already do this, but I am not sure that you all have put the procedures in writing.
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