RegWatch - CUNA Lending Council

CUNA Regulatory Affairs (edited by the Lending Council Regulatory Committee)
December 18, 2008 | COMMENTS

Regulatory Issues of Interest to CUNA Lending Council Members

In This Issue:

• SBA Lending for Credit Unions: CUNA Audio Conference
• HUD Finalizes RESPA Rules
• NCUA and Other Agencies Issue Appraisal Guidance
• FED Issues Proposal to Revise Mortgage Loan Disclosures
• SBA Issues Rule on Rates and Loan Pools for SBA Loans

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SBA LENDING FOR CREDIT UNIONS: CUNA AUDIO CONFERENCE

CUNA is hosting an audio conference on Small Business Administration (SBA) lending for credit unions. The program will explore the challenges the current economic environment has posed for credit unions and others who participate in lending, as well as provide information on how credit unions can participate in SBA programs.

The December 22 audio conference will be moderated by Nicholas Owens, National Ombudsman and Assistant Administrator for Regulatory Enforcement Fairness at the SBA. Also participating on the call will be Frank Kressman, NCUA Staff Attorney, and Grady Hedgespeth, Director of Financial Assistance at the SBA.

The agency experts will also discuss NCUA's member business lending requirements and how they impact SBA lending. Click here for additional details as well as to register for the program.

 

HUD FINALIZES RESPA RULES

The Department of Housing and Urban Development (HUD) has issued a final rule to amend the requirements under the Real Estate Settlement Procedures Act (RESPA) in order to improve the mortgage process and to lower settlement costs for borrowers. The rule will make significant changes to the Good Faith Estimate (GFE) form. The changes will result in a new format for the GFE that is intended to ensure that the estimates are more accurate and to facilitate comparisons between lenders. These changes will also make it easier to compare the GFE and the HUD-1 or HUD-1A settlement statements.

In addition, the final rule will clarify when it is appropriate to provide borrowers with average price costing of settlement services. The rule will also include changes to the disclosures in connection with the lender payments to brokers that are commonly referred to as yield spread premiums.

The final rule will be effective as of January 16, 2009. However, use of the new GFE and the HUD-1/HUD-1A settlement statements will not be mandatory until January 1, 2010. HUD will issue additional guidance on compliance during this implementation period.

CUNA's Final Rule Analysis on the new RESPA rule will be posted on CUNA's website shortly.

- Jeff Bloch, Senior Assistant General Counsel

 

NCUA AND OTHER AGENCIES ISSUE APPRAISAL GUIDANCE

he NCUA and the other federal financial institution regulators (Agencies) have issued proposed Interagency Appraisal and Evaluation Guidelines (Guidelines) that outline supervisory expectations for sound real estate appraisal and evaluation practices. This includes formal appraisals, as well as other evaluation methods that are permitted under certain circumstances. The Guidelines are intended to clarify and provide more details on appropriate risk management principles and internal controls for ensuring that real estate appraisals and other evaluations are reliable and support the real estate transactions.

The Guidelines replace the 1994 Interagency Appraisal and Evaluation Guidelines and incorporate recent regulatory actions, while also reflecting other changes in industry practices, uniform appraisal standards, and available technologies. NCUA was not a party to the 1994 Guidelines.

The Guidelines also include three appendices. One provides further clarification on real estate transactions that are exempt from the agencies' appraisal regulations, while another addresses acceptable evaluation alternatives, including the use of automated valuation models (AVMs). The third appendix provides a glossary of terms.

Comments on the proposed Guidelines are due by January 20, 2009. Click here for a copy of CUNA's Regulatory Comment Call for more information.

- Jeff Bloch, Senior Assistant General Counsel

 

FED ISSUES PROPOSAL TO REVISE MORTGAGE LOAN DISCLOSURES

The Federal Reserve Board (Fed) late last week issued a proposal that will revise the Regulation Z disclosure requirements for mortgage loans. These are specific changes to implement provisions of the Mortgage Disclosure Improvement Act (MDIA), which was enacted this past July and amends certain provisions of the Truth in Lending Act. As previously planned, the Fed is in the process of reviewing Regulation Z in its entirety and will issue more changes to the mortgage disclosure provisions sometime next year.

The MDIA requires creditors to give good faith estimates of mortgage loan costs within three days after receiving the application for the mortgage loan and before any fees are collected, other than a reasonable fee for obtaining a credit report. This is consistent with the Fed's recent final rule that amends the Home Ownership Equity Protection Act, which imposes this requirement for the consumer's primary home, but the MDIA now broadens this requirement to include all dwellings, such as second homes. The proposed rule incorporates this extended coverage and also implements these additional requirements that were included in the MDIA:

• Creditors must wait seven business days after they provide the early disclosures before closing the loan.
• Creditors must provide new disclosures with a revised annual percentage rate (APR) if there are any changes that result in the APR being inaccurate beyond certain tolerances. These disclosures must be provided at least three days before the loan closing.

With regard to the above requirements, the proposed rule will allow a consumer to expedite the loan closing if due to a personal financial emergency, such as a foreclosure. As required under the MDIA, the requirements under the proposed rule will become effective as of July 30, 2009. Comments in response to the proposal are due by January 23, 2009. CUNA's Regulatory Comment Call, which will provide additional information, will be posted on CUNA's website shortly.

- Jeff Bloch, Senior Assistant General Counsel

 

SBA ISSUES RULE ON RATES AND LOAN POOLS FOR SBA LOANS

To address the current conditions that have limited the availability of business loans, the Small Business Administration (SBA) has issued an interim final rule that will make changes to loan pricing and to the formation of secondary market loan pools for SBA loans under Section 7(a). Specifically, the rule will allow loans to be priced based on the London Interbank Offered Rate (LIBOR) and will allow secondary market loan pools to be priced based on the weighted average coupon rate.

For many SBA lenders, the cost of funds is based at least in part on LIBOR, while the interest rate for Section 7(a) SBA loans is typically based on the Prime Rate. Recently, the spread between LIBOR and the Prime Rate has narrowed significantly, which has essentially eliminated the profit margin for lenders making SBA loans. As a result, many lenders have reduced the number of such loans that they are willing to make and this has reduced the amount of capital and financing that is now available to small businesses.

The interim final rule is effective as of November 13, 2008, although comments will be accepted until December 15, 2008. Click here for a copy of CUNA's Regulatory Comment Call for more information.

- Jeff Bloch, Senior Assistant General Counsel