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Credit unions hurt by CFPB TILA/RESPA combo

The Consumer Financial Protection Bureau proposed rule for combining loan disclosures associated with the Truth in Lending Act and the Real Estate Settlement Procedures Act is facing scrutiny from credit unions that fear they will have to stop offering certain loans.

The National Association of Federal Credit Unions sent a warning to the CFPB in a public comment letter on the proposed loan disclosures rule. NAFCU argues the rule, in its current form, will force some credit unions to stop serving long-time borrowers while imposing unreasonable compliance costs on credit unions that already conduct quality due diligence.

The rule would force creditors to bare responsibility for any errors or lack of timeliness issues caused by a mortgage broker.

Federal credit unions also fear electronic-record retention requirements would impose unreasonable fees on credit unions and believe the rule's overall exemption for small credit unions should go beyond firms that issue five or fewer mortgages each year to include credit unions with $175 million or less in assets.

"Many small credit unions that conduct a small number of mortgage loans to their specific membership would simply cease their mortgage operations," the NAFCU wrote in its letter. "For example, a credit union whose membership consists of teachers in a part of one state or another whose membership consists of firefighters of another state may originate twenty mortgages in a year."

The organization suggests this type of credit union would not qualify for the exemption, forcing them to end relationships with long-time borrowers.

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