The National Association of Federal Credit Unions is urging the House Financial Services Committee to pass a bill that would require the National Credit Union Administration conduct a year-long study to analyze the impact of its second risk-based capital proposal on credit unions’ mortgage servicing assets before moving forward with a flawed rule.
The bill was introduced by Subcommittee Chairman Blaine Luetkemeyer, R-Mo., and would require NCUA to conduct a study on mortgage servicing assets and report to Congress within one year.
"This language would promote much-needed transparency, require a thorough analysis of the proposal’s impact on mortgage servicing assets and encourage NCUA to take more time to consider the full impact of its proposed capital rule," NAFCU Vice President of Legislative Affairs Brad Thaler says.
Other provisions of the bill would give statutory relief regarding privacy notices; waive escrow mandates for mortgage loans held in portfolio; provide an exemption from independent appraisals for loans of $250,000 or less held in portfolio; and give a QM safe harbor for all loans held in portfolio.
NAFCU has long supported the elimination of the redundant statutory notice requirement.
NAFCU also supports the inclusion of the study and report provision that would delay the implementation of NCUA’s proposed risk-based capital regulation as it relates to mortgage servicing assets until an impact study is conducted and alternatives are explored.
“We are pleased that this legislation would waive escrow mandates for loans held in portfolio and increase the “small servicer” exemption threshold to 20,000 mortgages annually. This important exemption recognizes the strong history of small institutions providing high-quality mortgage servicing,” Thaler writes in the open letter. “Given their track record, small servicers should be incentivized to continue to service mortgage loans. The existing escrow rules drive small creditors from the mortgage market because it is difficult to provide cost effective escrow services.”
The bill would also exempt higher-risk mortgages of $250,000 or less from appraisal requirement provisions under the Truth in Lending Act if the lender holds the loan in portfolio for at least three years.
It would also provide important legal safeguards for lenders acting in good faith throughout the appraisal process.