Credit unions, combing through the Consumer Financial Protection Bureau's proposed loan originator compensation and qualification rules, remain optimistic the CFPB will consider the unique structure of credit unions' as they flesh out regulations.
It is the hope of credit unions that the CFPB will not apply the same rules evenly across the residential mortgage lending landscape.
The latest CFPB proposal would require lenders to provide borrowers with a comparable, alternative loans with no upfront discount points, origination points or fees that are retained by the lenders or their affiliates before it imposes upfront points and fees on consumers.
"Certainly, we are taking a close look at the qualification requirements (for originators) under the proposed rule with respect to mortgage loan originators," said Jared Ihrig, senior assistant general counsel for the Credit Union National Association.
He added that, currently, credit union loan officers are regulated under the Secure and Fair Enforcement for Mortgage Licensing Act and must be registered. The idea behind his review is to ensure there are no costly redundancies or rules that would create excessive burdens for credit unions.
"We will be taking a close look at the character, fitness and training requirements that are contained within the proposed rule," Ihrig said.
"We are hopeful that each of these rules will not be overly burdensome on credit unions. In looking at the proposal, we are cautiously optimistic since there have been points considered by the CFPB based on feedback on credit unions. Initially, they had proposed a flat-fee requirement and it looks like that is not part of the proposal."
Ihrig also is reviewing how credit union loan officers can be compensated under the rules.
"In many instances, credit unions provide annual bonuses based on the performance of the entire credit union, which includes loan originators. We want to ensure that credit unions are able to do this."
Ihrig said his association is particularly concerned about how new regulations could impact smaller credit unions.
Those concerns also were raised Monday by Tom Brewer, CEO of the Peoples Federal Credit Union, as he testified at a House Hearing Before the Subcommittee on Financial Services Monday.
"The creation of the Consumer Financial Protection Bureau poses yet another concern as they begin to issue new regulations for the financial services industry," Brewer said in prepared testimony. He noted compliance can be a full-time job, requiring multiple employees if it becomes too complex. That burden alone can stifle smaller credit unions.
"Most of the costs of compliance do not vary by size and, therefore, are proportionately a much greater burden for smaller institutions," Brewer said. "If a smaller credit union offers a particular service it has to be concerned about complying with most of the same rules as a larger institution, but can only spread those costs over a much smaller volume of business."
He noted that in West Virginia alone, there are 100 credit unions and roughly 50% of them have less than $10 million in assets.
Ihrig said any CFPB or regulatory proposals that unduly impacts credit unions could be addressed through a request for exemptions.
"That is something we are considering. We are urging the CFPB where permissible under statute and where appropriate to exempt credit unions from regulatory requirements that they propose on mortgage rules," he said. "Credit unions vary in size, and we are concerned about the impact on smaller credit unions."
Some of the redundancies that could be a concern are the proposed rule's requirements for criminal background checks and training requirements for originators. Ihrig said credit unions are already forced to handle those issues, creating an area of possible redundancy.
"We will be reaching out to our members on issues such as the CFPB's proposed rule requiring lenders to make no point and no fee loan options available," he said. In addition, the association plans to address the issue of whether given an exemption, the unions can have the authority to allow consumers to pay up front points or fees. "We believe where consumers want to use their choice to lower their monthly payments or lower their interest rates, they should have an option to do so."