With the Consumer Financial Protection Bureau's qualified mortgage regulation implementation date looming large, credit unions are gearing up to make sure all of their related software and operating systems ducks are in a row.
"There is not a lot of gray area for not being in compliance," said Scott Toler, CEO of Credit Union Mortgage Association, which services more than 70 credit unions nationwide.
While the streamlining of lending practices is a logical step forward, for many third-party software providers and concerned credit unions, these regulations are coming down the pike too fast. "We are getting an uptick of inquiries from credit unions that are scared to death because they don't have the staff to handle it," added Toler.
Dan Newberry, vice president of Real Estate Operations for the $1.3 billion TTCU The Credit Union, Tulsa, Okla., which serves 105,000 members, believes Congress passed Dodd-Frank and established CFPB as a way to rectify the "devious behavior" of a group of people that caused the mortgage collapse.
"The proposed regulations, while extremely onerous, will force lenders to streamline fees associated with mortgage lending in order to compete in the marketplace," said Newberry who also serves as an Oklahoma state senator in the 37th District.
Newberry explained that TTCU services 100% of its mortgage loan production. As a result, the credit union is not under contract with any third party and handles all loan underwriting, servicing and origination.
"In 2012-2013, we changed or business software to ensure compliance with anticipated regulations and engaged a compliance software company to audit all loan packages prior to delivery to a loan officer or member."
While upgrading its internal software, TTCU also changed its loan packages to be standardized regardless of loan product, which means
From a service perspective, Toler said those financial lending institutions operating above boards will see little change come January 2014. "If you are an honest mortgage company, you are already doing these things." When it comes to software compliance, he said that is another story.
"We do relay on outside vendors for our software and I have spoken to all of them," said Toler. "They will be ready, and we will be ready. No vendor wants to be non-compliant." And while he said the majority of vendors have made the necessary changes, or are in process, one vendor is cutting it close ensuring compliance by Dec. 20.
VyStar Credit Union chief lending officer Kathy Bonaventura is among countless credit unions executives who have had QM regulations on the radar. The $3.7 billion credit union, serving over 347,000 members, currently uses Mortgage Cadence as its vendor. To date, numerous conversations on the topic have transpired.
"They are working to address compliance challenges early in the processing stage to allow for any last minutes changes, if necessary," she said.
Like Newberry, Bonaventura sees many "positives" in the regulation. For example, there will be consistency among lenders, which in turn provides investors with a higher level of comfort when purchasing MBS pools and members will be provided protection with regard to lenders making loans, which are reasonable and not simply volume driven. The downside, she said, "is the unintentional impact on consumers because of lack of flexibility, which may occur in underwriting."
As the compliance date draws closer, Newberry perceives that these regulations, while born from the desire to punish predatory lenders, will have some negative impacts. "This also punishes legitimate mom-and-pop lenders by forcing QM compliance, which they cannot afford. The irony here is that in an attempt to protect consumers the new laws inadvertently force smaller lenders out of business by unnecessarily increasing the cost of doing business."
