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NAFCU is requesting that the Consumer Financial Protection Bureau use its authority under the Dodd-Frank Act to exempt small entities, including credit unions, from a proposed rule that would implement strict rules regarding mortgage loan originator compensation.

Under the proposed rule, a lender could only offer a mortgage loan with points and fees if an alternative mortgage product without points and fees was also offered. NAFCU Regulatory Affairs Counsel Tessema Tefferi, writing in an Oct. 16 comment letter, said the proposal is yet another example of "grouping credit unions with mortgage lenders for which certain regulations, including this rulemaking, may be appropriate."

NAFCU opposes requiring credit unions to offer a "zero-zero alternative" loan when providing a quote to a consumer on a mortgage loan, Tefferi said. Such a requirement, "is not reasonable" since it would mislead and "ultimately confuse consumers." Instead, credit unions should be allowed to make such alternative loans available for members upon request, and only if the member in question qualifies.

An alternative approach that the CFPB is considering, which would allow creditors to make loans with discount points and origination points or fees only if the consumer also qualifies for a "zero-zero" alternative loan, is "simply untenable," Tefferi said. That approach would greatly reduce credit, a fact even the CFPB recognizes in the preamble of the proposed rule. With this provision, he said, home ownership would be "virtually unattainable for many consumers."

• NAFCU comment letter
• Regulatory Alert (members only)