NCUA’s December Report Addresses Concerns about Liability Under the Ability-to-Repay-Rule; Impact of DoD Proposed Rule Webcast; Programming Note
Written by Victoria Daka, Regulatory ComplianceÂ Specialist
Compliments of the season! "ItÃ¢ÂÂs the most wonderful time of the year.Ã¢ÂÂ
On Friday, Brandy blogged about the Region III Report article from the latest NCUA Report. Today, IÃ¢ÂÂd like to take a look at another article from the NCUA Report, which focuses on the Ability-to-Repay Rule. This article seeks to address the concerns about liability under the CFPBÃ¢ÂÂs Ability-to-Repay Rule by indicating the reason for the Ã¢ÂÂqualified mortgageÃ¢ÂÂ definition; extending leeway to credit unions to continue using their existing successful traditional relationship-lending approach; and, summarizing the three main categories of Ã¢ÂÂqualified mortgages.Ã¢ÂÂ
As per the article, Ã¢ÂÂCongress directed [the CFPB] to define a category of loans where lenders would have certainty that their loans comply with the rule, and where borrowers would have the greatest protections. So, [the CFPB] developed criteria for what are called Ã¢ÂÂqualified mortgages.Ã¢ÂÂ In addition, this article informs credit unions that they may continue to utilize their successful traditional relationship-lending approach, regardless of whether the mortgagees are Ã¢ÂÂqualified,Ã¢ÂÂ as there many loans that are not qualified mortgages, yet are fundamentally sound. Â
Â Furthermore, this article summarizes the three types of qualified mortgages: (1) the general definition; (2) the Ã¢ÂÂGSE eligibleÃ¢ÂÂ provision; and (3) the small-creditor provision as follows:
Ã¢ÂÂGeneral Definition. Any loan for which the consumerÃ¢ÂÂs income and debt have been considered and verified with a debt-to-income ratio of 43 percent or less is a qualified mortgage.
GSE or Agency-eligibleÃ¢ÂÂ Category of Qualified Mortgages. If a mortgage is eligible to be purchased, guaranteed or insured by one of several government-sponsored enterprises or certain government agenciesÃ¢ÂÂFannie Mae, Freddie Mac, the U.S. Department of Agriculture and the Rural Housing ServiceÃ¢ÂÂit is considered a qualified mortgageÃ¢ÂÂ¦
Small-Creditor Category of Qualified Mortgages. If your credit union has less than $2 billion in assets (adjusted annually for inflation) and your credit union and affiliates made 500 or fewer first-lien, closed-end mortgages in the prior year, then all mortgages you keep in portfolio are considered qualified mortgages.Ã¢ÂÂ
Â The article is available in its entirety here.
Webcast: How All Credit Unions Will Be Impacted by the DoD Proposed Rule
If you offer unsecured credit of any kind, then this webcast is a must-attend eventÃ¢ÂÂthe proposed rule doesnÃ¢ÂÂt just affect military-focused credit unions. The Department of DefenseÃ¢ÂÂs proposed rule would amend the Military Lending Act (MLA) to make the definition of Ã¢ÂÂconsumer creditÃ¢ÂÂ cover more credit types. Learn what you can do to prepare and protect your credit union with this strategic webcast.
Programming Note. NAFCU's office will close at noon today and will also be closed on Thursday and Friday for the long holiday weekend. We will be back to blogging on Monday. Happy Holidays!