Mon, Feb 3, 2014
Washington, District Of Columbia
In a new CompBlog post, Credit Union National Association Senior Compliance Counsel Mike McLain outlines what documents credit unions must provide to borrowers that make conventional payments as well as those that make automatic payments for a closed-end mortgage loan.
New mortgage servicing regulations require credit unions to provide periodic statements for fixed-rate and adjustable-rate mortgage loans. An exception permits credit unions to provide coupon books containing certain required information for fixed-rate mortgage loans. However, credit unions would still be required to send periodic statements for the remaining adjustable-rate mortgage loans. This is true even if a borrower has automatic payments for a closed-end mortgage loan, McLain said.
The Consumer Financial Protection Bureau's final mortgage servicing rule requires mortgage servicers to meet new periodic statement requirements, provide additional notices of rate changes on adjustable-rate mortgage loans to borrowers and help ensure that consumers know their options to prevent foreclosures. The servicing rule contains a number of exemptions for credit unions and other financial institutions that meet the bureau's "small servicer" definition.
"Only small servicers are exempt from the periodic statement requirements," McLain said. A credit union would be considered a small servicer if the credit union, together with any affiliates, service 5,000 or fewer mortgage loans, and the credit union (or an affiliate) are the creditor or assignee for all of them, he clarified.
Only closed-end "mortgage loans" should be counted to determine if a credit union is a small servicer. "Do not include loans the credit union voluntarily services for a creditor or an assignee that is not an affiliate and for which the credit union does not receive any compensation or fees. Also do not count any reverse mortgages, or timeshare plans," McLain wrote.
The small servicer exemption is determined each calendar year based on the loans a credit union and its affiliates service as of Jan. 1 for the remainder of the year. A credit union may lose the small servicer exemption if it:
- Services more than 5,000 loans; or
- Takes on the servicing of a loan it does not own or did not originate.
Credit unions that lose their exemption will have six months from the date it stopped being a small servicer or until the next Jan. 1, whichever is later, to comply with the periodic statement requirements, McLain said. CUNA CompBlog Post