Rep. Blaine Luetkemeyer, R-Mo., chairman of the House Financial Services Subcommittee on Housing and Insurance, recently re-introduced a bill that would provide credit unions and community banks with statutory relief regarding privacy notices, waive escrow mandates for mortgage loans held in portfolio, and give a qualified mortgage (QM) safe harbor for all loans held in portfolio.
Only this time around, the Community Lending Enhancement and Regulatory Relief (CLEARR) Act of 2015, which has the support of the National Association of Federal Credit Unions (NAFCU), would require the National Credit Union Administration (NCUA) to conduct a study over the course of one year to determine the impact that its revised risk-based capital proposal on mortgage servicing assets would have on the industry.
More specifically, the NCUA would be required to examine the history of the market, the risks associated with mortgage servicing assets, and regulatory approaches to addressing those risks other than requiring servicers to bolster their capital reserves.
‘We appreciate Chairman Luetkemeyer's leadership in pressing for added regulatory relief and for working to ensure credit unions parity with other institutions with respect to capital requirements,’ writes Carrie Hunt, senior vice president of government affairs and general counsel for the NAFCU, in a statement. ‘This bill would promote much-needed transparency, require a thorough analysis of the [NCUA's risk-based capital proposal's] impact on mortgage servicing assets and encourage NCUA to take more time to consider the full impact of its capital rules.’
In a statement, Jim Nussle, president and CEO of the Credit Union National Association, says the proposed legislation, which was first introduced in 2013, is ‘a good first step toward meaningful regulatory relief for credit unions and other community based financial institutions.’
‘NAFCU recognizes the good work of this committee in favorably reporting this legislation in the 113th Congress, and appreciates your continued interest in this broadly supported provision,’ Adams writes. ‘NAFCU has long supported the elimination of the redundant statutory notice requirement.’
In addition, the NAFCU is ‘pleased that this legislation would waive escrow mandates for loans held in portfolio and increase the 'small servicer' exemption threshold to 20,000 mortgages annually.’
‘This important exemption recognizes the strong history of small institutions providing high-quality mortgage servicing,’ Adams writes. ‘Given their track record, small servicers should be incentivized to continue to service mortgage loans. The existing escrow rules drive small creditors from the mortgage market because it is difficult to provide cost effective escrow services.’
NAFCU also applauds a measure in the bill that would exempt higher-risk mortgages of $250,000 or less from appraisal requirement provisions under the Truth in Lending Act, provided the lender holds the loan in portfolio for at least three years.
This, in turn, would ‘provide important legal safeguards for lenders acting in good faith throughout the appraisal process,’ Adams says.
‘When the committee reviews this bill for potential improvements, NAFCU would also recommend raising the $250,000 threshold to a higher level,’ Adams adds.
In addition, NAFCU supports the legislation because it would mean that loans held in portfolio by smaller lenders would automatically attain the QM safe harbor under the Consumer Financial Protection Bureau's new mortgage rules.