ARTICLE
Compliance Update with Amy K by Amy Kleinschmit, Chief Compliance Officer NCUA 3rd Distribution Earlier this week, the NCUA announced an $865.5 million distribution to the 1,800 membership capital account holders of the former Members United, Southwest Corporate, and U.S. Central corporate credit unions. Scheduled to occur before the end of September 2021, this is the third round of distribution from the former corporate credit unions’ asset management estates. Information on the Corporate System Resolution Program, including projections for the Corporate Asset Management Estates Recoveries and Claims and the process for determining when distributions are made to member capital account holders, can be found on the NCUA’s website. NCUA DEI Summit The National Credit Union Administration (NCUA) announced it will be hosting credit union leaders, credit union trade and support organizations, and diversity and inclusion professionals during the NCUA’s second Diversity, Equity, and Inclusion (DEI) Summit. This FREE three-day event will take place virtually Nov. 2–4, 2021. Chairman Harper, along with Vice Chairman Kyle Hauptman, Board Member Rodney Hood, and other prominent keynote speakers will address attendees. Summit topics include: How to Get Started in the DEI Journey; How to Increase Gender Diversity in the C-Suite; Facilitating Courageous Conversations Around Tough Topics; Diversity in the Boardroom; and Economic Equity and Justice. Sign up online to receive notifications about the Summit on the NCUA’s website here. HMDA Data The FFIEC released the 2020 HMDA data reported by 4,475 U.S. financial institutions. Some quick stats – the total number of originated closed-end loans increased by about 5.3 million between 2019 and 2020, or 67.1 percent. Refinance originations for 1-4 family properties increased by 150.0 percent from 3.4 million, and home purchase lending increased by 6.7 percent from 4.5 million. A variety of reports with this data can be found here. Additionally, the FFIEC recently announced the release of a HMDA Data Browser feature – the HMDA Maps tool. It allows those interested in exploring HMDA data to filter subsets by popular variables and display them in an illustrative format. Once users have displayed their desired data, they have the option to download the data as a CSV, copy and share the page URL, or save the summary report as a PDF. The HMDA Maps tool contains data for the years 2018, 2019, and the most recent, 2020 data. Find this new tool here. CFPB Mortgage Servicing Rule The Consumer Financial Protection Bureau (CFPB) issued their final rule revising Regulation X to provide for additional protections for borrowers affected by the COVID-19 pandemic. This final rule is effective on August 31, 2021. The CFPB provided an executive summary of the rule which can be found here. Briefly, this final rule establishes temporary special COVID-19 procedural safeguards that must be met for certain mortgages before the servicer can make the first notice or filing required by applicable law for any judicial or non-judicial foreclosure process because of a delinquency. Also, the final rule permits servicers to offer certain streamlined loan modification options made available to borrowers with COVID-19-related hardships based on the evaluation of an incomplete loss mitigation application. The final rule amends the early intervention obligations to help ensure that servicers communicate timely and accurate information to borrowers about their loss mitigation options during the current crisis. Another revision under the final rule is to clarify servicers’ reasonable diligence obligations when the borrower is in a short-term payment forbearance program made available to a borrower experiencing a COVID-19-related hardship based on the evaluation of an incomplete application. Finally, the final rule defines COVID-19-related hardship to mean a financial hardship due, directly or indirectly, to the national emergency for the COVID-19 pandemic declared in Proclamation 9994 on March 13, 2020 (beginning on March 1, 2020) and continued on February 24, 2021, in accordance with section 202(d) of the National Emergencies Act (50 U.S.C.1622(d)). Of note, section 1024.41(f) prohibits a servicer from referring a borrower to foreclosure in several circumstances. Specifically, § 1024.41(f)(1) prohibits a servicer from making the first notice or filing required by applicable law for any judicial or non-judicial foreclosure process (“first notice or filing” or “foreclosure referral”), unless the borrower’s mortgage loan obligation is more than 120 days delinquent, the foreclosure is based on a borrower’s violation of a due-on-sale clause, or the servicer is joining the foreclosure action of a superior or subordinate lienholder. (Reminder that 1024.41(f)(1) applies to small servicers.) You may recall from the proposed rule, that the CFPB had proposed a special COVID-19 Emergency pre-foreclosure review period that generally would have prohibited servicers from making a first notice or filing because of a delinquency from the effective date of the rule until after December 31, 2021. As explained in the preamble to the final rule, “the Bureau recognized that, if adopted as proposed, the special pre-foreclosure review period could have prevented a servicer from making the first notice or filing even in circumstances where additional time would merely delay rather than prevent avoidable foreclosure.” Instead, the final rule adds § 1024.41(f)(3) which will temporarily provide a more tailored procedural protection to minimize avoidable foreclosures in light of a potential wave of loss mitigation-related default servicing activity during a period when borrowers are also likely to need extra assistance. Final § 1024.41(f)(3) does not apply to small servicers. This is because small servicers are exempt from the requirements in § 1024.41, except with respect to § 1024.41(f)(1). The final rule’s temporary procedural safeguards are in § 1024.41(f)(3) and not § 1024.41(f)(1). Final § 1024.41(f)(3) generally requires a servicer to ensure that one of three temporary procedural safeguards has been met before making the first notice or filing because of a delinquency: (1) the borrower submitted a completed loss mitigation application and § 1024.41(f)(2) permits the servicer to make the first notice or filing; (2) the property securing the mortgage loan is abandoned under state law; or (3) the servicer has conducted specified outreach and the borrower is unresponsive. The temporary procedural safeguards are applicable only if (1) the borrower’s mortgage loan obligation became more than 120 days delinquent on or after March 1, 2020; and (2) the statute of limitations applicable to the foreclosure action being taken in the laws of the State where the property securing the mortgage loan is located expires on or after January 1, 2022. CU Policy Pro Updates The June 2021 Content Update is now available. These changes include 17 policy updates and the consolidation of several optional policies related to Credit Union Culture. Please note that all documentation related to this update can be found in the Resources area of CU PolicyPro (under Content Update Archives > June 2021). Using the Update Overview document along with the tracked-changes information, review the changes and for each policy decide if you want to: Do nothing and leave your policy as is (usually only if the update does not apply to your credit union, or you are not currently using the policy) Remove the policy from your CU Policies Manual and bring in the updated policy in its entirety (usually if your CU Policies Manual version has little or no customization, or if our updates were very extensive and it would be easier to start with the updated content and re-customize for your credit union) Use the redlined version as a guide and manually incorporate the updates into your CU Policies Manual version (usually if the updates were very minor, or if your CU Policies Manual version is heavily customized and it would be less work to manually add the updates rather than re-customize the policy). A brief summary of the impacted policies is listed below. Policy 1100 – Credit Union Culture (**new title**). This policy was updated to include Policy 1110, Policy 1120, Policy 1130 and Policy 1140. Wording was revised to be more inclusive of all these parts of the credit union’s culture. Key fields remain relevant and in place. Policy 1110 – Mission Statement (*DELETED*) This policy was deleted, and the key field incorporated within Policy 1100. Policy 1120 – Vision Statement (*DELETED*) This policy was deleted, and the key field incorporated within Policy 1100. Policy 1130 – Credit Union Values (*DELETED*) This policy was deleted, and the key field incorporated within Policy 1100. Policy 1140 – Credit Union History (*DELETED*) This policy was deleted, and the key field incorporated within Policy 1100. Policy 1170 – Equal Opportunity Statement. This policy was updated to be more comprehensive and in-line with current industry standards. Policy 1200 – Organization. This policy was reviewed and updated to reference other governance documents that the Credit Union Board may maintain. Policy 2110 – BSA AML Program. Policy 2110 was updated to change the FinCEN website link that was used to determine whether an MSB has registered appropriately. The new website is: https://www.fincen.gov/msb-registrant-search. (Required) Policy 2112 – Bank Secrecy Act: Servicing Marijuana-Related Accounts. Minor change was made to this policy to clarify that the credit union will comply with “All applicable Federal laws.” This change was suggested based on examiner scrutiny. The policy also added references to the accounts and “services” the Credit Union will offer. Policy 2310 – Telephone Inquiries (**new title**). This policy was revised to amend terminology and provide clarification on escalation and reporting. Policy 2605 – International Remittance Transfers. Clarity was added to the Estimates section under section B regarding which specific amounts on the prepayment disclosure can be estimated based on the particular scenario mentioned. Policy 4120 – Information Security. This policy was updated to add content regarding threat intelligence and information sharing. The update is intended to meet examiner expectations regarding credit unions who share information through federally sponsored organizations. Policy 4125 – Incident Response. This policy was also updated to add content regarding threat intelligence and information sharing. The update is intended to meet examiner expectations regarding credit unions who share information through federally sponsored organizations. Policy 5205 – Small Asset Liquidity Risk Management. Updated to provide clarity on the credit unions who should be utilizing this policy (under $50 million). In addition, Section references were corrected. Policy 6215 – Derivative Transactions (**new title**) This policy was updated to reflect the most recent changes to the NCUA regulation in Part 703. Significant changes were made to the policy to comply with the amendments. (Required if Offered) Policy 7302 – Real Estate Appraisals. This policy was updated to remove the reference to the rural exemption since it is no longer needed with the threshold increase for appraisals moved to $400,000. The policy was also updated to cross-reference different applicable areas within the policy and to generally strengthen content and remove commentary language. Policy 7303 – Real Estate Appraisals – Appendices. Similar to the above, this policy was updated to remove the reference to the rural exemption since it is no longer needed with the threshold increase for appraisals moved to $400,000. Clarification was also added to clarify these appendices as a tool to be used in conjunction with Policy 7302 for an effective program. Policy 7320 – Home Equity Loans. This policy was updated to remove duplicative content and reference the applicable policy (appraisals) and add consistent terminology across other policies. Policy 7330 – Residential Real Estate Loans. This policy has been revised to capture the expanded exemption for establishing escrow accounts for higher-priced mortgage loans that became effective on February 12, 2021. The policy was also revised to cross reference additional policies, be clearer on the determination of “value” and corresponding LTV limits, and to better place the consideration and requirements for Private Mortgage Insurance (PMI). Additional notes: Key Field 7330-8 has been removed from this policy because it is duplicative. Instead, Key Field 7320-11 has been added to this policy - It is also used in Policy 7320, Home Equity Loans, so this Key Field may already be defined for your credit union. An additional instance of Key Field 7330-14 has been added to this policy. Policy 7362 – Temporary Policy for Loan Modifications and Reporting due to COVID-19. This policy was amended to reflect the expiration date of two COVID concessions from the CFPB. Statements previously issued by the CFPB covering these accommodations were rescinded effective on April 1, 2021. One provision related to forbearance will expire on June 30, 2021. At that time, it will be up to the credit union to consider retiring this policy. Policy 9420 – Regulation D: Monetary Control Act. Policy 9420 was updated to reflect the Federal Reserve Board’s reporting changes which ended the quarterly collection of the FR 2900 effective on January 1, 2021 and reduced the number of items collected weekly from 12 to 5, effective for the report as-of-date April 12, 2021. As always, DakCU members may contact Amy Kleinschmit at akleinschmit@dakcu.org with any compliance related questions.
Compliance Update with Amy K
by Amy Kleinschmit, Chief Compliance Officer
NCUA 3rd Distribution
Earlier this week, the NCUA announced an $865.5 million distribution to the 1,800 membership capital account holders of the former Members United, Southwest Corporate, and U.S. Central corporate credit unions. Scheduled to occur before the end of September 2021, this is the third round of distribution from the former corporate credit unions’ asset management estates.
Information on the Corporate System Resolution Program, including projections for the Corporate Asset Management Estates Recoveries and Claims and the process for determining when distributions are made to member capital account holders, can be found on the NCUA’s website.
NCUA DEI Summit
The National Credit Union Administration (NCUA) announced it will be hosting credit union leaders, credit union trade and support organizations, and diversity and inclusion professionals during the NCUA’s second Diversity, Equity, and Inclusion (DEI) Summit. This FREE three-day event will take place virtually Nov. 2–4, 2021.
Chairman Harper, along with Vice Chairman Kyle Hauptman, Board Member Rodney Hood, and other prominent keynote speakers will address attendees. Summit topics include: How to Get Started in the DEI Journey; How to Increase Gender Diversity in the C-Suite; Facilitating Courageous Conversations Around Tough Topics; Diversity in the Boardroom; and Economic Equity and Justice.
Sign up online to receive notifications about the Summit on the NCUA’s website here.
HMDA Data
The FFIEC released the 2020 HMDA data reported by 4,475 U.S. financial institutions. Some quick stats – the total number of originated closed-end loans increased by about 5.3 million between 2019 and 2020, or 67.1 percent. Refinance originations for 1-4 family properties increased by 150.0 percent from 3.4 million, and home purchase lending increased by 6.7 percent from 4.5 million. A variety of reports with this data can be found here.
Additionally, the FFIEC recently announced the release of a HMDA Data Browser feature – the HMDA Maps tool. It allows those interested in exploring HMDA data to filter subsets by popular variables and display them in an illustrative format. Once users have displayed their desired data, they have the option to download the data as a CSV, copy and share the page URL, or save the summary report as a PDF. The HMDA Maps tool contains data for the years 2018, 2019, and the most recent, 2020 data. Find this new tool here.
CFPB Mortgage Servicing Rule
The Consumer Financial Protection Bureau (CFPB) issued their final rule revising Regulation X to provide for additional protections for borrowers affected by the COVID-19 pandemic. This final rule is effective on August 31, 2021. The CFPB provided an executive summary of the rule which can be found here.
Briefly, this final rule establishes temporary special COVID-19 procedural safeguards that must be met for certain mortgages before the servicer can make the first notice or filing required by applicable law for any judicial or non-judicial foreclosure process because of a delinquency. Also, the final rule permits servicers to offer certain streamlined loan modification options made available to borrowers with COVID-19-related hardships based on the evaluation of an incomplete loss mitigation application. The final rule amends the early intervention obligations to help ensure that servicers communicate timely and accurate information to borrowers about their loss mitigation options during the current crisis. Another revision under the final rule is to clarify servicers’ reasonable diligence obligations when the borrower is in a short-term payment forbearance program made available to a borrower experiencing a COVID-19-related hardship based on the evaluation of an incomplete application.
Finally, the final rule defines COVID-19-related hardship to mean a financial hardship due, directly or indirectly, to the national emergency for the COVID-19 pandemic declared in Proclamation 9994 on March 13, 2020 (beginning on March 1, 2020) and continued on February 24, 2021, in accordance with section 202(d) of the National Emergencies Act (50 U.S.C.1622(d)).
Of note, section 1024.41(f) prohibits a servicer from referring a borrower to foreclosure in several circumstances. Specifically, § 1024.41(f)(1) prohibits a servicer from making the first notice or filing required by applicable law for any judicial or non-judicial foreclosure process (“first notice or filing” or “foreclosure referral”), unless the borrower’s mortgage loan obligation is more than 120 days delinquent, the foreclosure is based on a borrower’s violation of a due-on-sale clause, or the servicer is joining the foreclosure action of a superior or subordinate lienholder. (Reminder that 1024.41(f)(1) applies to small servicers.)
You may recall from the proposed rule, that the CFPB had proposed a special COVID-19 Emergency pre-foreclosure review period that generally would have prohibited servicers from making a first notice or filing because of a delinquency from the effective date of the rule until after December 31, 2021.
As explained in the preamble to the final rule, “the Bureau recognized that, if adopted as proposed, the special pre-foreclosure review period could have prevented a servicer from making the first notice or filing even in circumstances where additional time would merely delay rather than prevent avoidable foreclosure.”
Instead, the final rule adds § 1024.41(f)(3) which will temporarily provide a more tailored procedural protection to minimize avoidable foreclosures in light of a potential wave of loss mitigation-related default servicing activity during a period when borrowers are also likely to need extra assistance. Final § 1024.41(f)(3) does not apply to small servicers. This is because small servicers are exempt from the requirements in § 1024.41, except with respect to § 1024.41(f)(1). The final rule’s temporary procedural safeguards are in § 1024.41(f)(3) and not § 1024.41(f)(1).
Final § 1024.41(f)(3) generally requires a servicer to ensure that one of three temporary procedural safeguards has been met before making the first notice or filing because of a delinquency: (1) the borrower submitted a completed loss mitigation application and § 1024.41(f)(2) permits the servicer to make the first notice or filing; (2) the property securing the mortgage loan is abandoned under state law; or (3) the servicer has conducted specified outreach and the borrower is unresponsive. The temporary procedural safeguards are applicable only if (1) the borrower’s mortgage loan obligation became more than 120 days delinquent on or after March 1, 2020; and (2) the statute of limitations applicable to the foreclosure action being taken in the laws of the State where the property securing the mortgage loan is located expires on or after January 1, 2022.
CU Policy Pro Updates
The June 2021 Content Update is now available. These changes include 17 policy updates and the consolidation of several optional policies related to Credit Union Culture. Please note that all documentation related to this update can be found in the Resources area of CU PolicyPro (under Content Update Archives > June 2021).
Using the Update Overview document along with the tracked-changes information, review the changes and for each policy decide if you want to:
Do nothing and leave your policy as is (usually only if the update does not apply to your credit union, or you are not currently using the policy)
Remove the policy from your CU Policies Manual and bring in the updated policy in its entirety (usually if your CU Policies Manual version has little or no customization, or if our updates were very extensive and it would be easier to start with the updated content and re-customize for your credit union)
Use the redlined version as a guide and manually incorporate the updates into your CU Policies Manual version (usually if the updates were very minor, or if your CU Policies Manual version is heavily customized and it would be less work to manually add the updates rather than re-customize the policy).
A brief summary of the impacted policies is listed below.
Policy 1100 – Credit Union Culture (**new title**). This policy was updated to include Policy 1110, Policy 1120, Policy 1130 and Policy 1140. Wording was revised to be more inclusive of all these parts of the credit union’s culture. Key fields remain relevant and in place.
Policy 1110 – Mission Statement (*DELETED*) This policy was deleted, and the key field incorporated within Policy 1100.
Policy 1120 – Vision Statement (*DELETED*) This policy was deleted, and the key field incorporated within Policy 1100.
Policy 1130 – Credit Union Values (*DELETED*) This policy was deleted, and the key field incorporated within Policy 1100.
Policy 1140 – Credit Union History (*DELETED*) This policy was deleted, and the key field incorporated within Policy 1100.
Policy 1170 – Equal Opportunity Statement. This policy was updated to be more comprehensive and in-line with current industry standards.
Policy 1200 – Organization. This policy was reviewed and updated to reference other governance documents that the Credit Union Board may maintain.
Policy 2110 – BSA AML Program. Policy 2110 was updated to change the FinCEN website link that was used to determine whether an MSB has registered appropriately. The new website is: https://www.fincen.gov/msb-registrant-search. (Required)
Policy 2112 – Bank Secrecy Act: Servicing Marijuana-Related Accounts. Minor change was made to this policy to clarify that the credit union will comply with “All applicable Federal laws.” This change was suggested based on examiner scrutiny. The policy also added references to the accounts and “services” the Credit Union will offer.
Policy 2310 – Telephone Inquiries (**new title**). This policy was revised to amend terminology and provide clarification on escalation and reporting.
Policy 2605 – International Remittance Transfers. Clarity was added to the Estimates section under section B regarding which specific amounts on the prepayment disclosure can be estimated based on the particular scenario mentioned.
Policy 4120 – Information Security. This policy was updated to add content regarding threat intelligence and information sharing. The update is intended to meet examiner expectations regarding credit unions who share information through federally sponsored organizations.
Policy 4125 – Incident Response. This policy was also updated to add content regarding threat intelligence and information sharing. The update is intended to meet examiner expectations regarding credit unions who share information through federally sponsored organizations.
Policy 5205 – Small Asset Liquidity Risk Management. Updated to provide clarity on the credit unions who should be utilizing this policy (under $50 million). In addition, Section references were corrected.
Policy 6215 – Derivative Transactions (**new title**) This policy was updated to reflect the most recent changes to the NCUA regulation in Part 703. Significant changes were made to the policy to comply with the amendments. (Required if Offered)
Policy 7302 – Real Estate Appraisals. This policy was updated to remove the reference to the rural exemption since it is no longer needed with the threshold increase for appraisals moved to $400,000. The policy was also updated to cross-reference different applicable areas within the policy and to generally strengthen content and remove commentary language.
Policy 7303 – Real Estate Appraisals – Appendices. Similar to the above, this policy was updated to remove the reference to the rural exemption since it is no longer needed with the threshold increase for appraisals moved to $400,000. Clarification was also added to clarify these appendices as a tool to be used in conjunction with Policy 7302 for an effective program.
Policy 7320 – Home Equity Loans. This policy was updated to remove duplicative content and reference the applicable policy (appraisals) and add consistent terminology across other policies.
Policy 7330 – Residential Real Estate Loans. This policy has been revised to capture the expanded exemption for establishing escrow accounts for higher-priced mortgage loans that became effective on February 12, 2021. The policy was also revised to cross reference additional policies, be clearer on the determination of “value” and corresponding LTV limits, and to better place the consideration and requirements for Private Mortgage Insurance (PMI). Additional notes: Key Field 7330-8 has been removed from this policy because it is duplicative. Instead, Key Field 7320-11 has been added to this policy - It is also used in Policy 7320, Home Equity Loans, so this Key Field may already be defined for your credit union. An additional instance of Key Field 7330-14 has been added to this policy.
Policy 7362 – Temporary Policy for Loan Modifications and Reporting due to COVID-19. This policy was amended to reflect the expiration date of two COVID concessions from the CFPB. Statements previously issued by the CFPB covering these accommodations were rescinded effective on April 1, 2021. One provision related to forbearance will expire on June 30, 2021. At that time, it will be up to the credit union to consider retiring this policy.
Policy 9420 – Regulation D: Monetary Control Act. Policy 9420 was updated to reflect the Federal Reserve Board’s reporting changes which ended the quarterly collection of the FR 2900 effective on January 1, 2021 and reduced the number of items collected weekly from 12 to 5, effective for the report as-of-date April 12, 2021.
As always, DakCU members may contact Amy Kleinschmit at akleinschmit@dakcu.org with any compliance related questions.