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Credit Unions Point to Troubling Aspects of Proposed CFPB Rules

The ""National Association of Federal Credit Unions (NAFCU)"":http://www.nafcu.org/default.aspx expressed its opposition to the ""Consumer Financial Protection Bureau's (CFPB)"":http://www.nafcu.org/default.aspx proposed rule on mortgage application and settlement disclosures. The association asserted ""Tuesday"":http://www.nafcu.org/News/2012_News/November/NAFCU_s_Hunt_urges_CFPB_to_revisit_TILA_RESPA_proposal/ in a letter to the federal agency that the rule places undue regulatory burdens on credit unions and will likely cause some institutions to leave the mortgage market altogether.

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In the first quarter of this year, credit unions originated about 8 percent of mortgages nationwide, an increase over the previous record high of 5 percent. This increase, according to NAFCU Vice President Carrie Hunt, is evidence ""that members are not only highly satisfied with their credit unions but also that consumers overall are increasingly aware of the value that credit unions provide.""

However, despite the fact that more consumers are turning to credit unions more often for mortgage-related services, Hunt foresees some credit unions cutting down or eliminating their mortgage divisions due to ""the costs and burden associated with the constantly increasing and unforgiving intensity of regulations imposed on credit unions.""

In the letter to the CFPB, NAFCU points to several specific areas of concern.

As stated, the CFPB's proposed rule makes an exception for lenders that originate no more than five mortgages per year. NAFCU suggests the exemption instead be extended to any credit union with $175 million or less in assets.

The association suggests this would better fit the CFPB's obligation to offer some regulatory relief to small businesses, something the Dodd-Frank Act expressly requires the government agency to consider.

Another area of concern stated by the NAFCU is construction-only and vacant land loans. The CFPB's rule provides exemptions for home equity lines of credit and reverse mortgages but neglects to mention construction-only or vacant land loans.

""Many aspects of the proposed rule are simply incongruous for these types of loans and would provide little to no benefit for borrowers,"" stated the letter from the NAFCU.

The NAFCU said it is ""critically important"" the CFPB understand the full consequences of its actions on the market and ""does everything in its power to ensure that its actions do not cause the tightening of credit by driving small institutions out of the marketplace.""

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