Even though the calendar has turned from 2020 to 2021, credit unions continue to feel the operational effects of the COVID-19 pandemic, particularly in regard to mortgage compliance. For example, ACES added 4,354 new questions to its managed questions set in 2020, the vast majority of which were COVID-related. Given this state of affairs, credit unions must be mindful of the mortgage-related regulatory challenges that lie ahead in 2021.
From an origination standpoint, credit unions will need to ensure their lending practices are sufficient and have been updated to address the standards in the Department of Housing and Urban Development’s (HUD) 2020 disparate impact rule. Specifically, as part of an overall fair lending program, credit unions should evaluate each policy or practice against the new standards to verify that it serves a “valid interest.”
The Consumer Financial Protection Bureau (CFPB) has increased enforcement activity since the end of 2020, and as the Biden Administration establishes its footing, CFPB enforcement activity is expected to increase further. For example, the CFPB has already signaled that it will increase its scrutiny of how lenders processed forbearance requests under the Coronavirus Aid, Relief and Economic Security Act of 2020 (CARES Act), which has been extended through June, and even with the delay to October for the Qualified Mortgage (QM) rule changes, CFPB enforcement and oversight will only increase. The National Credit Union Administration (NCUA) has similarly identified the CARES Act and consumer financial protection in its 2021 Supervisory Priorities. Thus, credit unions need to prepare now for this shift. With its custom questionnaire and reporting functionality, ACES Quality Management and Control™ software makes it easy for credit unions to keep up with the ever-changing regulatory requirements and investor guidelines.
Additionally, the NCUA has zeroed in on appraisal independence rules in recent examinations, and with the changing mortgage regulatory landscape, the need for credit unions to audit their loan production is more important than ever. The robust quality control audit packs from ACES Quality Management provide credit unions with endless customizations and reporting capabilities, ensuring that credit unions of all sizes can maintain loan quality and compliance in any volume environment.
On the servicing side, federal credit unions may soon be allowed to purchase mortgage servicing rights (MSRs) from other FCUs, according to a proposed amendment from the NCUA Board. Given the complexity of the MSR market, credit unions that opt to enter this market will need to shore up their due diligence and quality control procedures to adequately evaluate these transactions, and to do that, they will also need to make strategic investments in audit technology such as ACES Quality Management and Control™ software to maintain productivity while managing these new risks.
Overall, member protection is the underlying mortgage regulatory theme for 2021. With the pandemic’s end not yet in sight, credit unions should prepare to remain adaptable and diligent in addressing these operational and regulatory challenges. Leveraging the technology and compliance support available from ACES Quality Management, credit unions can easily monitor changing regulatory and investor requirements while keeping an eye on their organization’s areas of risk, thus making the mortgage regulatory landscape easier to navigate — pandemic or not.
Amanda Phillips is executive vice president of compliance for ACES Quality Management. For more information, visit https://www.acesquality.com.