/LSCU%20Regulation%20Z%20RCC

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The Federal Reserve Board (Fed) has issued a proposal that would require additional consumer protections and disclosures for mortgage loans. This is the second phase of the Fed’s review of the mortgage lending rules under Regulation Z, the Truth in Lending Act (TILA). Below are the links to the two proposals issued last year on closed-end mortgages and home equity lines of credit (HELOCs), which comprised the first phase of this review: 1 http://www.cuna.org/download/rcc_090209.pdf http://www.cuna.org/download/rcc_093009a.pdf This latest proposal includes the following: • Changes to the disclosures that borrowers receive for reverse mortgages and changes to the rules for reverse mortgage advertising and the prohibition on certain practices with regard to reverse mortgages. • Changes to the disclosures that explain the borrower’s to rescind certain mortgage loans and changes to the responsibilities of the lender if the borrower exercises this right. • Requirements to ensure that borrowers receive new disclosures when the parties agree to modify the key terms of a closed-end mortgage loan. • Revising the disclosure rules for credit insurance and debt cancellation and suspension products. This would require the disclosure of the maximum premium or charge per period; the maximum benefit amount, along with a statement that the borrower will be responsible for the balance above the maximum benefit amount; that the cost depends on the balance or interest rate, if applicable; and information about the Fed’s website that provides information about these products. The proposal also includes changes with regard to the disclosure of eligibility requirements that were proposed last year and the disclosure to the borrower that the product may not be necessary. For the eligibility requirements, this would include additional statements as to the time period and age limit for coverage and this would allow lenders to make the eligibility determinations prior to the time of enrollment. These disclosures must be in at least 10-point type size and consistent with the model forms and sample language provided in the proposal. Also, if these disclosures are provided early, the lender must then redisclose the maximum premium or charge per period if this is different at the time of the loan closing. With some of the constrains that have been placed on credit union operations this year such as the opt in requirements for overdraft programs and the ongoing NCUA assessments, the changes on credit life and debt cancellation will have a negative impact on fee income which has caused concern by many credit unions. To view the model form, click here. 1. What impact will this change have on your operations? 2. Do you think this change will have any impact on the number of your members who sign up credit life and debt cancellation? For all mortgage loans, the proposal would: • Require lenders to refund fees if the borrower decides to withdraw the loan application three business days after they receive their loan cost disclosures. • Require loans servicers to provide borrowers information about the owner of the loan upon request within ten days. • The proposal also includes other provisions with regard to mortgage loans, such as changes in the determination of whether a mortgage loan is a “higher-priced” loan for purposes of other Regulation Z provisions that implement the Home Ownership Equity Protection Act (HOEPA). After reviewing comments to this proposal, the Fed then plans to issue a final rule to incorporate the issues in this proposal and the proposals that were issued last year. Comments are due by December 23, 2010. Please submit comments to the LSCU by December 9, 2010. If commenting directly to the Fed, you must refer to Docket No. R-1390.


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