National Credit Union Administration (NCUA)
NCUA Releases September Update to the Simplified CECL Tool
The NCUA released the September 2023 Version of its Simplified CECL Tool, which includes the latest life-of-loan, or Weighted Average Remaining Maturity, factors, and other enhancements.
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Consumer Financial Protection Bureau (CFPB)
CFPB Data Point: 2022 Mortgage Market Activity and Trends
The CFPB released an annual data point report which analyses 2022 mortgage lending activity and trends based on HMDA data. In 2022, mortgage applications and originations declined markedly from the prior year, while rates, fees, discount points, and other costs increased. Overall affordability declined significantly, with borrowers spending more of their income on mortgage payments and lenders more often denying applications for insufficient income. Most refinances during the reported period were cash-out refinances, and, in a reversal of recent trends, the median credit score of refinance borrowers declined below the median credit score of purchase borrowers. As in years past, independent lenders continued to dominate home mortgage lending, with the exception of home equity lines
of credit.
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Internal Revenue Service (IRS)
IRS Issues Guidance for the Transfer of Clean Vehicle Credits
The IRS issued proposed regulations, Revenue Procedure 2023-33, and frequently asked questions for the transfer of new and previously owned clean vehicle credits from the taxpayer to an eligible entity for vehicles placed in service after December 31, 2023.
The Inflation Reduction Act provides taxpayers with credits for qualified new and previously owned clean vehicles acquired and placed in service during the taxable year. Beginning Jan. 1, 2024, in certain situations, taxpayers will be able to transfer the new and previously owned clean vehicle credits to eligible entities.
The guidance clarifies how taxpayers can elect to transfer new and previously owned clean vehicle credits to dealers who are eligible to receive advance payments of either credit. The proposed regulations and revenue procedure also provide guidance for dealers to become eligible entities to receive advance payments of new or previously owned clean vehicle credits.
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Financial Crimes Enforcement Network (FinCEN)
FinCEN Issued a Proposed Rule to Extend the Deadline for Certain Companies to File Their Beneficial Ownership Information
Reports
FinCEN issued a Notice of Proposed Rulemaking (NPRM) to extend the deadline for certain
reporting companies to file their initial beneficial ownership information (BOI) reports. FinCEN is proposing to amend its final BOI Reporting Rule to provide 90 days for reporting companies created or registered in 2024 to file their initial reports, instead of 30 days. The proposed rule would not make any other
changes to the final BOI Reporting Rule: reporting companies created or registered before January 1, 2024, would have until January 1, 2025, to file their initial BOI reports with FinCEN, and entities created or registered on or after January 1, 2025, would have 30 days to file their initial BOI reports.
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Those Who Do Not Learn from History are Doomed to Repeat It
A recent press release from the Consumer Financial Protection
Bureau (CFPB) highlighted the annual report on residential mortgage lending activity and trends for 2022. The CFPB highlighted that overall affordability declined significantly, with borrowers spending more of their income on mortgage payments and lenders more often denying applications for insufficient income.
In fact, the CFPB stated:
Lenders increasingly denied applicants for insufficient income: Lenders denied loan applications due to insufficient income at higher rates than at any point since that data was first collected and reported in 2018. More than 50% of mortgage denials for Asian applicants were due to insufficient income. The same was true for around 45% of denials for Black and Hispanic applicants, and around 40% of denials for white applicants. Denials due to insufficient income were below 40% for all four groups in 2018.
At which point my inside voice says, “Well Duh”. You all wrote the Ability to Repay rule in 12 CFR 1026.43. This requirement came out of the
Dodd-Frank Act and requires mortgage lenders to consider the applicant’s ability to repay mortgage loans.
The ability to repay requirements also created Qualified Mortgages (QM). Credit unions and other lenders like QMs since they provide a safe harbor and presumption of compliance with the rule. Otherwise, if something goes wrong with the loan, the creditor would be on the hook to prove they complied with the ability to repay rule.
Until October 1, 2022, the general QM rule contained the requirement that the consumer’s Debt-to-Income (DTI) ratio must not exceed 43 percent. The CFPB replaced that requirement with a new one to compare the annual percentage rate (APR) of the loan against the average prime offer (APOR) rate. If the APR exceeds certain tolerances, which are based on the amount of the loan, it would no longer be a QM. Since the APRs are generally established based on the applicant's credit scores, consumers with lower credit scores may be denied at higher rates since they would not be able to qualify for a QM.
In addition, creditors still must consider the consumer’s current or reasonably expected income or assets other than the value of the dwelling that secures the loan, debt obligations, alimony, child support, and monthly debt-to-income ratio or residual income.
It is as if the group who wrote the press release does not grasp the rule that the CFPB wrote and enforces, which requires considering into account the DTI. But we all remember some of the practices that led to the great recession, then the Dodd-Frank Act, followed by all of the mortgage rules published by the CFPB. If we do not learn from the painful lessons of the great recession, we are doomed to repeat it.
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