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. 

League InfoSight Highlight: Adverse Action Notices Artificial Intelligence 

The CFPB’s most recent Circular from September 19, 2023 addresses credit union’s increased use of artificial intelligence (AI) and complex credit models. 

The CFPB clarifies in Circular 2023-03 that the credit union CANNOT rely on the checklist of reasons in the sample forms within Regulation B to satisfy their obligation under the Equal Credit Opportunity Act (ECOA) if those reasons do not specifically and accurately indicate the principal reason(s) for the adverse action. AI or complex algorithms may gather and analyze data outside of the application and credit file that may result in adverse action. Specific reasons must be identified and used within the adverse action notice to comply with Regulation B, and using the example reasons may be overly broad or vague, which is also prohibited if it obscures the specific and accurate reasons the credit union relied upon to take the adverse action. 

ECOA provides that when taking adverse action against an applicant the credit union must provide a statement of reasons for the action taken. The reasons must be “specific” and indicate the “principal reason(s) for adverse action.” The reasons must also “relate to and accurately describe the factors actually considered or scored by a creditor.” The CFPB clarifies that the sample forms merely provide an illustrative and non-exclusive list of the most common reasons used by creditors. 

As credit unions continue to explore artificial intelligence and the use of predictive technology, it is critical that adverse action notices are reviewed, and appropriate and accurate reasons for adverse action utilized. Credit unions can access additional information in InfoSight in the Loans and Leasing Channel under the Equal Credit Opportunity Act. 

Glory LeDu, 
CEO, League InfoSight and CU Risk Intelligence 

League InfoSight Highlight: Third Party Service Providers – More Scrutiny in 2024? 

It’s no secret that the NCUA has been trying to gain authority over third-party vendors that provide services to federally insured credit unions. In addition to direct comments from NCUA board members, there have been multiple publications. A few of the most recent include a reportissued in March 2022 by the NCUA and another report in June 2023 to the Committee on Financial Services of the House of Representatives and to the Committee on Banking, Housing, and Urban Affairs of the Senate on Cybersecurity and Credit Union System Resilience. 

Because credit unions rely significantly on third parties to provide a range of core business functions, products, services, and activities, there are various risks the credit union must consider and mitigate. While this article won’t go into detail on the debate of the NCUA’s vendor authority, it will discuss the priority across multiple regulatory agencies and the options that credit unions have to be successful in leveraging third-party expertise while managing risk. 

The Office of the Comptroller of the Currency’s Committee on Bank Supervision has already set forth their 2024 annual supervision and priorities. While not directly providing oversight to credit unions, it’s interesting to read the focus on the banking side. Of particular interest was the significant focus of review for examiners on third party relationships and service providers, including related controls and risk management. 

With the increased focus and scrutiny on third parties, how is your credit union handling the due diligence of these critical vendors? Many credit unions have told us that what was once an internal process, is becoming too much to track and manage. League InfoSight and CU Risk Intelligence partner with CUVM (previously Credit Union Vendor Management) to offer credit unions affordable options for both self-service and full-service vendor management options. It’s important for credit unions to consider the increased use and reliance on third parties and to also have some candid conversations about the current process and if it is sufficient to mitigate the credit union’s risk most effectively. Know your options! Unfortunately, if you aren’t proactive in having these conversations now, you may be having them with the examiner during your next exam. We are here to help! 

Glory LeDu, 
CEO, League InfoSight and CU Risk Intelligence 

The Forgotten Generation: Generation X Approaches Retirement 

NCUA Awards $3.1 Million Through Expanded CDRLF Grants 

CFPB Blog: The Law Requires Companies to Delete Disputed Unverified Information from Consumer Reports 

CFPB Blog: Four Million Complaints – More Than Just a Milestone 

What to do if you’re billed for an SBA EIDL or PPP loan you don’t owe 

Not all business coaches are trying to help you 

Spot and Stop Dishonest Charity Fundraisers 

That Friend Request Could be from a Scammer 

Oct 25, 2023 – NCUA - CDRLF Success Stories Webinar 

Oct 26, 2026 – NCUA & FTC Webinar on Protecting Your Credit and Identity 

Oct 30, 2023: 5300 Call Report Due to NCUA 

Nov 1, 2026 – CFPB & HUD Public Hearing on Appraisal Bias 

Nov 10, 2023: Veterans Day - Federal Holiday (Observed) 

Nov 23, 2023: Thanksgiving Day - Federal Holiday 

Dec 25, 2023 – Christmas Day – Federal Holiday 

Can we require our employees to direct deposit their payroll checks into our credit union and eliminate paper checks? 

No, you cannot require your employees to direct deposit their payroll checks into your credit union.  However, you can require your employees to direct deposit their payroll checks if they are allowed to choose the institution that will receive the direct deposit.  Therefore, you can still eliminate paper checks, but you have to allow your employee the option to choose what institution they have the check deposited. 

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If you have questions about this communication, contact us at 800.546.4465, or via our shared email inbox at compliance@gowest.org.

Have a great week!

Your GoWest Compliance Team, 

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