Mortgage Disclosure Improvement Act



Real Estate Settlement Procedures Act

|Effective |Regulation |Summary |Impact |

|Date | | | |

|1/1/10 |HUD Regulation X/Real |Revised Good Faith Estimate (GFE) of settlement costs that includes tolerances on final settlement costs and |Major revisions to RESPA procedures |

| |Estate Settlement |a new method for reporting wholesale lender payments in broker transactions. |New disclosures |

| |Procedures |Revised HUD-1 Settlement Statement form that makes the GFE and HUD-1 easier to compare. |System changes |

| | |New tolerances between the GFE estimates and HUD-1 charges |Member education |

| | | |Staff training/significant learning curve |

Overdraft Protection Disclosures

|Effective |Regulation |Summary |Impact |

|Date | | | |

|1/1/10 |12 CFR 707/ NCUA’s |Credit unions must provide additional periodic statement disclosures of overdraft fees and fees for returning|Procedure changes |

| |Truth in Savings |items unpaid |System changes |

| |Regulation |Restricts credit unions’ ability to provide “padded” balance amounts in response to balance inquiries using |Member education |

| | |automated systems such as ATMs, online banking and voice response units. |Staff training |

Credit Card Act Phase II

|Effective |Regulation |Summary |Impact |

|Date | | | |

|2/27/10 |Regulation Z/Truth in |Protects consumers from unexpected increases in credit card interest rates by generally prohibiting increases|Major revisions to credit card procedures |

| |Lending |in a rate during the first year after an account is opened and increases in a rate that applies to an |New and revised forms and disclosures |

| | |existing credit card balance. |Loan policy/underwriting changes |

| | |Prohibits creditors from issuing a credit card to a consumer who is younger than the age of 21 unless the |Major system changes |

| | |consumer has the ability to make the required payments or obtains the signature of a parent or other cosigner|Member education/over limit fee opt-in campaign |

| | |with the ability to do so. |Financial impact analysis/decreased fee and interest |

| | |Requires creditors to obtain a consumer’s consent before charging fees for transactions that exceed the |income |

| | |credit limit. |Staff training |

| | |Limits the high fees associated with subprime credit cards. | |

| | |Bans creditors from using the “two-cycle” billing method to impose interest charges. | |

| | |Prohibits creditors from allocating payments in ways that maximize interest charges. | |

Expedited Funds Availability

|Effective |Regulation |Summary |Impact |

|Date | | | |

|2/27/10 |Regulation CC/ |The Federal Reserve has finished the consolidation of check processing regions |Revisions to Funds Availability Policy |

| |Expedited Funds |All checks are now considered “local” for funds availability purposes |Revision to procedures |

| |Availability | |Possible system changes |

| | | |Changes to lobby signage |

| | | |Staff training |

Higher Education Opportunity Act

|Effective |Regulation |Summary |Impact |

|Date | | | |

|2/14/10 |Regulation Z/Truth in |Creditors that extend private education loans must provide disclosures about loan terms and features on or |New disclosures |

| |Lending |with the loan application and must also disclose information about federal student loan programs that may |System changes |

| | |offer less costly alternatives. Additional disclosures must be provided when the loan is approved and when |Staff training/identification of possible covered |

| | |the loan is consummated |loans |

| | |The broad definition of “private education loan” means that even multi-purpose loans used incidentally for |Loan policy changes/CU’s must decide if these loans |

| | |secondary education expenses are covered. |will still be offered due to the cost and difficulty |

| | |Restrictions on using the name, emblem, or mascot of an educational institution in a way that implies that |of providing disclosures. |

| | |the institution endorses the creditor’s loans. | |

Internet Gambling

|Effective |Regulation |Summary |Impact |

|Date | | | |

|06/01/2010 |Regulation GG/ |New Regulation |System changes |

| |Prohibition on Funding |Effective date delayed from December 1, 2009. Additional delays possible |Account opening procedure changes |

| |of Unlawful Internet |The Act prohibits gambling businesses from knowingly accepting payments in connection with unlawful Internet |Account monitoring changes |

| |Gambling |gambling, including payments made through credit cards, electronic funds transfers, and checks. |Staff training |

| | |The new regulation requires U.S. financial firms that participate in designated payment systems to establish | |

| | |and implement policies and procedures that are reasonably designed to prevent payments to gambling businesses| |

| | |in connection with unlawful Internet gambling. | |

| | |Card systems can restrict covered transactions via merchant and transaction coding | |

| | |All other payment systems will be covered via due diligence in account-opening procedures designed to ensure | |

| | |that commercial members do not originate or receive restricted transactions through the member relationship. | |

Overdraft Program Restrictions

|Effective |Regulation |Summary |Impact |

|Date | | | |

|07/01/2010 |Regulation E/ Electronic |Prohibits financial institutions from charging consumers fees for paying overdrafts on automated teller |Major system changes |

| |Funds Transfers |machine (ATM) and one-time debit card transactions, unless a consumer consents, or opts in, to the |New forms |

| | |overdraft service for those types of transactions. |Procedure changes |

| |12 CFR 707/ NCUA’s Truth in |Before opting in, the consumer must be provided a notice that explains the financial institution’s |Staff training |

| |Savings Regulation |overdraft services, including the fees associated with the service, and the consumer’s choices. |Significant member education |

| | |Current overdraft coverage for checks, ACH and recurring debit card transactions are not subject to the |Financial impact analysis due to decreased fee income |

| | |opt-in requirement. | |

| | |Discrimination against consumers who do not opt in is prohibited. Institutions must provide consumers | |

| | |who do not opt in with the same account terms, conditions, and features (including pricing) that they | |

| | |provide to consumers who do opt in. | |

Open-end Loan Revisions

|Effective |Regulation |Summary |Impact |

|Date | | | |

|07/01/2010 |Regulation |First comprehensive revision of the Regulation Z/Truth in Lending rules applicable to all open-end loans|All open-end loans: |

| |Z/Truth-in-Lending |in 25 years. |New forms |

| | |Applications and Solicitations: Format and content changes to make the credit and charge card |Procedure changes |

| | |application and solicitation disclosures more meaningful and easier for consumers to use. |Staff training |

| | |Account-Opening Disclosures: Enhances the cost disclosures provided at account opening to make the |MFOEL plans: |

| | |information more conspicuous and easier to read. |Significant loan policy changes |

| | |Periodic Statement Disclosures: Revisions to make disclosures on periodic statements more |Significant loan application and processing changes |

| | |understandable, primarily by making changes to the format requirements such as by grouping fees and |Member education |

| | |interest charges together. |Significant staff training |

| | |Changes in Consumer’s Interest Rate and Other Account Terms: Expands the circumstances under which | |

| | |consumers receive written notice of changes in the account terms (e.g., an increase in the interest | |

| | |rate), and increases the amount of time these notices must be sent before the change becomes effective. | |

| | |Additional Protections: Additional protections for consumers with “fixed” rates. | |

| | |Changes to multi-feature open-end loans (MFOEL): Clarifies when and how creditors who offer MFOEL can | |

| | |obtain borrower information, underwrite and periodically verify information. | |

FACTA

|Effective |Regulation |Summary |Impact |

|Date | | | |

|07/01/2010 |Regulation V/ Fair Credit |Guidelines address furnishing accurate information to credit bureaus. |All open-end loans: |

| |Reporting |New regulations on when credit unions must directly respond to consumer disputes. |Procedure changes |

| | | |Staff training |

Credit Card Act Phase III

|Effective |Regulation |Summary |Impact |

|Date | | | |

|08/22/10 |Regulation Z/ Truth in |Prohibits credit card issuers from charging penalty fees (including late payment fees and fees for |System changes |

| |Lending |exceeding the credit limit) that exceed the dollar amount associated with the consumer’s violation of |Financial impact analysis due to decreased fee income |

| | |the account terms. For example, card issuers would no longer be permitted to charge a $39 fee when a |and restrictions on interest rate increases |

| | |consumer is late making a $20 minimum payment. Instead, the fee could not exceed $20. |Policy and procedures changes |

| | |Bans inactivity fees, such as fees based on the consumer’s failure to use the account to make new |Staff training |

| | |purchases. | |

| | |Prevents issuers from charging multiple penalty fees based on a single late payment or other violation | |

| | |of the account terms. | |

| | |Requires credit card issuers to inform consumers of the reasons for increases in rates. | |

| | |Requires issuers that have increased rates since January 1, 2009 to evaluate whether the reasons for the| |

| | |increase have changed and, if appropriate, to reduce the rate. | |

SAFE Act

|Effective |Regulation |Summary |Impact |

|Date | | | |

|10/1/ 2010 |Title V of the Housing and |Mortgage Loan Originators should have been registered on the Nationwide Mortgage Licensing System by |New Procedures |

| |Economic Recovery Act of |July 29, 2011 |Staff training |

| |2008 |To be registered as a “registered loan originator,” a credit union employee who handles residential |Costs for registration |

| | |mortgage loan originations will have to: | |

| | |Provide fingerprints for submission to the FBI and other agencies for a state and national criminal | |

| | |history background check | |

| | |Provide personal history and experience, including authorization for the system to obtain information | |

| | |about any administrative, civil or criminal findings by any jurisdiction; and | |

| | |Be assigned a unique identifier that will facilitate electronic tracking and public access to his or her| |

| | |employment history and enforcement action record | |

| | |Policies and procedures are required | |

Privacy

|Effective |Regulation |Summary |Impact |

|Date | | | |

|1/1/2011 |12 CFR Part 716/ NCUA’s |New uniform Privacy disclosures |New Form |

| |Privacy Regulation |Use of the new form is not required, but provides a safe harbor if used |Staff training |

| | | |Member education |

FACTA: Risk Based Pricing Notice

|Effective |Regulation |Summary |Impact |

|Date | | | |

|1/1/2011 |12 CFR Part 222 |Requires a creditor to provide a consumer with a notice when, based on the consumer's credit report, the|New disclosure |

| | |creditor provides credit to the consumer on less favorable terms than it provides to other consumers. |Possible systems changes |

| | |Consumers who receive this "risk-based pricing" notice will be able to obtain a free credit report to |New procedures |

| | |check the accuracy of the report. |Staff training |

| | |Risk-based pricing refers to the practice of setting or adjusting the price and other terms of credit |Member education |

| | |provided to a particular consumer based on the consumer's creditworthiness. The final rules provide | |

| | |creditors with several methods for determining which consumers must receive risk-based pricing notices. | |

| | |As an alternative to providing risk-based pricing notices, the final rules permit creditors to provide | |

| | |consumers who apply for credit with a free credit score and information about their score. Today, most | |

| | |consumers must pay a fee to obtain their credit score. | |

Regulation Z: Mortgage Loan Transfer Notification

|Effective |Regulation |Summary |Impact |

|Date | | | |

|1/1/2011 |Regulation Z/Truth in |The Federal Reserve Board issue final rules to implement a statutory amendment to the Truth in Lending |New disclosures |

| |Lending |Act requiring that consumers receive notice when their mortgage loan has been sold or transferred. The |Procedural changes |

| | |new disclosure requirement became effective in May 2009, upon enactment of the Helping Families Save |Staff training |

| | |Their Homes Act. Under that act, a purchaser or assignee that acquires a mortgage loan must provide the | |

| | |required disclosures in writing within 30 days. | |

| | |To provide compliance guidance and greater certainty on the new requirements, the Board published | |

| | |interim rules in November 2009, which were effective immediately. To allow covered parties time to make | |

| | |any necessary operational changes, they may continue to follow the November 2009 interim rules until the| |

| | |mandatory compliance date for the final rules, which is January 1, 2011. | |

Regulation Z: MDIA Disclosures

|Effective |Regulation |Summary |Impact |

|Date | | | |

|1/30/2010 |Regulation Z/Truth in |The Federal Reserve Board has issued an interim rule that revises the disclosure requirements for |New disclosures |

| |Lending |closed-end mortgage loans under Regulation Z (Truth in Lending). The interim rule implements provisions |System changes |

| | |of the Mortgage Disclosure Improvement Act (MDIA) that require lenders to disclose how borrowers' |Staff training |

| | |regular mortgage payments can change over time. |Member education |

| | |The MDIA, which amended the Truth in Lending Act, seeks to ensure that mortgage borrowers are alerted to| |

| | |the risks of payment increases before they take out mortgage loans with variable rates or payments. | |

| | |Accordingly, under the interim rule, lenders' cost disclosures must include a payment summary in the | |

| | |form of a table, stating the following: | |

| | |The initial interest rate together with the corresponding monthly payment | |

| | |For adjustable-rate or step-rate loans, the maximum interest rate and payment that can occur during the | |

| | |first five years and a "worst case" example showing the maximum rate and payment possible over the life | |

| | |of the loan; and | |

| | |The fact that consumers might not be able to avoid increased payments by refinancing their loans. | |

| | |The interim rule also requires lenders to disclose certain features, such as balloon payments, or | |

| | |options to make only minimum payments that will cause loan amounts to increase. | |

Regulation Z: Mortgage Loan Originator Compensation

|Effective |Regulation |Summary |Impact |

|Date | | | |

|4/1/ 2011 |Regulation Z/Truth in |The final rules protect mortgage borrowers from unfair, abusive, or deceptive lending practices that can|Revised procedures |

| |Lending |arise from loan originator compensation practices. |Revised broker compensation practices |

| | |The new rules apply to all persons who originate loans, including mortgage brokers and the companies |Staff training |

| | |that employ them, as well as mortgage loan officers employed by depository institutions and other | |

| | |lenders. | |

| | |The final rules, which apply to closed-end loans secured by a consumer’s dwelling, will: | |

| | |Prohibit payments to the loan originator that are based on the loan’s interest rate or other terms. | |

| | |Compensation that is based on a fixed percentage of the loan amount is permitted. | |

| | |Prohibit a mortgage broker or loan officer from receiving payments directly from a consumer while also | |

| | |receiving compensation from the creditor or another person. | |

| | |Prohibit a mortgage broker or loan officer from “steering” a consumer to a lender offering less | |

| | |favorable terms in order to increase the broker’s or loan officer’s compensation. | |

| | |Provide a safe harbor to facilitate compliance with the anti-steering rule. The safe harbor is met if: | |

| | |The consumer is presented with loan offers for each type of transaction in which the consumer expresses | |

| | |an interest (that is, a fixed rate loan, adjustable rate loan, or a reverse mortgage); and | |

| | |The loan options presented to the consumer include the following: | |

| | |the lowest interest rate for which the consumer qualifies; | |

| | |the lowest points and origination fees, and | |

| | |the lowest rate for which the consumer qualifies for a loan with no risky features, such as a prepayment| |

| | |penalty, negative amortization, or aballoon payment in the first seven years. | |

Financial Literacy Training

|Effective |Regulation |Summary |Impact |

|Date | | | |

|July 27, 2011 |12 CFR 701.4 |Directors must have the following financial skills: |Training for board members |

| | |Working familiarity with basic finance and accounting practices | |

| | |Ability to read and understand the credit union’s balance sheet and income statement | |

| | |Ability to ask substantive questions of management and auditors | |

| | |Level of financial knowledge should be consistent with the size and complexity of the credit union. | |

| | |Directors appointed prior to January 27, 2011 should have acquire necessary skills by July 27, 2011. | |

| | |Directors appointed after January 27, 2011 will need to acquired necessary skills within six months of | |

| | |their appointment. | |

Online Banking Authentication Systems

|Effective |Regulation |Summary |Impact |

|Date | | | |

|January 1, 2012 |FFIEC Supplement to |Changes should be completed by January 1, 2012. |New changes to internet banking authentication systems|

| |Authentication in an |Required by the supplement to the FFIEC’s “Authentication in an Internet Banking Environment.” |New procedures |

| |Internet Banking Environment|Examiner expectations include: |New or updated member awareness program |

| | |Risk Assessments (updated at least every 12 months or as membership, products, services, or on-line |Enhanced member service and education during the |

| | |threats change) |upgrade |

| | |Increased authentication for higher risk transactions (member initiated ACH withdrawals, business | |

| | |accounts) | |

| | |Implementation of layered security for online banking | |

| | |Re-evaluation of authentication techniques (username/password/cookie and simple challenge questions will| |

| | |no longer be considered adequate) | |

| | |Member Awareness and Education Program | |

| | |Assistance and cooperation from your online banking provider is critical. Status updates should be | |

| | |provided to the board. | |

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