Tag Archive for Lending

The Looming Impact of Dodd-Frank

Originally posted on CUInsight.com.

Guest post written by John Levonick, Chief Legal & Compliance Officer, Mortgage Cadence, LLC.

Mortgage Cadence is the NAFCU Services Preferred Partner for Mortgage Processing and Fulfillment Services.

Dodd-Frank impacts lenders in many ways. In the span of less than two years there are now many new rules that will have material impact on the conduct of all mortgage originators and assignees. Consider the following impending rules:

  • Qualified Mortgage (QM) / Ability to Repay (ATR)
  • LO Comp Rule (Reg. Z)
  • Appraisal Rules:
    • Joint Rule (TILA / Reg.Z – HPML)
    • Copy Rule (ECOA)
  • Escrow Rule
  • Know Before You Owe / Integrated Disclosures (TILA / RESPA)

While all are important, the Ability to Repay (ATR) elements of the Qualified Mortgage (QM) rules is first on our list. That’s where we’ll turn our attention this month.

The Ability to Repay requirements with the Qualified Mortgage

A QM is a new loan classification that represents how the lender has made a thorough assessment of, and has fully documented, a borrower’s ability to repay their covered loan. Currently, Regulation Z, as amended by the Board of Governors of the Federal Reserve System in 2008, prohibits creditors from extending Higher-Priced Mortgage Loans (HPML) without regard for the consumer’s ability to repay. The ATR rule extends application of this requirement to all loans secured by dwellings, not just HPMLs. Also of note, this final rule establishes a Safe Harbor that contains a “presumption of compliance” with the ATR requirement for non-HPML QMs. While the ATR rule does not specify any particular underwriting model, lenders must consider and validate, at a minimum, 8 discrete underwriting factors:

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Commit to Success

Originally posted on Vantiv’s Blog.

Guest post written by Bob Long, Senior Vice President, Vantiv.

Vantiv is the NAFCU Services Preferred Partner for ATM, Debit Card & Gateway Processing; Credit Card Processing & Servicing; Merchant Services.

Many factors over the past few decades have driven credit and debit to be ubiquitous payment types today. But one thing is for sure: debit and credit cards did not grow by themselves. It took a commitment by issuers, acquirers, consumers and merchants to make the life-cycle of the card transaction work.

Through my experience, I’ve found that the word “commitment” summarizes those member financial institutions that move from good to great. This is best accomplished through a focus in three important areas:

Management Commitment: The management of your card program requires the proper resources and knowledge. Balancing risk, measuring growth, equating the increased non-interest income with card usage, focusing on growing the yield of your revolving balances – this all takes time. Seek out ways to take the complexity out of your credit program. Unsecured lending can be complex enough, and when you tie underwriting methodologies to multiple card product types, it gets even more complex. Use the resources of your credit union with those of your processing partner and commit to a collaborative, consultative approach.

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Five Ways to Make a Credit Score Model Work for You

Guest post written by Barrett Burns, President and CEO, VantageScore Solutions, LLC.

VantageScore Solutions, LLC is the NAFCU Services Preferred Partner for Credit Scoring.

Times have changed since a promise and handshake were all you needed to get a loan. Now credit scores speak to your character. Most credit unions primarily rely on credit scores to help make consumer lending decisions. Credit scoring models incorporate credit scores with other characteristics related to creditworthiness. In today’s market, there are dozens of different credit scoring models available, from generic models such as the VantageScore 3.0 model, to customized models that are generally expensive to build and maintain.

Even so, it’s a common misconception to think of credit scores as a commodity, or a “one-size-fits-all” risk management tool.  A credit score is the numerical representation of the likelihood that a consumer within a specific population will become 90 days or more past due on a debt obligation in a two-year timeframe. It’s important to remember that this propensity to default is assessed within the context of the population being scored. The most effective credit scoring models incorporate other relevant information, such as current economic factors, over a greater population. Choosing the right model for your credit union can help you in ways you might not expect, from saving time and expense to improving accuracy and applicant pools.

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Credit Unions Calculate Your Member Share

Originally posted on CUInsight.com

Guest post written by Dan Green, Mortgage Cadence, LLC.

Prime Alliance, the NAFCU Services Preferred Partner for Credit Union Mortgage Solutions is a Mortgage Cadence company.

Year-end 2012 credit union data was released in the last few weeks. That’s an awful lot like running up and down the streets yelling, “Hey, everyone, the new phone book is here.” But for data nerds generally and these mortgage data nerds specifically, it’s a highly anticipated event. Although trends are trackable intra-year and performance predictions are easy to make, this is when we find out what really happened.

2012 was an eventful mortgage lending year. Credit unions closed $124 billion in first mortgages, the highest amount recorded in the industry’s five-decade home finance history. While dollars lent are good, market share is better. It grew, too, to 7.09%, also the highest it has ever been. If you are keeping score like the two of us have for so many years, this is truly good news. Both dollars and share continue the upward trend that began in 2006.

There are many different ways to look at mortgage lending performance. Total dollars and share of the US market are two broad measures. They are simple to calculate and easy to obtain. The reality is, however, neither tell us much about individual credit union performance, and neither provide a means of judging lending achievement vis-a-vis other credit unions. We think there are four simple ways to do that, too.

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Credit Union Industry Experts: What’s in Store for 2013

Originally posted on CUInsight.com

I like to say that one of a visionary leader’s most important functions is seeing over the horizon and recognizing opportunities and threats before anyone else does, and then shaping the strategy and tactics of the organization accordingly.

So for our year-end blog post I asked our Preferred Partners to tell us what they see coming over the horizon, from their perspective, that credit union executives need to be focused on and/or prepared for as we head into 2013. Looking back a year, I see some common themes—revenue issues, economic uncertainty, regulatory uncertainty, and political uncertainty. From that perspective, not much has changed as we look forward to 2013. Here is what a few of them said:

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