CUNA Comment Letter

Proposed Revisions to the Regulation C Commentary

April 8, 2003

Ms. Jennifer J. Johnson
Secretary
Board of Governors of the
Federal Reserve System
20th Street and Constitution Avenue, NW
Washington, DC 20551

Dear Ms. Johnson:

Re: Docket No. R-1145, Proposed Revisions to Regulation C Official Staff Commentary (Home Mortgage Disclosure Act)

The Credit Union National Association (CUNA) appreciates the opportunity to comment on the proposed revisions to the official staff commentary to Regulation C, which implements the Home Mortgage Disclosure Act (HMDA). Last year, the Federal Reserve Board (Fed) issued final rules that substantially revise Regulation C. These rules will be effective as of January 1, 2004, except for the requirement that lenders ask telephone applicants for information on their race, ethnicity and gender, which was effective as of January 1, 2003. The proposed revisions to the official staff commentary will provide guidance for applying these new rules to loan applications received prior to January 1, 2004 for which final action is taken after that date. CUNA represents more than 90 percent of our nation’s 10,000 state and federal credit unions.

Summary of CUNA’s Position

The official staff commentary includes the following provisions that would apply to applications received prior to January 1, 2004 for which final action is taken after that date:

We commend the Fed for proposing these changes that will help facilitate credit union compliance with the new HMDA rules that will take effect on January 1, 2004. These changes to the Regulation C official staff commentary will reduce the burden for credit unions as they continue their preparation for compliance with these new rules.

Beginning on January 1, 2004, the HMDA rules will require lenders to report new data items, including the rate spread between the loan’s annual percentage rate and yield on comparable Treasury securities when the spread exceeds certain thresholds. The Fed has requested comment on whether there are less burdensome alternatives with regard to calculating this spread for loans in which applications are received prior to January 1, 2004.

The new HMDA rules will require that lenders use the Treasury securities in effect as of the 15th of the month prior to the date when the interest rate is locked or set for the final time before the loan is consummated. We oppose using any date other than the rate lock date for purposes of calculating the rate spread. Using other dates could provide misleading and possibly useless data, particularly if the final rate is compared to a Treasury yield that is published more than thirty days before the date the final rate is locked. The resulting calculations could unfairly portray a lender as a high rate lender when, in fact, significant fluctuations in the interest rate environment and consumers choosing to float their interest rate actually cause the calculated rate spreads to be high.

Thank you for the opportunity to comment on the proposed revisions to the Regulation C official staff commentary. If you or other Board staff have questions about our comments, please give Associate General Counsel Mary Dunn or me a call at (202) 638-5777.

Sincerely,
Jeffrey Bloch
Assistant General Counsel