CUNA Regulatory Comment Call


August 29, 2007

PROPOSED DISCLOSURES FOR SUBPRIME MORTGAGE LOANS

EXECUTIVE SUMMARY

Please feel free to fax your responses to CUNA at 202-638-7052; e-mail them to Senior Vice President and Deputy General Counsel Mary Dunn at mdunn@cuna.com and to Senior Assistant General Counsel Jeff Bloch at jbloch@cuna.com; or mail them to Mary and Jeff in c/o CUNA’s Regulatory Advocacy Department, 601 Pennsylvania Avenue, NW, South Building, Suite 600, Washington, DC 20004-2601. You may also contact us at 800-356-9655, ext. 6032, if you would like a copy of the proposal, or you may access it here.

BACKGROUND

The federal financial institution regulators, including NCUA, recently issued the Statement to provide guidance when assessing a borrower’s ability to repay a subprime mortgage loan. The Statement addresses the appropriate consumer protection issues and practices, including existing statutes, rules, and guidance that are intended to protect consumers from unfair, deceptive, and other predatory practices. The Statement also addresses other issues to ensure that this type of lending is conducted in a safe and sound manner, and it is intended to complement the nontraditional mortgage loan guidance that the regulators issued last year.

The Statement also includes provisions that outline the information that should be provided to consumers with regard to these types of loans. These proposed disclosures are now being issued to assist financial institutions in complying with these provisions.

BRIEF DESCRIPTION OF THE PROPOSED DISCLOSURES

The use of these proposed disclosures or illustrations is entirely voluntary and there is no expectation that institutions must use them in their communications with consumers. Institutions that follow the recommendations in the Guidance may choose to:

Regardless of whether these illustrations are used, the Statement indicates that the information provided to consumers should be clear and balanced with regard to the relevant benefits and risks of certain ARM products. This includes clear and detailed information about the costs, terms, features, and risks of these types of loans. Specifically, the information should clearly explain the risk of substantial increases in the monthly payments, prepayment penalties, balloon payments, and the lack of an escrow account for taxes and insurance, if necessary. Consumer should also be informed about any additional costs associated with a stated income or reduced documentation loan.

Click here and refer to the end of the proposal for the two types of disclosures that may be provided, one being a narrative form, which would need to be modified to reflect the terms of the loan being considered by the consumer, and the other being a chart with numerical examples.

QUESTIONS TO CONSIDER REGARDING THE PROPOSED DISCLOSURES FOR SUBPRIME LOANS

Eric Richard • General Counsel • (202) 508-6742 • erichard@cuna.com
Mary Mitchell Dunn • SVP & Deputy General Counsel • (202) 508-6736 • mdunn@cuna.com
Jeffrey Bloch • Assistant General Counsel • (202) 508-6732 • jbloch@cuna.com
Lilly Thomas • Assistant General Counsel • (202) 508-6733 • lthomas@cuna.com