CFPB's Exam Procedures Are Valuable Tools

8/1/2013

The Consumer Financial Protection Bureau (CFPB) will not likely subject your credit union to an examination.

Yet, the agency's newly updated examination procedures can serve as valuable tools for surviving the tidal wave of new regulations.

Together with the small entity compliance guides, the exam procedures can make your learning curve for the new regulations less steep.

Those tools also can maximize the benefits of your compliance efforts. You can use the exam procedures to structure and document your compliance program in a way that fits the exam process.

The CFPB's updated exam procedures cover recent changes regarding the Equal Credit Opportunity Act and the Truth in Lending Act. (For full details on these changes, see "CFPB releases first round of new mortgage exam procedures," p. 40.)

Sorting through the maze of new CFPB mortgage rules in the official Federal Register publications can be mind-numbing for new or experienced compliance officers.

And digesting new requirements is a painstaking effort. Countless cross references and a lack of complete text of "as final" rules (combining changes from all of the various different rule makings) add to the difficulty.

By contrast, the CFPB's exam procedures present the new compliance requirements in a straightforward, checklist-style format.

Each part of the rule is broken into an independent point, including relevant notes on the applicability for each subpart. For example, to determine whether higher-priced mortgages require an escrow account, the procedures directly set out the five exemptions, such as initial construction loans, reverse mortgages, and details of the small creditor exemption.

Another example: A narrative discussion of the loan originator rule explains when your credit union is, and isn't, a loan originator. The exam procedures then provide a list of documents and information you must retain to verify that your loan originators satisfy the qualifications.

Thus, the new procedures perform three very useful functions for your compliance department.

They:

1. Confirm (or improve) your team's understanding of the regulation;

2. Organize and plan compliance policies and procedures; and

3. Verify your compliance with the rules before examiners arrive.

Other resources

The CFPB has made available several other valuable resources to enhance your understanding of the big picture of the new rules and how they fit together.

The agency houses all of these resources on one Web page. (Visit consumerfinance.gov, select "law & regulation," and then "mortgage rule implementation.")

This page includes:

• Compliance guides. Known as the small entity compliance guides, these booklets should be an indispensable resource as staff learns the rules.
• Short videos explaining each rule.
• Charts outlining how rules apply differently, for example to open and closed-end loans, and to closed end loans covering a principal residence.
• Links to resources, such as the list of rural and under served counties and Department of Housing and Urban Development-approved counselors.

The small entity compliance guides are especially helpful. Well organized and easy to understand, the guides organize material by topic.

If, for example, a question arises regarding foreclosures and loss mitigation, you an quickly scan the table of contents of the guide covering "mortgage servicing rules" and locate foreclosures within the "loss mitigation" section.

The guides provide quick reference and plain language answers to frequently asked questions. But most important, the guides provide the citation to the actual rule or official comment.

While these tools can't save you from slogging through the actual regulations and official comments, they can make your compliance journey much easier.