Compliance Blog

Written by Bernadette Clair, Senior Regulatory Compliance Counsel

CFPB Bulletin on Non-Discriminatory Access to Credit for Mortgage Applicants Who Receive Public Housing Assistance. The CFPB recently released Bulletin 2015-02, Section 8 Housing Choice Voucher Homeownership Program. The bulletin is intended to remind creditors “of their obligations under the Equal Credit Opportunity Act (ECOA)¹ and its implementing regulation, Regulation B,² to provide non-discriminatory access to credit for mortgage applicants using income from the Section 8 Housing Choice Voucher (HCV) Homeownership Program.³Ã¢Â€Â (Footnotes omitted). The Section 8 Housing Choice Voucher Homeownership Program (Program), created to assist low-income, first-time homebuyers in purchasing homes, is funded by the Department of Housing and Urban Development and administered by participating local public housing authorities.

The Bulletin was issued in response to certain lending practices that have come to the attention of the CFPB – namely that some financial institutions have been excluding or refusing to consider income from the Program during the loan application and underwriting process, or only permitting Program vouchers to be used for certain mortgage loan products or delivery channels. The Bulletin reminds institutions of their fair lending obligations under ECOA and Regulation B regarding the treatment of income derived from any public assistance program. From the Bulletin:

“ECOA and Regulation B prohibit creditors from discriminating in any aspect of a credit transaction against an applicant “because all or part of the applicant’s income derives from any public assistance program.”⁶ “Any Federal, state, or local governmental assistance program that provides a continuing, periodic income supplement, whether premised on entitlement or need, is ‘public assistance’ for purposes of the regulation. The term includes (but is not limited to) . . . mortgage supplement or assistance programs . . . .”⁷ As such, mortgage assistance provided under the Section 8 HCV Homeownership Program is income derived from a public assistance program under ECOA and Regulation B.

Regulation B further provides that “[i]n a judgmental system of evaluating creditworthiness, a creditor may consider . . . whether an applicant’s income derives from any public assistance program only for the purpose of determining a pertinent element of creditworthiness.”⁸ However, “[i]n considering the separate components of an applicant's income, the creditor may not automatically discount or exclude from consideration any protected income. Any discounting or exclusion must be based on the applicant's actual circumstances.”⁹” (Footnotes omitted).

The Bulletin goes on to provide guidance on managing fair lending risk in this area, such as making sure underwriting policies are clearly articulated; training underwriters, mortgage loan originators and others involved in mortgage loan origination; and monitoring for compliance with underwriting policies. For complete details, the CFPB’s press release is available here and the Bulletin is available here.

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Updated Mortgage Origination Examination Procedures. Earlier this month, the CFPB also released updated mortgage origination examination procedures, which include guidance on how the agency will conduct examinations for compliance with the TILA-RESPA Integrated Disclosure Rule (TILA-RESPA). This document can be a handy tool for those working to implement TILA-RESPA requirements in advance of the August 1, 2015, effective date. For a complete run-down of NAFCU resources to assist those working to implement the rule, check out this blog by my colleague JiJi.

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Public Inquiry into Student Loan Servicing Practices. The CFPB has issued a request for information seeking comments from the public about industry student loan servicing practices; practices related to loan repayment, including practices related to student loan repayment for borrowers in distress; the applicability of consumer protections from other consumer financial product markets (such as consumer mortgages and credit cards) to student loan servicing; and input about the availability of data on student loan performance and on borrower characteristics during repayment. Comments are due to the CFPB on or before July 13, 2015.

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NAFCU Webcast: UCC Provisions Affecting Your Credit Union. The Uniform Commercial Code (UCC) impacts many of your credit union’s lending and payment processing activities—but the connection usually isn’t obvious until there’s a problem. Avoid this issue by being well-informed. Attend this detailed webcast to learn how various sections of the UCC affects the different operations of your credit union, from lending to dishonored checks. The webcast will be held on Thursday, May 21, from 2:00 p.m. – 3:30 p.m. ET. Register here.