The Oak Tree by yaoyufang


									                                                                                             Summer 2011

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                                    The Oak Tree

                            THE OAK TREE ADVANTAGE IN AN EVER-
                            CHANGING REGULATORY WORLD
                            Genelle Rich, President
                                                       Have you found your desk under an enormous stack of
                                                       paperwork just to try to comprehend what the
                                                       regulators are requesting your credit union do with all
                                                       the new rules? Is your credit union concerned as each
                                                       comment period closes and no final rule has been
                                                       issued? What are you going to do? It has been the
                                                       business of Oak Tree Business Systems, Inc. to assist
                                                       each of our Credit Unions not only with the
                                                       information they are looking for but the compliant
                                                       documents that will support your credit union’s needs.
                                                       It is time to clear off your desk and rest easy from here
                                                       on out. If you have put your credit union in the hands
                                                       of the professionals at Oak Tree Business Systems, you
                             know that we have been providing forms for credit unions for over 35 years. We
                             are the most respected experts in the industry and we are here to assist you.
                                       We realize with all the change in the regulations comes much
                             uncertainty. Upon the completion of your Credit Union’s form packages, we are
                             still here to assist. We will set up training at no additional cost for your credit
In This Issue…               union and we can help your loan officers understand what new procedures may
                             be required of your staff. We are here to make this process understandable and
 The Oak Tree Advantage 1
                                       Oak Tree continues to take all actions by the regulators very seriously
 Dodd-Frank First            and, as we wait for more information to be released, we continue to support and
 Anniversary Approaches 2    comfort our clients. Take the time to evaluate the cost of your time spent working
                             on understanding new regulations versus the opportunity to have a company that
                             specializes only in understanding the regulations and how they apply to your
 So What’s Happened Since    forms. This is a win-win situation for the credit union and Oak Tree. You need
 The Last Newsletter    3    compliant forms and we want to provide them to you.
                                       If you have recently received a proof from Oak Tree for a regulatory
                             update, please take the time to review your forms thoroughly and return the
 Adverse Action Changes 4
                             proof at your earliest convenience, so your Data Processor is allowed ample time
                             to map your forms. The regulators show no signs of slowing the ever-evolving
 Commercial Packages   4     changes in the regulations. Without delay, let us help you with your compliance
                             nightmare and restore the peace within your Credit Union.
    Dodd-Frank First Anniversary Approaches
    Michael A. Kus, PLLC
     As the one-year anniversary of the Dodd-Frank                premiums,” which took effect April 1, 2011 (the
Wall Street Reform and Consumer Protection Act                    National Association of Mortgage Brokers had filed
(“Dodd-Frank”) approaches on July 21, 2011, it is a               suit against the Federal Reserve to block the rule, but
good time to take stock of some of the changes in store           after several procedural losses, has withdrawn the
for Credit Unions that stem from this monumental                  complaint and the case has been dismissed);
legislation.                                                  •   Expanding the scope of the “ability to repay”
     Probably the most significant change for Credit              requirement to all dwelling-secured loans;
Unions wrought by Dodd-Frank is the creation of the           •   Establishing minimum standards for residential
Consumer Financial Protection Bureau (the “CFPB”).                mortgage loans and a qualified “safe harbor” loan
The CFPB becomes operational on July 21, 2011, at                 known as a “qualified mortgage”;
which time the responsibility for administering the           •   Prohibiting certain loan features, including some
various consumer laws and regulations passes from the             types of prepayment penalties;
various federal regulators, including the Federal             •   Mandating the creation of a single Truth In
Reserve Board and the National Credit Union                       Lending/Good Faith Estimate (TIL/GFE) disclosure
Administration, to the CFPB. For credit unions with               document;
assets of more than $10 billion, the CFPB will become         •   Adjustments to the “High Cost Mortgage” rules;
the exclusive regulator. For smaller credit unions, the       •   New requirements related to mortgage escrow
National Credit Union Administration will remain the              accounts;
primary federal regulator (the “prudential regulator” in      •   New standards for how quickly a payment must be
Dodd-Frank terminology), but the responsibility for               credited to a borrower’s account and payoff
maintaining and developing the regulatory process will            statements must be furnished; and
rest with the CFPB. In practical terms this means that        •   Codifying appraisal standards under Regulation Z
the standard of oversight for credit unions will be the           for the first time under an Interim Final Rule that
same as applied to other financial institutions.                  was published October 28, 2010, and which took
     Effective July 21, 2011, the responsibility for the          effect April 1, 2011.
regulations that implement the following major
consumer laws will be the responsibility of the CFPB:               One regulatory change required to be
                                                              implemented on July 21, 2011, coinciding with the
• The Electronic Fund Transfer Act (EFTA)                     launch of the CFPB, is an increase in the Regulation Z
• The Equal Credit Opportunity Act (ECOA)                     exemption threshold for consumer credit transactions
• The Fair Credit Reporting Act (FCRA)                        (other than those secured by real property) from
• The Home Mortgage Disclosure Act (HMDA)                     $25,000 to $50,000. Going forward, the $50,000
• The Real Estate Settlement Procedures Act                   amount will also be subject to an inflation adjustment
  (RESPA)                                                     mechanism. Similar changes are being made to the
• The Secure and Fair Enforcement for Mortgage                Consumer Leasing Act regulation, Regulation M.
  Licensing Act (the SAFE Act)                                      Debit card interchange fees and the rules for
• The Truth In Lending Act (TILA)                             routing debit card transactions are another significant
• The Truth In Savings Act (TISA)                             Dodd-Frank change. A provision contained in Dodd-
                                                              Frank mandates that fees charged to merchants for
     Regulations implementing ten other consumer              processing debit card transactions must be
laws affecting the day-to-day operations of credit            “…reasonable and proportional to the cost incurred by
unions will also be the province of the CFPB. For the         the issuer with respect to the transaction.” The Dodd-
first time, there will be a single authority with             Frank amendment also provides that the decision of
responsibility for all consumer regulations.                  which payment card network to use belongs to the
     Mortgage lending rules and disclosures will              merchant by requiring that card issuers provide a
undergo significant changes once the CFPB assumes             minimum of two networks over which debit card
responsibility for the TILA and RESPA regulations. A          transactions may be processed. Other provisions
number of significant changes to the mortgage lending         prohibit card issuers and networks from using certain
regulations that were proposed by the Federal Reserve         techniques to influence a merchant’s choice of network.
Board in the summer of 2009, including revisions to           In addition, small financial institutions ($10 billion or
both open-end credit (HELOC) and closed-end credit            less in assets) are exempt under the new amendments.
(term loan) mortgage disclosures, have been effectively             This provision of Dodd-Frank was the subject of
put on hold in anticipation of the transfer of authority to   significant resistance from the credit union industry
the CFPB. Final Rules implementing these changes will         from before the time it was enacted. When the
not be issued until the CFPB assumes responsibility.          regulations proposed by the Federal Reserve Board
Unfortunately, no timetable has been announced for            offered two alternate interchange fee standards, both of
when these Final Rules should be expected.                    which set a specific price cap for interchange fees,
     In addition to the changes that were previously          resistance turned to outright opposition. Although the
floated by the Fed, Dodd-Frank specifies several other        exemption from coverage applies to virtually every
changes to the mortgage regulations, including:               credit union, the fact that credit unions compete for
• Significant tightening of the rules covering                business in the same marketplace with the larger card
   mortgage loan originators’ compensation and                issuers means that the price control caps applied to the
   incentives, including prohibiting “yield spread            large institutions nevertheless directly affect all credit

unions. The provision that requires card issuers to offer               This aspect of Dodd-Frank is not expected to survive
a minimum of two networks for processing transactions             in its current form. Efforts to modify this requirement
create an irresistible incentive for merchants to choose          have been ongoing since before this provision was
the most cost effective means of processing debit card            signed into law, and as of the time this article is being
transactions. Under the proposed regulation, credit               written, Congress is considering amendments that
union card issuers would experience significant pressure          would require a “wait and study” process before any of
to match the capped costs to remain competitive.                  these changes could be implemented.
     The consequence of the new requirement, if                         It is abundantly clear that the Dodd-Frank Wall
implemented as proposed, would force most credit                  Street Reform and Consumer Protection Act will bring
unions to consider some unsavory alternatives. Facing             significant changes to the financial marketplace.
the prospect of reduced or non-existent margins in                Beginning July 21, 2011, the next several years will
their debit card operations, credit unions will have to           bring a variety of changes that will affect credit unions
decide how to make up for the loss in revenue, thereby            both large and small.
putting price pressures on other credit union products.

     So, What’s Happened Since?
     Rod G. Terry, Director of Product Management
      I recently wrote an article to inform everyone of the       institution is ready. But with nothing final and the July
recent state of affairs concerning proposed rule changes          21st date fast approaching, what do you do?
to Regulations B, V Z and CC that stemmed from the                      Well, with respect to the increase in the minimum
passage of the Dodd-Frank Wall Street Reform and                  amount of funds deposited by check that must be given
Consumer Protection Act ("Dodd-Frank Act") and its                next day availability, the regulators left behind a clue and as
amendment of the Fair Credit Reporting Act ("FCRA"),              a result, the course of action is clear. The regulators
Truth-In-Lending Act ("TILA") and Expedited Funds                 included in their preamble a statement indicating that they
Availability Act ("EFAA").                                        expect the increase to take effect on July 21, 2011,
      As you may recall, the proposed rules for                   regardless of whether the proposed rule is finalized.
Regulations B and V revolved around the amendments to             Therefore, you should begin preparing for the change so
the FCRA requiring disclosure of: (a) credit scores and           that your institution is ready on the 21st. Because of the
information relating to credit scores in the risk based           regulator's stated position, Oak Tree's clients that receive
pricing notices consumers receive; and (b) any credit             their disclosure in an electronic format and whose existing
score used in taking an adverse action and information            policy was impacted by the increase, have already received
relating to that score in the adverse action notices that         a revised proof. No action can be taken on the balance of
consumers receive. Whereas, the amendments to the                 the proposed rule changes to Regulation CC unless and
EFAA generated the proposed rule for Regulation CC                until the rule is finalized, and then only as applicable.
which focused on the: (i) minimum amount of funds                       Unfortunately, the proposals for Regulations B and
deposited by check that must be given next day                    V did not include information in the preamble stating
availability; (ii) availability schedule for nonproprietary       whether any aspect of the proposal would take affect
ATMs; and (iii) safe harbor protections for the                   even if the proposed rules themselves were not finalized.
reasonable hold extension for other checks and deposits           Instead, they stated their rationale behind the issuance of
into nonproprietary ATMs. And finally, the amendments             the proposed rules. Namely, the importance of: (a)
to TILA that resulted in the proposed rule for Regulation         having implementing regulations and revised model
Z would: (a) create an exemption for certain creditors to         forms in place that addressed the amendments to section
the escrow disclosure requirement applicable to some              615(h) of the FCRA; (b) providing consumers with
higher-priced mortgage loans; (b) expand the minimum              consistent disclosures of credit scores and information
period for mandatory escrow accounts from the current             relating to credit scores in the risk based pricing notices
one year to five years and, under certain circumstances,          they receive; and (c) uniform compliance when
longer; (c) require a new disclosure for all closed-end           providing a credit score used in taking any adverse action
loans for which an escrow account will be established             and information relating to such score. Thus, absent the
and that are secured by a first-lien on real property or a        issuance of implementing regulations and model forms
dwelling; and (d) require a different disclosure be given         creditors are unable to ensure that they will meet the
when a mortgage transaction is entered into without an            regulators objectives. Because of this, no action can or
escrow account or when an escrow account on an                    should be taken at this time.
existing mortgage loan will be cancelled.                               And last but not least is the proposed rule change
      The comment periods for these proposed rules                to Regulation Z. Again, the preamble did not include a
have closed, and what actions, if any, have the regulators        statement indicating whether any aspect of the proposal
taken since the deadlines to comment on the proposals?            would take affect even if the proposed rule was not
None. As of this writing, the Feds have not issued one            finalized. Consequently, it is necessary to wait for the
final rule, interim final rule, a notice withdrawing a            final rule that, if issued, would contain the
proposed rule or any combination thereof. As the                  implementing guidelines and requisite model forms.
Compliance Officer or person in charge of disclosures                   Oak Tree continues to monitor these matters on a
at your institution, you are responsible for the                  daily basis and is ready to institute any regulatory
disclosures' content and want to make sure that your              required revisions to their clients' existing forms.

                                                                OK, Oak Tree...Where’s My
                                                                Adverse Action Form?
                                                                 In our Spring Edition of The Advantage, Rod Terry, our Director
                                                           of Product Management, informed you of the Federal Reserve Board’s
                                                           proposed rulemaking to amend model adverse action notices via the
                                                           Dodd-Frank Act. The effective date of these amendments is July 21, 2011.
                                                                 The comment period for the proposed rule closed, but no final rule
                                                           has been issued. Recently we spoke with counsel regarding this topic
                                                           and was informed that it is likely that the final version will not be
          The Oak Tree                                     released until the new bureau takes over on July 21st. In addition, it was

                                                           felt that an implementation time table will accompany the final rule.
                                                           Once the rule is released, Oak Tree will begin to make the changes.
                                                                 These changes were proposed to include the disclosure of credit
                                                           scores and information relating to credit scores when a credit score is
                 Published By                              used in taking adverse action. The proposed actions were intended to
                                                           ensure that consumers receive consistent disclosures of credit scores
                                                           and information relating to credit scores in the notices they receive.
                                                                 As always, Oak Tree Business Systems, Inc. is poised to begin
                                                           modification of their clients' electronically supplied adverse action
                                                           notices, pending finalization of the rule changes to Regulation B. Oak
                                                           Tree Business Systems, Inc. offers the entire suite of risk based
                                                           pricing notices in addition to an adverse action notice.

                                                            Press Release...
                                                                  The Federal Reserve Board recently announced that the
                                                            Consumer Advisory Council will hold its next meeting on Thursday,
            P.O. Box 6967                                   June 16. The meeting will take place in Dining Room E, Terrace
      Big Bear Lake, CA 92315                               Level, in the Board's Martin Building. The session will begin at 9:00
   (909) 585-7753 • (800) 537-9598                          a.m. and is open to the public.
         FAX (877) 585-4226                                       The Council's function is to advise the Board on the exercise of
                                                            its responsibilities under various consumer financial services laws
     e-mail -                           and on other matters on which the Board seeks its advice. Time
        Please visit our website:                           permitting, the Council will discuss the following topics:                                     • National mortgage servicing standards
                                                               • Real estate owned (REO) issues
The Oak Tree Advantage is produced as an                       • Proposed rules regarding ability to pay for mortgage loans
informational newsletter for the benefit of Oak Tree           • Risk retention proposal and "qualified residential mortgages"
customers only and should not be construed as the              • Proposed rules regarding remittance transfers
offering of legal advice. All rights are reserved and no
portion of The Oak Tree Advantage may be
                                                               • Reports by committees and other matters initiated by Council
reproduced without express written permission from             members may also be discussed. The Board invites comments
Oak Tree Business Systems, Inc.                                from the public on any of these matters.

        Volume Thirteen Edition Two                        Increase Your Membership
                                                           with Commercial Lending
                                                           Margaret A. Bennett, Assistant Director Of Client Services
            Richard D. Gallagher
                                                              With your members more savvy and demanding than ever, offer the
                   President                               extra benefit of Commercial Lending. Your credit union can offer a
                                                           complete line of commercial lending products through Oak Tree
                  Genelle Rich                             Business Systems. These documents take the transaction from the
                                                           application through closing, providing a clear and concise set of forms
       Director Of Data Services                           that follow Oak Tree’s long standing practice of using clear, easy-to-
                                                           understand language, just like our consumer lending forms!
            Rachel Mayson                                     Consider the benefits of Oak Tree Business Systems line of commercial
                                                           documents: These business loan documents can handle both closed-end and
 Director Of Product Management                            open-end credit. Fixed or variable-rate transactions can be documented
           Rod G. Terry                                    using either the Promissory Note and Business Loan Agreement or the
                                                           Business Line of Credit Agreement. We can help make access for your
                                                           members for both Business Membership and Commercial Lending fast and
        Legal Advisors                                     easy. From small loans for everyday business needs to financing
        Michael A. Kus                                     commercial real estate mortgages, we offer a variety of business loan
KUS, RYAN & ASSOCIATES, PLLC                               products to meet your Business Lending needs. In this ever-changing global
                                                           market, small businesses are still at the heart of thriving local economies.
                                                              Let us help your Credit Union achieve its goals and be your gateway
                               to a commercial lending solution by choosing Oak Tree as both your
                                                           member and business services partner. Take a minute and give us a call
                                                           at our Toll Free number (800) 537-9598 or you may contact me by email

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