How are Credit Scores Determined?

How are Credit Scores Determined?

It’s the time of year when credit unions see an increase in consumer lending. Members seek to secure home loans or financing for an automobile. That means two things are necessary. First, you are going to need compliant consumer lending and/or home equity lending forms. Oak Tree has forms to cover all lending and disclosure requirements to fund either loan type. Our home equity and consumer lending packages are customizable and contain all of the disclosure forms necessary to make the process as simple as possible. When your members ask “how are credit scores determined”, you should be prepared for some answers.

Secondly is a discussion about credit scores. They are perhaps the primary determining factor, and a proper understanding now can help your members secure the best financial opportunities later. Credit scores influence interest rates, loan amounts, collateral requirements, and ultimately whether or not to lend money to a borrower. Here is how they are determined:

Types of Credit. This is actually referring to the types of credit already used by a member and generates 10% of a member’s overall credit score. It’s comprehensive too, including things like a consumer’s mortgage, retail accounts, credit cards, and installment loans.

Amount Owed. This comprises 30% of an individual’s credit score. Things included here are items such as the total number of accounts (and their balances), how much of any credit line is used at any given time, and the ratio of installment amounts owed against the amount already paid.

Credit History Length. 15% of a consumer credit score comes from one simple factor: the amount of time an account has been active. Consumers with new accounts indicate more risk since they are considered new to the world of lending.

New Credit. This makes up 10% of an individual’s total score and accounts for how many credit accounts have been recently opened, and the total proportion of those accounts levied against things like recent inquiries, and any positive reestablishment of credit history if payment was a problem in the past.

Of course, anyone’s credit score will change over time, accurately reflecting current financial behavior. Negative information falls off after so many years regarding things like bankruptcy, lawsuits, or judgments. With all of these factors in the mix, it’s highly possible that an individual’s credit score will look different from one month to the next. This is good information to have on hand when it comes time to discuss lending with one of your members. Our lending forms packages can help you facilitate the process of underwriting to make it as simple as possible. The credit conversation, however, is up to you. It might be great to discuss the importance of credit scores beforehand with those members who are interested in consumer credit. News flash, Oak Tree can help you market those potential members. Contact us at MarketingServices@OakTreeBiz.com

This will allow them to make adjustments before they seek funding, and hopefully, improve their credit score. When the time comes for your members to start the process, you will be ready if you are an Oak Tree customer. They will too since you gave them all the information they needed to properly understand their credit score. If you need consumer lending, or home equity lending forms, contact us today. All of our forms are customized to your needs and can integrate with any data processor. We have you covered, so you can work with your members to improve their credit score so they get the best rates and terms available when it is time for them to borrow!

Oak Tree has been helping credit unions with their lending documents for over 37 years now.

Climate Change and Mortgage Lenders

Climate Change and Mortgage Lenders

A home is a safe haven for members, and the biggest, most important purchase many will ever make. As a trusted source of lending and financial expertise, credit unions have an obligation to administer the benefits of fair rates on mortgage lending, as well as provide financial education to understand the risks involved with owning and operating a home. A lot of that risk can depend on location and the changing climates. This is why we wanted to look at climate change and mortgage lenders today.

Natural disasters cannot be predicted, but property-owning members and financial lending institutions can be prepared for them. Fires in the west, blizzards in the north, flooding in the south; over the past years, many homeowners have been surprised by nature’s destructive and abrupt course. Many of those caught in these disasters were not prepared with insurance to cover any and all possibilities of property destruction in their areas.

This unpreparedness puts the majority in jeopardy and causes debt, mortgage defaults, and eventually, property loss. With these defaults and strained situations, most lenders look to Fannie May and Freddie Mac to take on property mortgages to lighten portfolios and escape delinquency. It is then up to taxpayers and the government to clean up and fund reconstruction, which shifts state and federal spending and debt.

Whether one believes in global warming or not, climate change and natural disaster rates have been available as proof that the world is changing along with past regulatory forecasts. On the horizon of increasing climate-shift awareness, it becomes imperative for lenders to consistently be aware of possible risks and forecasted possibilities, as well as relay information, require necessary insurance, and provide compliant forms and disclosures to protect the institution, member, and community.

Fixed Mortgage Rates & Climate Change

Fixed mortgage rates lock in home buyers to essential regulations and disclosures for 30+ years. A length of time which can hardly perceive the possible changes in shifting climates and incoming disasters.

According to MarketWatch.com “The number and total value of flood insurance policies have been declining since 2006, meaning that households that purchased a property in coastal areas especially may be at increased risk of defaulting on their mortgages. Commercial banks, including two of the largest U.S. mortgage lenders, JPMorgan Chase JPM, +0.69%, and Wells Fargo WFC, -0.08%, have the ability to price mortgages for flood risk, and by design they can securitize some of these loans, thereby spreading the risk to more parties.”

Leaning on government funding agencies fuels lending for financial institutions as a safety net for defaulted portfolios. This allows unassuming members who strive for the status of homeownership to jump into high-priced mortgages in potential hazard and climate-changing zones, ultimately putting the property, buyers, and lender in a risk area that inadvertently will be picked up by taxpayers and hurt real estate economy, through Fannie and Freddie in a time of disastrous outcomes.

The seeds of change have been planted, with many startup companies beginning to dive deep into climate change forecasting and disaster risks measured to inform the housing market and more importantly, the lenders and buyers.

”Some of the players include Four Twenty Seven Inc., which this year was acquired by the credit-ratings firm Moody’s, and a 3-year-old firm called Jupiter, which converts flood, fire, heat, drought, cold, wind, and hail events into risk modeling for real estate assets, including in such high-population coastal areas as New York and Miami.” MarketWatch.com

Some are requesting reforms to Fannie and Freddie that would require insurance or raise guarantee fees as a precursor to absorbing mortgages from lenders. Making mortgage terms flexible in change regulations for changing climates in terms of necessary insurances will make lenders and buyers responsible and less likely to default and lose property in the face of disaster. When it comes to climate change and mortgage lenders it pays to prepare and plan ahead.

Oak Tree is compliant in all 50 states, and creates customized form packages containing compliant, informed, and prepared forms and disclosures for your credit union including flood hazard determination forms or flood hazard insurance notice. Don’t wait for another disaster to strike: get your lending team and your members prepared and secured for the future. Contact us today!

What a CU Needs to Stay Compliant

While credit union compliance may have been under the radar just a decade ago, a recession, global pandemic, and going digital have all contributed to a multitude of new regulations and an emphasis on compliance. So let us look at what a CU needs to stay compliant because you need to keep your credit union compliant.

Utilizing a proactive mindset can prevent costly compliance litigation and fines. We have assembled a checklist to help you assess your CU’s compliance strengths and risks.

Regulations

It’s important to stay diligent. Implementing a plan to stay compliant is necessary to fulfill CU strategies for growth and longevity.

Regulatory agencies such as NCUA, Federal Reserve, Federal Financial Institutions Examination Council (FFIEC), and Consumer Financial Protection Bureau provide updated information on laws and compliance.

1.Study past and current trends.

Use the facts you have and projected trends to create a plan of action.

2.Execute a plan.

Create detailed reports, update budgets, and keep staff trained and informed on any changes.

3.Audit yourself.

As regulations change, so should your products and processes. Continuously think about how you can improve and decrease any weaknesses.

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Good Partners

Networking with other credit unions to talk about compliance is important not only for your branch but CUs as a whole. By finding out how others view compliance issues and how they have resolved those same issues can save you from future costly mistakes. What a CU needs to stay compliant sometimes is a good partner to watch their back.

Plus, if you place importance on forming a network of CU executives, you will have someone to call. Picking up the phone is much easier than taking a deep dive into compliance blogs or manuals that might not even fully answer your specific question.

Once you foster a friendship with several local or regional CUs, consider forming a committee that focuses on compliance. That way when any regulatory changes are introduced, you can talk about them as a committee and forward that information to everyone involved. This collaboration is a hallmark of the CU world, an advantage over most banks that prefer to keep a corporate distance.

For example, Washington State Employees Credit Union (WSECU) organized a consumer protection compliance committee back in 2014 in response to the Dodd-Frank mortgage rules and state examinations. As CUs need to conform to a growing list of regulations, the committee provides oversight and guidance to the CU’s management of compliance.

Tools

The Federal Financial Institutions Examination Council (FFIEC) provides three compliance resources that are worth adding to your toolbox. These free resources are a great addition to your current setup and can fill gaps when your budget is minimal for data compliance. What a CU needs to stay compliant is the proper tools.

FFIEC Information Technology Examination Handbook

The FFIEC IT Exam Handbook is the main guide used to assess compliance by auditors. Although it offers an outline for audits, it does not include everything. An auditor may suggest changes that aren’t included in the handbook.

FFIEC IT Exam Handbook includes information on the following topics:

• • Allocating staff and technology to information technology
• •Organizing an established information security culture within your CU
• •Defining risk identification processes
• • Risk monitoring and reporting
• •Consistent security operations

FFIEC Cybersecurity Assessment Tool (CAT)

Credit unions have access to the Automated Cybersecurity Examination Tool (ACET) which is based on the CAT. The ACET provides easy-to-interpret results that are easy to implement. This is an improvement over a standard PDF.

CIS Controls® (CIS)

For cyber-attack prevention, this free tool is a great addition to credit union cybersecurity programs, whether you build your own or use a third-party solution.

Online Security

Members of credit unions switch from traditional banks to experience an increase in personalized customer service, security, and trust. Online security is a key component of trust as members continue to lean toward digital products and processes.

As part of maintaining compliance, security monitoring is key in protecting your members’ information. By consistently following these three steps you can prevent future cyber-attacks.

1. Find Your weaknesses

Consistently check for weaknesses in your CU’s security monitoring. It is impossible to efficiently monitor your credit union logs manually. Using a security operations center (SOC) can provide cybersecurity 24/7.

2. Create a Plan

Once you start using a SOC, single out your vulnerabilities to see which ones need attention.

3. Fix Vulnerabilities

IT teams can benefit from a patch management system to fix vulnerabilities and keep them from creating a larger issue. This system saves man-hours by removing the task of manually determining which issues need a patch.

The Cloud

Cloud security is used by 75% of credit unions. The protocol of cloud security compared with traditional methods is virtually the same.

Involve Your Members

Keeping your members educated about their overall cybersecurity can help decrease cyber-attacks and even fraud. Over 80% of hacking-related breaches are due to weak or stolen passwords.

Simply adding password requirements to member accounts like character length, a mixture of both lowercase and uppercase letters, numbers, and special characters will help protect sensitive member information. You can also add multi-factor authentication as an additional layer of online protection.

ADA

Website and mobile apps should be secure, and also follow the Americans with Disabilities Act (ADA) guidelines.

Choose a web developer or ADA agency to audit your site to ensure that you are compliant on all devices including desktops, tablets, and mobile phones. They can also check to see if your site is accessible through text readers and audio scanners.

Post-Coronavirus World

As credit unions have catered to their members during coronavirus in the form of pandemic-specific products and processes, this new way of doing business has opened up a whole new set of regulatory changes and compliance issues.

New trends, such as digital notary signings, have changed the way credit unions complete the loan process. CUs also had to put a priority on the government-issued SBA Paycheck Protection Program to fully serve its members struggling to fund their small businesses during the pandemic. With the increase in remote member transactions, it’s important to protect members against fraud not only during the coronavirus but post COVID-19 as well.

The silver lining from coronavirus is the opportunity to test remote work among credit union employees and digital products and services for CU members. As credit unions set future risks, goals, and marketing strategies, compliance is at the forefront of success. All of these changes required swift compliance action from training, to sensitive advertising content, as well as reforming loan processes.

As the global pandemic continues to shape member preferences toward digital, it’s a great time for CUs to re-think strategies regarding member engagement and how that affects their brick and mortar world.

Avoid excess anxiety about compliance by networking with other CUs, taking advantage of free resources, and investing in online tools that will keep your CU compliant and your members’ information secure.

Credit Unions vs. Banks

Why Would People Throw Money Away with Banks Instead of Investing in a Credit Union?

Credit Unions vs. Banks

It can be in search of a checking account, a savings account, or a loan (such as that first mortgage) that drives a person to sign up for their first account at a financial institution, and oftentimes they go straight to the big banks, not knowing the cost of admission beyond the extremely effective advertising campaigns. Big banks are successful because they make so much revenue off of their customers. Oftentimes, friends and family members will be seen and heard complaining or struggling with high fees and monthly service charges, and more and more with no known recourse, and having to accept that this is part of the financial journey! Let’s look more into the differences between credit unions vs. banks.

Credit Unions and Loans

One of the first loans that most people tend to go for is the auto loan, and as a credit union, you can be that first direct or private party loan for a member. It would seem that a person seeking a loan for a car is more inclined to accept whatever loan they get from the dealer, but oftentimes, that is just as wasteful as getting a loan from a bank. A member of a credit union is often more likely to find better rates and acceptance for loans from their credit union, and that can save a lot of money on interest, fees, and other charges. Since members are not only customers but owners vested in the growing concern of the credit union, it means they are investing in their own “business.”

Credit unions are more likely to take a risk for a loan with a member than a bank would be with a customer. This is why many would be willing to say that it is easier to get approved for a loan with a credit union than a bank. For auto loans, we have seen a rise in auto lenders undercutting the banks and credit unions, but an auto loan with a credit union comes with other benefits that are more than just purchasing a car for an impossibly low rate. It builds a relationship with that credit union, and when members are ready for their next credit card, mortgage, or business loan this can be all the difference in getting the loan.

A major focus of a credit union is to provide essential services and lending opportunities when your members need it most. As great as credit unions are with benefits and consistently low rates, it is almost impossible to operate without any revenue when providing unbeatable rates 24/7/365. This means that strategizing lending rate drops and promotional loans, home equity lines, and other services are essential to provide members with outstanding opportunities, keep up the revenue stream, and propel the credit union into the future! Strategy for promotional efforts can depend heavily on your field of membership, and when you analyze lending spikes! For example, some credit unions might see higher auto lending applications around Memorial Day in their communities. Or you can provide great consumer lending rates during the holidays!

Credit Union Members

Finding opportunities to connect with your members and provide the best services at the best rates at the best times is what makes the credit union difference, and drives trust and loyalty! Especially since most, if not all credit unions, tend to work off of the “3 Stakeholder Rule.” They are the members, the employees, and the credit union that they are concerned with, and many have learned that the more they look to the needs and wants of the employees and members, then the credit union’s growing concern will be met. Banks tend to focus on the bottom line, and not so much on the people they employ or service.

Oak Tree keeps credit unions compliant and connected to their community growth through compliant forms and documents and many other services! Browse our products today and start expanding your services and membership. When we originally posted the credit unions vs. banks infographic it was well-received, we only ask that you credit us when sharing, and please don’t crop out our logo.

Fuel the Light

Humanitarian Highlight 1.14.21: Fuel the Light

Humanitarian Highlight 1.14.21

It is time for this week’s #HumanitarianHighlight you guys! We are so excited to present to you all of these amazing #creditunions and the #CUdifference they have all made in their communities. Let’s get started, shall we?!  Also, if you know of a #creditunion who has positively impacted their community, tag us and let us know so we can ensure they get recognized! Let’s see how they fuel the light!

Volt Credit Union

Giving back to the children in their community, Volt Credit Union presented a check of $10,000 to The Child Advocacy Center, Inc. The amount was donated by Volt’s members, others in their local community, and those donations were matched by the Volt Foundation.

TruStone Financial Federal Credit Union

TruStone Financial FCU, TruStone Home Mortgage, and the TruStone Financial Foundation came together and provided close to 1,000 toys, and were able to donate $1,750 to charity just in time for the holidays. The donations that were gathered from their branches were then given to Toys for Tots, as well as The Salvation Army of Cold Spring.

“TruStone Financial established the TruStone Foundation in 2009 to reinforce its commitment to financial education. With strong ties and a healthy respect for education at all levels, the Foundation funds scholarships and financial literacy programs in the classroom and beyond. We believe by supporting our future leaders, our local communities will become stronger.” TruStone Financial Foundation

Glendale Federal Credit Union

Lending a helping hand, Glendale FCU members and their staff took it upon themselves to donate needed items such as blankets, socks, towels, and stuffed animals for the children to the Glendale Police Officers’ Association and their “Cops for Kids” program.

“The “Cops for Kids” Program targets the needs of the community’s underprivileged, disabled, hospitalized and at-risk children, as well as those who are victims of accidents and/or crimes. Every year, members of the Glendale Police Department adopt families during the holidays, providing Christmas trees, gifts, and holiday meals. The Glendale Police Officers’ Association has distributed over 20,000 toys to children throughout the community as a result of the generosity from Glendale citizens and businesses.” Glendale Police Officers’ Association

Cobalt Credit Union

Helping out our nation’s heroes, Cobalt Credit Union teamed up with the SAC Foundation and collected basic household and food items for donation to the Veterans at Victory Apartment in Omaha and Victory Park Apartment in Lincoln.

“SAC Foundation is the charitable arm of Cobalt Credit Union and a registered 501(c)(3) nonprofit organization. We are a separate, independent entity operated by our own Board of Directors comprised of Cobalt Credit Union employees. We have a mission to be a steward of economic and social sustainability in the communities we serve. Our ongoing partnership with Cobalt Credit Union and its employees help further our mission.” Cobalt Credit Union

Cal State L.A. Federal Credit Union

With the year 2020 throwing so many unforeseen challenges families’ ways, Cal State L.A. FCU partnered with the Para Los Niño’s Organization and participated in their Adopt-a-Family program, which helps provide gifts for families in need. Cal State L.A. FCU was able to donate a list of items ranging from household items to toys on the children’s wish lists.

“In 1980, Para Los Niños was founded with the simple idea of creating a safe space for the children of Skid Row to “just be a kid.” Building on the importance of a healthy, stable home and idea of education as an equalizer, Para Los Niños has since become a leading organization serving thousands in Los Angeles.” Para Los Niños

Fond du Lac Credit Union

During the holiday season, Fond du Lac CU hosted a canned food drive for the Solutions Center where with the help of their members, staff, and the local community they were able to donate close to 500 needed items to families in need.

“Solutions Center offers a multitude of services to those dealing with domestic abuse and homelessness. Our staff is made up of caring and dedicated professionals, on hand 24 hours a day, 7 days a week, 365 days a year to work closely with those in crisis. Our professionals understand that every situation is different, and services are personalized to each individual that is in need of assistance.”

Honor Credit Union

The restaurant industry has been hit hard during this pandemic, and Honor Credit Union went to great lengths to support their local restaurants and small business in their community by providing much-needed relief.  The funds raised went directly to employees in the restaurant business.

Thank you for reading this Humanitarian Highlight! Please check out last week’s, and please do not hesitate to contact us with any questions about our products & services through our email or by phone (800) 537-9598. How has your credit union helped fuel the light?

Navigating Current Lending Trends

Navigating Current Lending Trends for Growth and Compliance

Following current lending, trends can boost loan applications and approvals. It can also spark new partnerships and provide a competitive edge in a volatile market. Let’s look at navigating current lending trends for growth and compliance; and how they can help your credit union grow.

How do I encourage membership growth?

CUs generally have lower loan rates, higher rates on savings and investment accounts, and fewer fees. While credit unions focus on securing memberships from younger generations, it’s important not to discount lending to small and mid-size businesses.

Due to economic uncertainty, small business owners are forced to seek online lending options. Online lenders are dominating the market with higher percentage approvals and quick funding.

Small businesses are worth the acquisition cost since most will need additional products like checking and savings accounts. A positive CU experience could solidify a long-term client both for business and personal financial needs.

How do I increase equipment loan approvals?

Once you have established relationships with small and mid-size businesses, they will likely need additional loans such as equipment financing. While it’s easy to put a business owner into a box by only recognizing his credit score or actuarial models, that box doesn’t meet the needs of today’s business owner.

Does the owner have collateral? Cash flow? Do they have a good reputation with your CU? All of these factors should also influence loan approval.

By underwriting each equipment loan, you can personalize the experience and collect pertinent data that can help upsell additional products and services.

Take the time to get to know local industries that are seeking loans. Do you understand their equipment needs? Are they able to source new or used equipment?

Establishing genuine care and concern for each business member’s needs can generate referrals and build trust among industries. Running a business in any industry is difficult and understanding the needs and unique financial mistakes can help your CU provide solutions to keep those businesses running without a hitch.

How do I go digital without losing members?

By 2025, it is estimated that over half of tasks currently held by various credit union personnel such as loan officers, tellers, and financial advisors could be automated according to Accenture. Although going digital could save financial institutions billions of dollars, it also affects the ability to provide a human experience, a touchpoint that credit unions rely on.

However, going digital doesn’t have to mean slashing the workforce or giving your members the cold shoulder. For example, OceanFirst Financial in New Jersey retrained its employees to assist digital banking roles.

Even though OceanFirst closed over 1/3 of its branches, through its employee retention efforts and forward-thinking mindset, it was able to keep over 90% of members who banked at the closed branches.

By adopting digital processes, OceanFirst also witnessed an 81% increase in mobile deposits (2019). Investing in retraining their employees not only educates their staff on digital processes but provides growth and sustainability for their coverage area.

Why should I partner with fintech?

As the need for a personalized digital banking experience paralyzes credit unions, fintech can provide the perfect partnership.

Your CU doesn’t have to become fluent in online coding or start from square one. By partnering with fintech companies, credit unions can expand their network of businesses, and simplify the loan process to engage more members at a faster pace.

This strategy is particularly important for CUs that lack manpower and budget in the areas of risk, underwriting, and compliance.

Fintech can also help CUs gather data analysis regarding their potential and current membership. The data measures credit risk allowing the credit union to understand the borrower’s financial behavior before a transaction has commenced.

By using smart credit risk technology, CUs can feel comfortable approving the loan, even if traditionally the borrower may have questionable credit on paper. This is the main avenue fintech uses to speed up loan approvals.

It’s important to choose a fintech early in the game. As fintech gets more established the rates start to increase, which means the cost of partnership can as well. Coronavirus has forced scenarios we have never conceived before. Only being able to communicate via a virtual world is right up fintech’s alley so take advantage of their automation techniques in personal and small business lending.

What’s next for the U.S. economy?

Since 2000, credit union lending as increased in both first mortgage and auto. Totaling $81.6 billion (26.0% of all credit union loans in Q2 2000) and $440 billion in Q2 2019 (41.1%), first mortgages have seen an increase of over 15%. Auto loans have increased too from $123.6 billion in 2000 to $374.4 billion in 2019.

However, 2020 has ushered in a global pandemic, social unrest, and an economic downturn. With all of these factors, it is unlikely that the nation will be as strong economically as it was between 2015-2019. Here are 3 factors that could limit economic growth in the next couple of years.

1. Political Uncertainty

President Trump frequently tweets and according to JP Morgan, those words go way beyond social media banter. JP Morgan nicknamed the tweets the ‘Volfefe Index’ after a confusing 2017 “covfefe” tweet. These specific tweets are showing a significant impact on Treasury yields.

Depending on the content, tweets affect volatility in the market which affects the pricing of options and securities.  As the November election looms, uncertainty in the market is considered commonplace.

2. Low Inflation Rate

A low inflation rate is meant to keep the recovery going. However, when inflation rates are already low, cutting them can make a weak economy weaker.

The probability of an additional 25-basis-point rate cut averaged approximately 87% for contracts expiring between the end of 2019 and September 2020 as found by the Federal Reserve Bank of Atlanta’s market tracker.

3. Future Economic Trends

As a higher ratio of Americans is retiring, the U.S. has seen a slowdown in productivity. Less productivity means less economic growth. This decline of economic growth along with a decline in consumer spending could be problematic for a quick economic recovery.

Even with lending wrapped up in the chaos of economic uncertainty, now is the time to invest in technology and comply with industry regulations to stay competitive. Listening to the needs of your members can help your CU weather economic uncertainties. Here at Oak Tree we follow the lending trends in the credit union industry and are here to help you adapt. What’s your feedback on navigating current lending trends for growth and compliance at your credit union?

New Heights

Humanitarian Highlight 9/24/2020 | New Heights

Humanitarian Highlight 9/24/2020

Welcome back to another #HumanitarianHighlight!! In today’s blog, we have many different credit unions that have contributed many types of actions to help out their communities. We couldn’t be more inspired by all the credit unions mentioned, which have inspired us to also take part in local food drives! So, thank you to all the credit unions taking humanitarianism to new heights!

Belco Community Credit Union

Caring for everyone around their community, Belco Community CU sponsored lunch for 60 students in The Salvation Army Summer Youth Enrichment Program. This is an absolutely incredible gesture. Thank you, Belco Community CU!

Nuvision Credit Union

Nuvision CU has been helping its members maintain financial security as part of their NuvisionCares program, all throughout the COVID crisis. The credit union teamed up with Think Together’s Shalimar Learning Center (an afterschool resource center for students who are from low-income families), to collect non-perishable foods and household items, diapers, and formula for the families who are in the program.

“We collected a large amount of food which benefited over 120 families. Every Nuvision branch participated. Our drop-off locations were also visited by numerous first responders and Costa Mesa Mayor Katrina Foley, who stopped by to bring some canned goods in support of the initiative.

We’re grateful to have been able to assist these families at a time when they need it most. These kids are going to be the next generation of hard workers in our community, and we want to make sure they have everything they need to learn, grow, and build their futures.” Nuvision CU

Also for the members in their Alaska branch, Nuvision was able to donate 3,300 pounds of food and raise $3,000 for the TCL’s Summer Meal Kit Program.

“From July 6th to the 31st, we collected donations at all branch locations. Every family who participated in The Children’s Lunchbox program received two snacks and two dinners per child, along with a pantry box that contains breakfast, lunch, and dinner for four.” Nuvision CU

Read the whole BLOG!

Utilities Employees Credit Union

Let’s give a shout out to the Utilities Employees CU employees for putting together and supplying goodie bags to be delivered to the United Community Services to help out their Unity in the Community event.

“United Community Services is committed to providing quality programs to meet the needs of Berks County residents. With the help of its many partners, UCS is able to offer programs that link individuals to workforce development opportunities reducing the risk of sustained poverty. In addition, UCS provides information and referral for individuals who are not eligible for programs, or need additional assistance…

UCS has gathered resources beneficial to connecting with partners and other agencies for anything ranging from help with the insurance marketplace and/or job searching.” United Community Services

Mass Bay Credit Union

Mass Bay CU took the time to deliver 400 of their backpacks full of school supplies to Francis W. Parker Elementary School! This is such a nice gesture and we are so proud of you all!

Marine Federal Credit Union

How awesome is this?! Marine FCU supplied 350 backpacks that were filled with school supplies to be given out to military children!

McCoy Federal Credit Union

Did someone say special delivery? McCoy FCU’s employees have done a fantastic job in making sure that the students from Lancaster Elementary School had the school supplies they needed before the year started. Way to go #CUfamily!

Coastal Community And Teachers Credit Union

Now, this is just wonderful! The Young Professionals group from the Coastal Community And Teachers Credit Union collected donations and acquired items for The Purple Door nonprofit organization. Outstanding job, everyone!

“The Purple Door is a 501(c)(3) nonprofit organization headquartered in Corpus Christi, Texas. Our agency provides FREE services to victims and survivors of family violence and sexual assault throughout a 12-county region of South Texas. We offer support and empowerment to individuals through safe shelter, non-residential services/programs, and outreach.

All services are confidential and available free of charge to victims and survivors staying at the shelter and those residing elsewhere in the communities we serve.” The Purple Door

Click HERE to learn more!

Hope Credit Union

A blog from their website:

“Netflix Invests $10 Million in HOPE to Build Economic Opportunity in Black Communities

JACKSON, MS – Netflix today announced a $10 million deposit in Hope Credit Union as one of the first investments in a $100 million initiative to build economic opportunity in Black communities. The investment is among the first made by Netflix in financial institutions and other organizations that directly support Black communities in the U.S.

The Netflix investment in HOPE will be in the form of a Transformational Deposit. In each Deep South state served by HOPE, for every dollar in net worth held by white households, Black households hold between ten and twenty cents. Through Transformational Deposits, HOPE imports funds into these capital-starved communities to make business, mortgage, and consumer loans and provide other financial services that build wealth and foster economic mobility. Over the next two years, HOPE estimates the Netflix deposit will support financing to more than 2,500 entrepreneurs, homebuyers, and consumers of color.”

READ THE FULL BLOG HERE!

Thank you for reading this Humanitarian Highlight! Please check out last week’s post, and please do not hesitate to contact us with any questions about our products & services through our email or by phone (800) 537-9598, especially if your credit union needs the best lending documents!

TRID & What It Means for Your Forms

TRID & What It Means for Your Forms at Your Credit Union

In a commentary article posted on Credit Union Times our CEO, Richard Gallagher discusses TRID and what it means for your forms. For Credit Unions, TRID requires not only adjusting model forms but also includes changes to computer software. Picking the right business partners to satisfy the TRID disclosure requirements is more critical than ever, and a reliable document provider is every bit as important as finding a qualified loan processor. 

What do you get when you attempt to abbreviate “Truth-in-Lending Act,” “Real Estate Settlement Procedures Act” and “Integrated Disclosures?” Well, if you are the CFPB, you get TRID, an acronym for two consolidated consumer real estate loan disclosure forms that represent many years and countless hours of research and development. The TRID forms consolidate two separate loan disclosures that had been required for decades by two different federal consumer protection laws and regulations recombining them into two different forms; one to be provided at the time of application and the other, at the time a closed-end consumer real estate loan is closed. For those wanting to dig a little deeper, let’s break this down.

On Aug. 11, 2017, the CFPB published a Final Rule in the Federal Register to formalize guidance and to provide greater clarity and certainty regarding specific mortgage disclosure provisions implemented by Regulation Z (2017 TILA-RESPA Rule). Although the Final Rule became effective on Oct. 10, 2017, 60 days after publication, compliance is not mandatory until Oct. 1, 2018. Confused? Aren’t the TRID disclosures already required? Let’s back up and review.

Richard Gallagher

To read more about TRID and how it affects your credit union, go check out the CU Times article and then check out our home equity lending documents for your credit union.

_{(note: this is an older blog entry and has been edited since originally posted.)}

MLA Changes & Their Effect on Credit Unions

MLA Changes & Their Effect on Credit Unions

Last year’s revisions to the Military Lending Act (MLA) regulations have generated quite a bit of buzz in recent days. You might be wondering how these changes will affect your forms, and what action you need to take. The good news is that if you are currently using Oak Tree forms for the types of credit that will be covered by the MLA, then your current forms are compliant, despite the revisions made to the MLA. It is important to be aware of the MLA changes & their effect on credit unions if you are running a credit union.

When the United States Department of Defense (DoD) revised their MLA regulations, they expanded the protections provided to active-duty service members and their families under the Military Lending Act (MLA). For the first time, loan products of the type normally offered by credit unions and other depository institutions are covered by the MLA regulations. While the new requirements took effect October 1, 2015, the mandatory compliance date is October 3, 2016 (and not until October 3, 2017 – and possibly later – for credit card accounts).

What is the MLA?

The current MLA regulations were issued in 2007 and were designed to protect active-duty members and their families (“Covered Borrowers”) from the most egregious forms of predatory lending. Whether a person is a Covered Borrower is determined by a service member’s active-duty military status. The MLA protections presently apply only to credit extended to service members and their immediate family members while the service member is on active duty and focus exclusively on: (i) payday loans of $2,000 or less with terms of 91 days or less; (ii) vehicle title loans (non-purchase money loans with terms of 181 days or less secured by a motor vehicle’s title); and (iii) tax refund anticipation loans. These loans are referred to as “Consumer Credit” transactions under current MLA regulations.

The MLA regulations limit the amount that a lender may charge a Covered Borrower for a Consumer Credit transaction. This limitation comes in the form of the unique “Military Annual Percentage Rate” (MAPR). Creditors are prohibited from charging an MAPR that exceeds thirty-six percent (36.0%).

When current regulations proved less than effective at curbing lending abuses, the DoD changed its strategy by expanding the scope of what constitutes a Consumer Credit transaction. Instead of targeting specific loan products, the revised MLA regulations now specify that all consumer loans subject to Regulation Z (both closed-end and open-end) would be covered, with limited exceptions granted for certain types of “mainstream” consumer loans. Under the new rules, only the following credit transactions are not subject to the MLA regulations (and thus, are not “Consumer Credit” transactions for purposes of the amended MLA regulations):

• Dwelling-secured loans, including loans to finance the purchase or initial construction of the dwelling, refinance transactions, home equity loans, home equity lines of credit, and reverse mortgages;
• Loans to finance the purchase of a motor vehicle when the loan is secured by that vehicle; and
• Loans to finance the purchase of other types of personal property when the loan is secured by that property.

For most types of Consumer Credit, only those transactions or accounts consummated or established on and after October 3, 2016, will be subject to the new requirements. For open-end (not home-secured) credit card accounts, only those accounts established on or after October 3, 2017, will have to comply with the MLA. The current requirements will remain in effect for affected closed-end credit products until October 3, 2016.

Under the new MLA regulations, a creditor is not required to disclose the MAPR as a numerical value (which is a requirement under the 2007 regulations), but is required to provide “a statement of the MAPR applicable to the extension of credit” (a text explanation of the MAPR rules). A Model Statement that may be provided to satisfy the MAPR disclosure requirements is provided in the new regulations and is currently available through Oak Tree. This disclosure must be provided both orally and in writing.

The 36.00% MAPR limitation remains, but will soon apply to both open-end credit and closed-end credit. For open-end credit accounts, the MAPR limitations are imposed on each billing cycle. Creditors may not impose fees and charges during a billing cycle if those fees and charges would result in the MAPR for that billing cycle exceeding 36.00%.

The new regulations contain essentially the same limitations on loan practices and the same administrative penalties that are provided in the 2007 regulations, but, because of Congressional amendments to the MLA in 2013, including civil liability provisions for the first time. Violations of the MLA and DoD regulations will now subject creditors to civil liability for actual damages (not less than $500 per violation), punitive damages, and equitable relief, among other provisions.

Credit Union Forms Requirements

Because of the significant civil liability provisions, credit unions must familiarize themselves with the requirements of the MLA and DoD regulations as revised, to ensure compliance by the effective dates. The MAPR limitations must be taken into account when credit is furnished to Covered Borrowers in order to avoid this potentially costly civil liability. It is strongly recommended that an MLA due diligence process be incorporated into application procedures in order to take advantage of certain safe harbor provisions contained in the new regulations.

How Does This Impact Your Forms?

Here is where the good news comes in. Although the credit union’s consumer lending operations are clearly affected by the new requirements, your forms remain compliant. Again, Oak Tree’s counsel has advised that Oak Tree’s current forms will not require revisions. The reason for this? Chat with us to find out why.

(note: this is an older blog entry and has been edited since originally posted.)

New Military Lending Act Regulations

New Military Lending Act Regulations Recent Changes Regarding Military Lending At Oak Tree Business Systems, Inc., we pride ourselves in maintaining forms that are up to date and compliant across all federal and state guidelines. Well, it is time for us to “up the ante” with this latest regulatory change. Protections have been expanded for active-duty service members and their families according to the revised regulations of the Military Lending Act. Now, loan products offered by credit unions and other depository institutions are covered by these regulations. The new requirements will take effect on October 1 of this year. The mandatory compliance date is October 3, 2016 (and not until October 3 of the following year, and possibly later for credit card accounts).

Why Did The Regulations Change?

The reason for the regulatory change has to do with why the MLA was enacted, to begin with. In 2006, Congress discovered that most active-duty members often looked to subprime lending sources to help them get relief during a financial crisis. Even though the loan provided short-term relief, the high-interest costs associated with carrying the new loan would throw these families into a cycle of unsustainable debt. This added to the stress that service members already feel in general, and this added stress would trickle down to their spouses and children. Therefore,  the MLA was established in 2007 to protect service members from predatory lending. The act was specific in that it only applies to active-duty members, and focuses on the following:

• Payday loans of under $2000 with terms of 91 days or fewer
• Non-purchase money loans with terms of 181 days or fewer secured by a motor vehicle title
• Tax refund anticipation loans

The MLA protects the consumer by limiting the interest amount that an institution may charge for these services. This limitation comes in the form of what is known as a Military Annual Percentage Rate, or MAPR. Creditors may not charge more than 36% MAPR. This differs from APR significantly, because finance charges normally excluded under Regulation Z are included under MAPR. The New Changes The new regulation changes extend to all consumer loans, not just short-term payday or tax refund anticipation loans. Under the new rules, the only types of transactions not subject to MLA regulations are:

• Dwelling secured loans, including loans to finance the purchase or initial construction of the dwelling, refinance transactions, home equity loans, home equity lines of credit, and first mortgages
• Loans to finance the purchase of a motor vehicle when the loan is secured by the vehicle
• Loans to finance the purchase of other types of personal property when the loan is secured by the property

So, What Does This Mean?

Essentially, it means that all of your forms must be updated to reflect the new changes, and kept up to date as each phase-in level date is established. You must be familiar with the new regulations to make sure that they are reflected in all of your applicable lending forms. Oak Tree Business Systems, Inc. will do just that. We will make sure that all of your lending forms are correct, include appropriate verbiage, and accurate, up-to-date MAPR so they are in compliance. Oak Tree is a leader in the industry with a proven track record of producing a compliant product every time. Give us a call if you have any questions regarding your forms, or if you are wondering how the new MLA regulations will affect your institution.

(note: this is an older blog entry and has been edited since originally posted.)

TRID Enforcement Grace Period

CFPB Allows for Grace Period for TRID Enforcement

2015 TRID Enforcement Grace Period

TILA-RESPA Integrated Disclosure requirements go into effect August 1, 2015, but now there will be a good-faith enforcement grace period. The CFPB will be allowing for a TRID enforcement grace period. Stevens said that the grace period allows for institutions that are working in good faith to implement the rule, “the regulatory framework in this country will use what they can to provide instructive guidance during this delay period.” This goes beyond lenders, including “service companies, real estate companies, and third-party vendors” who need to make their systems compliant according to Stevens. This grace period is open-ended and will go to at least the end of 2015. However, this grace period timeline could be extended if needed, depending on how disruptive the new regulatory implementation is.

Cynthia Lowman, president of United Bank Mortgage Corp., pointed out the impact these new rules will have on the entire mortgage-lending industry, and if it is not approached the right way that it “will have a negative impact on consumers, banks, and the recovery of the housing industry.” The main concern with this new rule is the lack of time to “test the new closing process in real-time.” The TRID rule does not provide lenders an opportunity to start using disclosures before August 1, and the fact that lenders are not able to test their systems and procedures ahead of time increases the risks of unanticipated disruptions. This argument leads to the TRID enforcement grace period. This grace period is to ensure that there is a successful implementation of the Rule.

According to Housing Wire, “in May, the House passed H.R. 2213, introduced by Congressman Steve Pearce, R-N.M., and co-sponsored by Congressman Brad Sherman, D-Calif., which prevents enforcement of the integrated disclosure requirements and the filing of any related lawsuit if (1) the person has made a good-faith effort to comply with the requirements, and (2) the conduct alleged to be in violation of the requirements occurred on or before Dec. 31, 2015, thus allowing stakeholders and the CFPB to test the effective operation of the rule.”

If you have further questions regarding the new RESPA-TILA integration or would like to know more about how Oak Tree can help your credit union, please email ClientServices@oaktreebiz.com.

Garrison, Trey “It’s official: CFPB will grant grace period on TRID enforcement.” Housing Wire., 3 June 2015.

(note: this is an older blog entry and has been edited since originally posted.)

2015 Integrated RESPA/TILA Disclosures

2015 New Integrated RESPA/TILA Disclosures

Implementation and Transition November of 2013 was a busy time for Federal regulators as they approved final rules combining some of the RESPA rules with other rules still required under The TILA. Congress’s intent is to create an entirely new set of disclosures that when in place, will provide consumers with information (both new & old) formatted in such a way that provides the utmost clarity and consumer understanding. Let’s discuss the New Integrated RESPA/TILA Disclosures.

The new integrated disclosures will fall into two categories (e.g. “Loan Estimate” and “Closing Disclosure”). The “Who, What, When, Where & Why” The new integrated disclosures will need to be provided by creditors or mortgage brokers that receive an application [Emphasis Added] from a consumer for a closed-end credit transaction secured by real property on or after August 1st, 2015. Creditors are prohibited from using the new disclosures for applications that are received prior to that August 1st date and will instead need to follow the current disclosure requirements under Regulations X and Z, and use the existing forms (e.g. Truth-In-Lending disclosures, GFE, Settlement Statements, etc.). The Federal regulators have built in a “transition period” or overlap of time, during which both sets of disclosures will need to be available and creditors will need to use the forms/disclosures that are appropriate to the specific transaction at hand. As applications received prior to August 1st, 2015 are consummated, withdrawn, or canceled, use of the existing GFE, Settlement Statements, and Truth-In-Lending forms will, for the most part, no longer apply. Closed-end reverse mortgages will still be subject to the current disclosure requirements under Regulations X and Z. As this particular “overlap” of disclosures can be particularly tricky, you really need to contact our Client Services Department for full details (Jenny@oaktreebiz.com – 800.537.9598). While August 1st may seem like a long way off, from a practical standpoint it isn’t, and for that reason, the construction of the new forms at Oak Tree is well underway to be certain of their availability in time for the new deadline. Given the size of the new documents and the scope of the transaction-specific information that must be mapped or otherwise programmed by your data processor, once you receive your proofs you will want to approve and return them as quickly as possible.

ELECTRONIC FUND TRANSFER AGREEMENT (REGULATION E) The Electronic Fund Transfer Act is a consumer protection statute that, among other things, limits a consumer’s potential liability for unauthorized transactions made with an approved account access device. The exact amount of the liability is for the most part, determined through the use of a tiered approach that is driven by the time within which a consumer notifies the financial institution. For example, when a consumer notifies a financial institution within two (2) business days after his learning of the loss or theft of the access device, the regulation provides that the consumer’s liability will be restricted to the lesser of $50.00 or the sum of the unauthorized transfers that occur before notice. In the event that the consumer fails to notify the financial institution within two (2) business days after learning of the loss or theft of the access device, the consumer’s liability will increase to the lesser of $500.00, or: (i) $50.00 or the amount of unauthorized transfers that occur within the two (2) business days, whichever is less plus (ii) The amount of unauthorized transfers that occur after the close of two (2) business days and before notice to the institution, provided the institution establishes that these transfers would not have occurred had the consumer notified the institution within that two-day period. The consumer may be liable for additional amounts, depending on the specific set of circumstances.

Since this regulation only establishes a consumer’s maximum liability, institutions are permitted to reduce these limits. Such is the case with the Zero Liability Rules that have been issued by both Visa and MasterCard. With respect to MasterCard, their revised zero liability rule now requires that the consumer use reasonable care in safeguarding the Card from loss or theft; and upon becoming aware of such loss or theft, promptly report that loss or theft to the Credit Union.

There’s more detail to be had here (“the fine print”) and we’re always available to pass it along to you. When you use Oak Tree for your credit union document needs, you can be sure we are keeping an eye on these kinds of changes to keep your forms compliant. We will ensure you are ready for the next “New Integrated RESPA/TILA Disclosures”.

(note: this is an older blog entry and has been edited since originally posted.)