Voting 2-1, credit union regulator’s board queues up 3 final rules for action before year-end

Final rules to cover CUSOs, shared facilities, mortgage servicing rights

Three final rules will be taken up – one each from October through December – affecting permissible activities by credit union service organizations (CUSOs), the definition of shared facilities, and the purchase of mortgage servicing rights under action approved by the National Credit Union Administration (NCUA) Board without the support of the board chairman.

The two Republicans on the three-member board, Vice Chairman Kyle Hauptman and Member Rodney Hood, were able to place the action on the board’s agenda under the agency’s own rules, which allow any board member to have an item included. (The manner in which this authority was exercised Thursday may have been a first.)

Under Thursday’s action, with Chairman Todd Harper dissenting, the board voted 2-1 to include:

  • a final rule on credit union service organizations (CUSOs) under Part 712 of the rules and regulations on the Oct. 21 NCUA Board agenda;
  • a final rule on field of membership (FOM) shared facility requirements under Part 701, Appendix B, on the Nov. 18 agency board agenda; and
  • a final rule on mortgage servicing rights under Parts 703 and 721 on the Dec. 16 agenda.

Harper provided the lone “no” votes on the issuance of all three proposed rules. In December, just after Mark McWatters left the board and Kyle Hauptman was confirmed and installed as a new board member, Harper voted against issuing the shared facility and mortgage servicing rights proposals, noting that he would want to see changes for both.

(The action also gives instructions to staff on the preparation of the final rules and authorizes the agency general counsel, until Feb. 28, 2022, to make whatever corrections or updates are required.)

As released in December, the FOM shared facility proposal would “modernize” requirements related to service facilities for multiple-common-bond federal credit unions (FCUs). It would, the agency said, include any shared branch, shared ATM, or shared electronic facility in the definition of “service facility” for a multiple-common-bond FCU that participates in a shared branching network.“The FCU need not be an owner of the shared branch network for the shared branch or shared ATM to be a service facility,” the agency said. “These changes would apply to the definition of service facility both for additions of select groups to MCB FCUs and for expansions into underserved areas.” Harper said he questioned the proposal’s ability, without changes, to increase service to underserved areas.

The mortgage servicing rights proposal would amend the agency’s investment regulation to permit FCUs to purchase mortgage servicing rights from other federally insured credit unions, subject to certain conditions. Describing the proposed rule as “half baked,” Harper then said he could find a way to support a final rule if changes were made.

In January, the board issued a CUSO proposal thatwould deem as permissible for CUSOs the origination of any type of loan that a federal credit union may originate; and grant the NCUA Board additional flexibility to approve permissible CUSO activities and services. The agency also invited comments on broadening federal credit unions’ authority to invest in CUSOs.

Harper, dissenting during the January board meeting, pointed out the NCUA’s lack of direct supervisory authority over CUSOs and indicated the proposal raised potential consumer protection concerns. On Thursday, he reiterated that and said the agency should be focusing on rules that protect consumers and “preparing the system for potential credit losses once the COVID-19 relief programs end.”

Harper voiced the possibility for unanimity on two of the rules at issue, but on the CUSO proposal, he reiterated his concerns about about the potential for growing an “already unregulated space within the credit union system, with little accountability for protecting consumers and credit unions.”

Board action memorandum