Credit unions and other lenders need to stay on their toes to keep up with new data reporting requirements that will kick in later this year thanks to financial reform legislation, said Paul Pouliot, first vice president with the Federal Home Loan Bank of Boston.
Pouliot presented his rundown of the potential impact of the huge new regulatory changes on the secondary market to a standing room-only session at the Great New England Credit Union Show. He highlighted several unresolved questions which will impact lenders, including Treasury’s plans to replace Fannie and Freddie, the effect of new qualified residential mortgage (QRM) standards mandated by the Dodd-Frank bill on lender’s risk retention requirements and new data standards being required by the Federal Housing Finance Agency (FHFA) which will kick in later this year.
While it may take years for Fannie and Freddie’s fate to be resolved, and new QRM rules won’t be finalized until next year, the FHFA has required Fannie and Freddie to fully adopt and implement the Uniform Mortgage Data Program by next spring, with some changes set to be rolled out this year. The Uniform Mortgage Data Program (UMPD) is intended to provide investors in Fannie and Freddie securities with more information about loan portfolios, increasing the amount of data available for review and bringing the GSE’s into line with data standards for private-label mortgage backed securities.
“Investors have had concerns about data defects that have been discovered over the years. Typically, these defects have been discovered when loans are seriously delinquent or in the process of foreclosure,” said Pouliot. “We need the confidence of the global markets to be willing to purchase mortgage backed securities in the future.”
Adopting the UMDP standards will mean that in addition to loan applications, lenders must also provide information derived from other steps in the loan origination process, such as appraisals and underwriting. But that will mean that many credit unions and other lenders will have to review their entire origination process and software in order to make sure they’re capturing the necessary information, and may have to make considerable investments in software and training, said Pouliot. Otherwise, they could find themselves unable to sell loans onto the secondary market.
