One of the benefits of your credit union's League membership is access to InfoSight--a valuable online compliance resource. This newsletter contains some timely highlights, and access to InfoSight is a benefit of League affiliation, so it is password-protected. If you have a specific compliance issue or concern, contact our Consulting Department at (800) 285-5300. Replies to this email will be directed to League VP Consulting & Education Joe Guilfoy .
InfoSight Highlight
IRS Form 1098
Credit unions (i.e., "interest recipients"/lenders) who receive mortgage interest payments of $600 or more during a calendar year, must report those interest payments to both the member (i.e., payer of record making those payments) and to the IRS on "Form 1098, Mortgage Interest Statement."

In 1994, the IRS issued a final regulation on reporting prepaid interest in the form of points paid on residential mortgages. Although this regulation took effect December 8, 1994, the reporting requirements do not apply to points received before January 1, 1995.

The IRS compares the 1098 provided by the credit union with the mortgage interest payments claimed as deductions on the member's income tax return.

What is a mortgage?
For purposes of this reporting requirement, a mortgage is defined as an obligation (e.g., a loan) secured (all or in part) by real property. It is the credit union's responsibility, as the interest recipient, to make the determination as to what a mortgage is. Note that real property includes a manufactured home, including certain mobile homes.

How do multiple mortgages effect credit unions?
The credit union must file a separate 1098 for each mortgage on which it received interest of $600 or more during a calendar year. If the credit union receives less than $600 of interest on a mortgage then no reporting is required.

What are mortgage interest payments?
According to Form 1098, the term mortgage interest includes "interest on any obligation secured by real property, including a home equity, line of credit, or credit card loan."

Click here to view the topic , and to ensure your credit union is in compliance.
Compliance Videos
NEW! Compliance Outlook for Q4 2017
In this video, Glory LeDu provides a brief summary of the key changes of the new HMDA rules that became effective January 1, 2018. You won’t want to miss this important overview!
Quarterly Update for Q4 and Review of Q3
This newly released Compliance Connection video reviews those laws and regulations effective in the 3 rd Quarter of 2017 and tells credit unions what to prepare for in the 4 th Quarter of 2017 as well as what’s coming up in the first half of 2018. You won’t want to miss it!
 
Just a reminder that Compliance videos since 2016 can be found on YouTube at the Compliance Connection channel , where they are generally updated quarterly.
Compliance News
The 2017 Tax Reform Bill: FAQ on the Deductibility of Home Equity Interest
CUNA Compliance has received several questions as of late regarding how the recently enacted tax reform legislation (H.R. 1) will affect the deductibility of interest for home equity loans and lines of credit going forward. Let’s take a closer look, keeping in mind that we are not tax law experts. Members should be advised to consult their tax advisor for further information regarding the deductibility of interest and other charges. 

Under the new tax law, is interest on home equity lines of credit (HELOCs) deductible or was that deduction removed?

Section 11043 of the tax bill amends Section 163(h)(3) of the Internal Revenue Code which is found in Title 26 of the United States Code. 

It provides that a deduction for interest paid on home equity indebtedness shall not be allowed for taxable years 2018 through 2025. There is no grandfather provision for this disallowance, meaning that the deduction has been temporarily eliminated for ALL home equity indebtedness regardless of when the debt was incurred. 

NOTE: Section 11043 also reduces the current $1,000,000 cap on the deductibility of interest for acquisition indebtedness to $750,000. However, acquisition indebtedness incurred before December 15, 2017 is grandfathered at the $1,000,000 limit. 

Section 163(h)(3)(C) defines home equity indebtedness as  any  indebtedness (other than acquisition indebtedness) secured by a qualified residence to the extent the aggregate amount of such indebtedness does not exceed:
  • The fair market value of such qualified residence, reduced by
  • The amount of acquisition indebtedness with respect to such residence.

Use of the word “any” would seem to indicate that either a closed-end home equity loan or home equity line of credit meets the definition of home equity indebtedness. 

NOTE: The Internal Revenue Code defines “acquisition indebtedness” as any indebtedness which is incurred in acquiring, constructing, or substantially improving any qualified residence of the taxpayer, so long as it is secured by such residence. 

Does any of this affect our advertising responsibilities when it comes to home equity loans and lines of credit?

Not really. Credit unions are strongly encouraged to not place themselves in the position of giving tax advice to their members. In addition, the advertising requirements found in Sections 1026.16 (for open-end credit) and 1026.24 (for closed-end credit) of Regulation Z remain. These sections provide that in advertisements for loans secured by the member’s principal dwelling, the credit union must clearly and conspicuously state that the member should consult a tax advisor for further information regarding the deductibility of interest and charges.

Source: CUNA Compliance Blog
Agencies announce leniency on 2018 HMDA data
OCC, FDIC, and a  public statement from the CFPB  all state that the respective agencies do not intend to require data resubmission unless data errors are material or assess penalties with respect to errors for data collected in 2018 and reported in 2019 under HMDA and Regulation C.

The Bureau also announced it intends to open a rulemaking to reconsider various aspects of its 2015 HMDA rule, such as the institutional and transactional coverage tests and the rule’s discretionary data points.
Delay of Prepaid Accounts Rule likely
The CFPB has issued a  statement on its Prepaid Accounts Rule , indicating that it "expects to issue a final rule amending certain aspects of its 2016 rule governing prepaid accounts soon after the new year. As part of that process, the Bureau expects, based on its review of the comments received, to further extend the effective date of the 2016 rule to allow additional time for implementation of the final rule. The Bureau proposed making changes to the prepaid rule in June; the comment period on the proposal ended in August."
Bureau announces HMDA tools additions
The CFPB circulated an email notice last week that it has launched a HMDA Check Digit Tool and Rate Spread Calculator, both available on the CFPB/FFIEC  Resources for HMDA filers  webpage.

Source: CFPB
NCUA Issues Letter to Credit Unions Regarding Examination Priorities
In case you missed it, the NCUA recently issued a Letter to Credit Unions highlighting the agency's areas of examination focus for 2018: cybersecurity, bank secrecy (customer due diligence), internal controls and fraud prevention, interest rate and liquidity risk, auto lending, commercial lending, consumer compliance (HMDA, MLA, and overdraft policies).  Click here to read the details of the NCUA letter.
 
Source: NCUA
Advocacy Highlight
Fed publishes Reg M proposal
The Federal Reserve Board has published its previously announced proposal to amend its Regulation M (12 CFR Part 213) to define its limited scope following enactment of the Dodd-Frank Act and the CFPB's issuance of its Regulation M. Both regulations implement the Consumer Leasing Act; the Fed's regulation only applies to certain motor vehicle dealers. Comments on  the Fed's proposal  are due by March 5, 2018.
 
Source: Federal Reserve
Tax Reform Bill Passed
At the end of 2017, the Congress passed the House-Senate tax reform conference committee of the compromise “Tax Cuts and Jobs Act” (TCJA), which would cut taxes by roughly $1.5 trillion over ten years and would make significant changes to and simplify our nation’s tax laws.  Use this link to read the details of the recent passage of the tax reform bill that allows credit unions to maintain their non-profit status, among many other provisions.
 
Source: CUNA Advocacy
Weekly Regulatory Advocacy Report
The Weekly Advocacy Report provides links to information about a number of recent League, CUNA and NCUA regulatory and advocacy activities. 
   
Upcoming Education Sessions
The League has several education sessions coming up. Several focus on compliance issues. They are listed in calendar format on the League website.
   
League Consulting Department Staff
(800) 285-5300
Compliance Calendar
January
  • January 15, 2018: Martin Luther King, Jr. Birthday - Federal Holiday
February
  • February 19, 2018: President's Day - Federal Holiday
March
  • March 16, 2018: Same-day ACH (NACHA) – Phase 3 of the implementation period for the rule.
April
  • April 1, 2018: Prepaid Accounts under the Electronic Fund Transfer Act/Regulation E and the Truth In Lending Act/Regulation Z (Date Extended)
May
  • May 11, 2018: Customer Due Diligence – CDD (FinCEN) – Effective date
  • May 28, 2018: Memorial Day - Federal Holiday
July
  • July 4, 2018: Independence Day - Federal Holiday
September
  • September 3, 2018: Labor Day - Federal Holiday
October
  • October 8, 2018: Columbus Day - Federal Holiday
November
  • November 12, 2018: Veterans Day (observed) - Federal Holiday
There's more available from InfoSight
InfoSight content is available from the League's website . Visit anytime to get sample policies, links to federal regulations and summaries of issues that are hot-topics at your credit union. 
 
Access to InfoSight is a benefit of League affiliation, so it is password-protected. If you don't have a passw ord or if you have forgotten yours, click on the tan "Log In" button in upper right corner of the site; a box will open. Click on the blue wording to get your password.