New York to Nation: Thank Us for the Mortgage Regs
I have some good news for anyone in New York responsible for sifting through the mortgage servicing regulations released by the CFPB yesterday. We have a huge advantage over other parts of the country because the framework for much of what the CFPB is proposing has been in New York State regulation since 2010. In fact, the CFPB noted in the preamble to yesterday’s rule that New York’s “regulations impose obligations on servicers with respect to, among other things, consumer complaints and inquiries, statements of accounts, crediting of payments, payoff balances, and loss mitigation procedures.” If you’re from another part of the country, brace yourself, you have a lot of work to do.
Here are some of the similarities where New York is ahead of the curve.
- New York already requires prompt crediting of mortgage payments.
- The new servicing requirements mandate that servicers respond in writing with explanations as to why members do or do not qualify for modifications or other forms of debt relief.
- A major thrust of the new regulations is to ensure that members have a contact person that they can get a hold of when trying to work through mortgage problems.
- Most importantly, New York statute and regulation already require pre-foreclosure notices and impose a legal obligation on lenders to make a good faith effort to work with delinquent borrowers prior to commencing a foreclosure. Don’t fool yourself, there is a good faith standard in what the CFPB outlined yesterday. For example, depending on the time frame “a borrower may appeal a denial of a loan modification program so long as the borrower’s complete loss mitigation application is received 90 days or more before the scheduled foreclosure sale.”
Now, I don’t want to overstate the case. There are a lot of details in the federal regulations that aren’t in New York law, so I’m by no means suggesting you put the CFPB’s proposal on the back burner. Credit unions that don’t meet the 5,000 or fewer mortgages exemption will have to send out monthly statements to their members as opposed to the annual requirement imposed by our regulations, but I know there is at least one servicer that already does this.
In addition, the CFPB’s attempt to end dual track modifications/foreclosures is going to propose even more procedural hurdles to an already cumbersome foreclosure process. The bottom line is that as envisioned by CFPB’s new regulations, a foreclosure cannot be completed until the servicer responds in writing to a member’s written mitigation request provided such request is sent at least 37 days before the foreclosure. In addition, if you gave a member an adjustable rate mortgage, they will have to get at least 210-240 days advance notice before the mortgage resets for the first time. I’ve been told by people who do this sort of thing for a living that this time frame makes it impossible to provide accurate information since you don’t know what the rate is going to be down the road. Don’t worry, the CFPB knows this and is allowing you to estimate what the new rate would be.
I recently did a blog pointing out that the Federal Housing Finance Administration wants to impose additional fees on mortgages purchased from New York because of expenses imposed by our foreclosure process. Perhaps when Dodd-Frank is fully implemented, everyone can have an expensive, cumbersome foreclosure process with the potential for keeping people in houses long after they can realistically afford to live there. As New York goes, so goes the nation.
Armstrong Should be a Bank CEO
Now that Lance Armstrong has admitted he cheated and lied to build up his stellar reputation as America’s best cyclist ever, he is more than qualified, at least with his chutzpah and clear lack of contrition, to become a CEO at one of America’s largest investment banks. After all, is Armstrong’s “everyone did it so let me get on with my life defense” any different than the grudging apologies offered by the captains of industry after the financial crisis only to go on the attack against any regulations holding them accountable for what they actually did? I’ll be impressed with Armstrong if he offers to give back the 100’s of millions of dollars he’s made off his cheating. On that note, have a nice weekend.