Needed: Clarification of NYs Abandoned property Requirements

June 21, 2016 at 8:59 am 5 comments

As I explained in yesterday’s updated post the Legislature included abandoned property legislation in Part Q of this budget bill (S. 8159) There are also loads of unanswered questions that need to be clarified before this law kicks in six months after it is approved by the Governor.  I could spend the next six weeks picking apart the language in this bill but I will just get my point across by analyzing its most basic provision: The carve out for financial institutions with low mortgage volume.

The legislation has two major components. An obligation to maintain abandoned property which applies to banks and credit unions above a threshold of mortgages and a second part that expands the scope of New York’s settlement conferences that applies to everyone.

Do the abandoned property provisions apply to your CU? It depends.  I underlined the parts of this definition .

It applies to “state or federally chartered banks, savings banks, savings and loan associations, or credit unions which: (1) originate, own, service and maintain their mortgages or a portion thereof; and (2) have less than three-tenths of one percent of the total loans in the state which they either originate, own, service, or maintain for the calendar year ending December thirty-first of the calendar year ending two years prior to the current calendar year. For any state or federally chartered banks, savings banks, savings and loan associations, or credit unions which originate, own, service and maintain between three-tenths of one percent and five-tenths of one percent of the total loans in the state which they either originate, own, service, or maintain for the calendar year ending December thirty-first of the calendar year ending two years prior to the current calendar year, the application of this section shall be prospective only.”

First, the good news is that the Association was able to carve out most credit unions. The threshold number of mortgages that will trigger  compliance with the abandoned property provision  will be set be set on an  ongoing basis by the DFS but based on 2014 numbers if your credit union does fewer than four hundred first lien mortgages  there is a good chance it is  off the hook .

Secondly, this bill does not categorically exempt state chartered credit unions. I’m pointing this out because this is exactly what the Sponsor’s memo accompanying this measure says it does.

Third for those of you who operate mortgage subsidiaries there is no exemption for those subsidiaries.

What concerns me most about the definition is that it manages to be both disjunctive and conjunctive at the same time. For a financial institution to be exempt it must “originate, own, service and maintain their mortgages or a portion thereof” and be below the threshold. In contrast any mortgage which your credit union either originates, owns, services, or maintains counts against the cap Does this mean that a credit union that quickly sells almost all of its mortgages to the secondary market isn’t exempt because it doesn’t maintain a portion of its mortgages? And  precisely how many mortgages constitute a “portion” of a mortgage portfolio anyway?

Inquiring minds need to know. As those of you charged with implementing this requirement for your cu begin to analyze it please don’t hesitate to reach out to the association.

Entry filed under: General.

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5 Comments Add your own

  • 1. Donna  |  June 21, 2016 at 1:36 pm

    Hi Henry. Is this separate and distinct from S4781-A (KLEIN) and A 6932-A (Weinstein)? I see it’s Part Q of the Budget Bill. What impact does that have on these other bills? Has this now passed both houses and it’s ready for the governor’s signature?

    Reply
  • 2. Henry Meier  |  June 22, 2016 at 10:23 am

    Donna this is what the Legislature is going to do on Zombie property. Once this bill is signed by the Governor, which it will be, it takes effect in 180 days

    Reply
  • 3. Keith O  |  July 1, 2016 at 9:16 am

    Henry – If an FI is affected by this law, does that effectively eliminate the ability of an FI to choose to not foreclose on a property? We’ve had loans that we’ve walked away from because the remaining balance did not justify foreclosure. The remaining balance was no worse than losing on a basic consumer loan. I know at least one involved an empty property. Or let’s say it was not empty but we still chose to just charge off the debt and not foreclose. We typically would not release our lien in these situations. What if the homeowner later abandoned the property? Would the state come back to us as lienholder? Should we file satisfaction of mortgage in a situation like this even though it was not actually satisfied? What a quagmire.

    Reply
  • […] always been concerned that the Legislature’s intent doesn’t match the language.  Yesterday,  NY’s Department of […]

    Reply
  • […] of residential real property mortgages originated in New York in 2015. The number is 212,646.  As readers of this blog know, under the zombie property regulations, credit unions will use this number to find out whether they […]

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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