Read It and Weep? NY Releases Zombie Property Regulations

September 28, 2016 at 9:04 am 1 comment

zombie-pictureWhen NY passed Zombie property legislation earlier this year the Legislature’s intent was to only impose the requirement to identify and maintain abandoned property on larger financial institutions. Specifically the law was to apply to those institutions which had  more than three-tenths of one percent of the total loans in the state which the mortgagee either originated, owned, serviced, or maintained for the calendar year ending two years prior to the current calendar year.

I’ve always been concerned that the Legislature’s intent doesn’t match the language.  Yesterday,  NY’s Department of Financial Services released its proposed regulations to implement the law which takes effect December 20th.    I’m still concerned that the state has cast  a wider net than intended.  Please take a look and the proposal and don’t be afraid to call  or email me and tell me why I’m wrong.  We will have 45 days to comment on the proposal after it is published to the State Register on October 12.

First, the regulation presumptively applies to all banks and credit unions. The state is going to tell you what the numerical threshold is but your credit union is going to have to prove why the regulation doesn’t apply to it.

Here is where it gets real interesting. The bold font is mine.

“1. For each calendar year, the obligations imposed by RPAPL 1308 shall not apply during that calendar year to a mortgagee that is able to establish all of the following:

it curves out “a state or federally chartered bank, savings bank, savings and loan association, or credit union that can prove

“B “engages in all of the following activities during that calendar year: mortgage origination, mortgage ownership, mortgaging servicing, and mortgage maintenance; and

  1. It had less than three-tenths of one percent of the total loans in the state which the mortgagee either originated, owned, serviced, or maintained for the calendar year ending two years prior to the current calendar year.”

To me a plain reading of this regulation only curves out institutions that do ALL of the activities listed in paragraph B.  As a result a small credit union that originates but does not service its loan wouldn’t qualify for the exemption no matter how few loans it does.

This could easily be remedied by the DFS amending its regulations or the Legislature doing a chapter amendment to clarify its intent. An amended regulation  would read something like this:

  1. For each calendar year, the obligations imposed by RPAPL 1308 shall not apply during that calendar year to a mortgagee that is able to establish it does all of the following.

“B. It engages in any [all] of the following activities during that calendar year: mortgage origination, mortgage ownership, mortgaging servicing, and mortgage maintenance; and…”

  1. It had less than three-tenths of one percent of the total loans in the state which the mortgagee either originated, owned, serviced, or maintained for the calendar year ending two years prior to the current calendar year.”
  2. No one can seriously think that smaller institutions should be burdened with this mandate. This law is going to be tough enough for the big Guys to comply with. Let’s not give smaller credit unions and community banks one more reason to stop making mortgages. Let’s clear up this ambiguity.

 

 

Entry filed under: New York State. Tags: .

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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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