DFS Clarifies Zombie Property Exemption

December 8, 2016 at 9:11 am 1 comment

Yesterday the Department of Financial Services finalized its Zombie Property regulations and clarified the exemption standard applicable to most credit unions.  This is a big help since it is now clear precisely what institutions are exempt.

The Governor also released a consumer Bill Of Rights for residents facing foreclosure.  It is yet another piece of paper to be provided to individuals facing foreclosure.

As all New Yorkers reading this blog should know, NY legislation set to take effect December 20th imposes obligations on lenders to maintain abandoned property upon which they have not yet foreclosed.  The good news is that the legislature exempted credit unions and banks that do a smaller volume of mortgage lending from these requirements. Unfortunately, the proposed exemption language was as clear as mud. Without clarification, institutions that the legislature intended to exempt from maintenance requirements would have found themselves having to comply with them. The DFS recognized this problem and made a helpful amendment.

As initially proposed to qualify for the exemption  you had to be a state or federally chartered credit union that:

…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.

The final regulation amends  subdivision B. It provides that to qualify for the exemption  a bank or credit union must :

  1. engage in mortgage origination and mortgage ownership during the calendar year; and
  2. 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.

Since even credit unions that sell most of their loans originate and own loans, the removal of the maintenance and service requirements will ensure that the exemption works for the institutions the legislature intended to exempt.

There is much more forthcoming on implementing the Zombie law so stay tuned.

Entry filed under: General. 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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