Posts filed under ‘Mortgage Lending’

The Good The Bad and The Ugly of NYs Legislative Session, part 1

NY’s Legislative Recap, Part 1

On Saturday morning the Assembly gaveled out putting an unofficial end to another New York State legislative session.  With the caveat that the session never really comes to an official end, except for a couple of seconds in January, here is my first look at some of the key developments that will impact your credit union and/or the industry. 

The Political Environment

This was the year of redistricting, which means that an inherently political process becomes even more political.  As a result of a Court of Appeals decision striking down the Congressional and State Senate maps for violating new provisions of the State Constitution, we still don’t know what Congresspersons and State Senators will be running in which districts this November.  Primaries for these seats are now scheduled for August 23rd.  In contrast, we were recently chatting about legislation with an Assemblywoman who was preparing to campaign later that day for her June 28th primary.  Assembly districts were not thrown out.  All this took place as Governor Hochul navigated her first session since taking over for former Governor Cuomo.  She is seeking a full term in November.  Against this backdrop, here are some of the key legislative developments.  Part 2 will be tomorrow.

More Progress on Public Deposits

Municipal Deposits – S670 Sanders

For the first time in decades, a bill which would authorize municipalities to place their deposits in credit unions passed the Senate.  While we will have to get the Senate to repass the bill next year, and get the Assembly to go along, this is more evidence that things are trending in the right direction.  Over the last few years we have passed legislation permitting credit unions to accept public funds as part of their participation in Banking Development Districts and receive subsidies for certain types of small business loans under the Excelsior Linked Deposit program.  Incidentally, all these votes mean that we have a record of who’s with us and who’s against us.

Mortgage Foreclosure and Defense

The legislature continues to aggressively examine New York’s mortgage lending process.  For my money, the most problematic bill that passed this year was S5473-D Sanders / A7737-B Weinstein.  Although the bill is being sold as a means of preventing putative abuses in New York’s foreclosure process, in reality it would create a hyper-technical foreclosure process that will retroactively allow hundreds, if not thousands, of people to gain clear title to houses they cannot afford.  New York already has the longest foreclosure process in the country and this bill would simply make things worse.

If this bill becomes law, credit unions with delinquent mortgage loans may have to dramatically increase their loan loss provisions. The bill has not yet been sent to the Governor and we continue to join with other industry stakeholders in opposing this bill.

As for some good news, the legislature did not pass bill S2143A Kavanagh / A2428A Dinowitz, which would create a private right of action, replete with treble damages, against mortgage servicers who commit even technical violations of Part 419, which is New York’s mortgage servicer regulation.  This bill raises a host of technical and policy issues which we will continue to address in the months ahead. 

State Level Antitrust Legislation

As I discussed in this post, the Legislature seriously considered a measure  S933-A Gianaris / A1812-A Dinowitz which would impose a state level European style antitrust framework.  The new framework would impact all businesses including credit unions.  Among the concerns we have about the bill is that it would make credit unions vulnerable to class action lawsuits for providing services in underserved areas and make any type of merger more expensive and time consuming by duplicating federal law.  This bill passed the Senate but fortunately never gained traction in the Assembly. 

Stay tuned.  My recap will continue tomorrow.

June 8, 2022 at 10:08 am Leave a comment

New York Introduces Further Remote Notarization Changes

In the closing days of December, Governor Hochul signed legislation permitting the use of remote notarization in New York, but coupled her signature with an announcement that further changes had been agreed to.  Yesterday, the Legislature introduced these proposed chapter amendments.

Although I am not quite ready to take a deep dive into the updated framework, if the Legislature passes these amendments, it means that starting January 31, notaries will be authorized to use remote ink notarization (RIN) to notarize a wide variety of documents, including the recording of mortgage documents that is required pursuant to Article 9 of New York’s Real Property Law. 

In the meantime, the effective date for the use of Remote Online Notarization (RON) will be pushed back to January 2023.  For more detail on the distinction between the two, read this recent blog.

Those of you interested in taking advantage of this increased flexibility should take a close look at this legislation, which, if acted on by the Legislature, will provide the guidelines for using this technology.

New York Clamps Down on Real Estate Agents, Fair Lending Violations

In 2019, Long Island Newsday reported on the results of a multiyear investigation into the area’s real estate practices.  It outlined disturbing evidence of widespread Fair Lending violations such as steering minorities to only certain communities.  In one of her last acts in December, Governor Hochul approved a series of measures passed in response to these allegations and subsequent legislative hearings. 

The bottom line is that the package is narrowly focused on additional education and training for the real estate industry, as well as providing increased funding for testing for Fair Lending violations.  As a result, these measures will not have a direct impact on your credit union, but don’t be surprised if you see a noticeable increase in the number of Fair Lending challenges to which lenders are subject in the coming years.

January 11, 2022 at 9:03 am Leave a comment

High Noon for Key Legislative Priorities

Good morning, folks.  Under New York State law, as interpreted by its Court of Appeals, all bills passed by the Legislature must be presented to the Governor by the end of the year. As a result, while many normal people are getting ready to take a long winter nap, those involved in the legislative process are experiencing an outburst of legislative activity. I wanted to highlight some of the key bills we are still keeping an eye on as we head into the Christmas break.

Later this week, we will find out whether the Governor has approved legislation which will legalize remote online notarization [S1780-C Skoufis] for New York State starting next April. This legislation has been a major priority of the industry. If it is signed by the Governor it will allow New Yorkers to get documents notarized without leaving their homes while permitting those credit unions that choose to do so to continue to provide notary services the old fashion way. In addition to being a huge benefit for the disabled and elderly, as well as individuals who live in communities that lack access to notaries, this legislation will bring us one step closer to a virtual mortgage transaction.

On the negative side of the balance, the Governor has yet to act on legislation which would reduce to 2% the amount of interest that can be charged on money judgments involving consumer debts. [S5724-A  Thomas]

Let’s say your credit union offers credit cards.  A member goes delinquent and ultimately your credit union gets a legal judgement against her for the outstanding debt. Under existing law you can charge up to 9% interest on that debt. If the Governor signs this law it will impact this process in two ways:

First, it will reduce the maximum interest rate from 9% to 2%. Even more controversially, however, the 2% cap would retroactively apply to judgements that have been entered but not yet executed. Operationally, I haven’t heard a good explanation yet of how this is going to be implemented.

Last but not least, the Governor is considering what action to take on Senate bill S1579A Parker which would require lenders and mortgage servicers to take responsibility for maintaining homes subject to delinquent mortgages earlier in the foreclosure process. Specifically, under the law, servicers and lenders would be responsible for maintaining property that is or becomes vacant or abandoned at the commencement of a foreclosure. Currently lenders and servicers must take on these responsibilities only for vacant and abandoned property after approximately 90 days.

December 20, 2021 at 9:54 am Leave a comment

Should the Government be subsidizing Million Dollar Homes?

The reason why I’m asking this question is because Fannie Mae and Freddie Mac will begin buying mortgages for as much as $1M starting next year, according to the Wall Street Journal.  Even though a million dollars doesn’t buy what it used to, the increased dollar amount not only will help your credit union help your members but will also, in my ever so humble opinion, touch off an election year debate about the role that government should play in housing finance. 

First, let’s start with the facts.  Fannie and Freddie purchase mortgage loans within Conforming Loan Limits (CLL).  Under the Housing and Economic Recovery Act (HERA), the CLL is adjusted each year based on changes in the average U.S. home price.  According to the journal, the baseline CLL will jump from $548,250 to $650,000.  The real eye popping number is that the conforming loan limit for high cost areas will jump from $822,375 to approximately $1,000,000.  The official announcement is expected November 30th

The sharp rise in the CLL underscores just how profoundly the pandemic has impacted the economy in so many unexpected ways.  Nationwide, the median single family home price rose 16% in the 3rd Quarter to more the $363,000.  We haven’t seen a comparable rise since 1968.  The rise in home prices has been fueled by a rush to the suburbs since remote work is now commonplace, combined with a shortage of homes to purchase.  It’s classic supply and demand. 

But I can’t help but think that more than a few of our elected representatives who live outside of Californian and New York will view a $1M home price as something the government should not be subsidizing.  Remember, it wasn’t all that long ago that a Republican controlled Congress, capped the federal deduction for state and local taxes, and it is a Democratically controlled Congress that has struggled to repeal this change.  Even though a million dollars is not what it used to be—one calculator I just consulted says that you need over $3.3M to have the same buying power that a million dollars would have given you in 1980—there is something about a million dollars which doesn’t sound middle class.  Let the demagoguery begin.

November 17, 2021 at 10:13 am Leave a comment

Fast And Furious: New COVID Guidance

Remember how in early July we were deluding ourselves into thinking that we were fast approaching a post-COVID nirvana in which we could all frolic freely without needing face masks, debating vaccine mandates or worrying about holding backyard barbecues?

Fast forward to mid-November and regulators are adjusting to a world in which COVID is a chronic condition and we have to adjust to this new normal. For credit unions in general, and compliance folks in particular, this means updating policies and procedures to make sure that you are keeping up with the latest COVID inspired dictates. Here are some of the latest developments I’ve spotted over the last week and a half:

  • The NCUA announced that it was extending the authority of federal credit unions to hold meetings remotely provided they have adopted the appropriate bylaws and send the appropriate notices to their membership. Remote flexibility is one of the good things to come out of the pandemic and I for one am glad to see that credit unions can continue to take advantage of this common sense measure.
  • Federal regulators, including the NCUA, recently announced that mortgage servicers were no longer going to be given a “get out of jail free card” when it comes to complying with RESPA’s mortgage servicing rules.

              In April of last year the same group of regulators issued a joint statement explaining that, “the current crisis could cause temporary business disruptions and challenges for mortgage servicers, including staffing challenges.” As a result, the regulators announced that they were giving servicers greater flexibility to comply with Regulation X. The same group of regulators now feels that the adjustment period has ended. The other day they announced that “servicers have had sufficient time to adjust their operations… agencies will apply their respective supervisory and enforcement authority to address any non-compliance with Regulation X”.  This one is a bit of a head scratcher to me because I could swear there is still plenty of evidence that staffing shortages persist and that members are still in need of enhanced forbearance assistance.  At least according to the CFPB.   

  • Never to be ignored, on October 28th New York’s Department of Financial Services issued its own guidance detailing its continuing expectations for mortgage servicers to work with consumers impacted by the pandemic. The guidance also encouraged servicers to participate in a new program being unveiled to provide financial support for eligible borrowers. I will have more about this program in the coming days.

On that note, visualize your post-COVID happy place and get to work.

November 16, 2021 at 9:24 am Leave a comment

NY Extends CRA Requirements to Licensed Mortgage Bankers

As expected, Governor Hochul signed legislation yesterday extending a state level Community Reinvestment Act (CRA) requirement on non-depository, state licensed mortgage banks.  The legislation does not apply to your credit union, but does apply to a credit union’s mortgage CUSO. 

Under the legislation, the Superintendent is given broad authority to assess, in writing, an institution’s record of performance “in helping to meet the credit needs of its entire community, including low and moderate income neighborhoods, and consistent with safe and sound operation of the mortgage  banker.”  Among the specific areas that DFS is to consider are the activities undertaken to assess the credit needs of its community; communicate its services; and the geographic distribution of its credit applications, extensions and denials. 

The law takes effect in a year so DFS will presumably promulgate regulations to flesh out the details.  The legislation was passed this past session following an investigation by the Department examining lending practices by mortgage bankers in the Western New York area. 

On that note, don’t forget to vote.

November 2, 2021 at 8:58 am Leave a comment

Is Your Credit Union Impacted By New Security Standards?

I have some good news and some bad news for you this morning. The good news is that the regulation I’m about to talk about does not apply to your credit union. The bad news is that it might apply to your credit unions CUSO. 

Yesterday the Federal Trade Commission (FTC) finalized regulations imposing enhanced requirements on financial institutions under its jurisdiction to implement information security programs. For example, the new regulations require, among other things, that entities designate an individual responsible for implementing and overseeing its data security program; develop procedures to ensure that the board of directors is periodically informed about data security developments; perform risk assessments that identify the entities’ data security vulnerabilities; implements dual-factor identification; and perform penetration testing to guard against third party intrusions. 

Nothing in these new requirements should come as a surprise to anyone reasonably aware of existing industry standards for data security, particularly if you are an entity subject to New York’s cybersecurity regulations. In fact, the really shocking thing is how many businesses are not currently subject to these baseline requirements. This is why both CUNA and NAFCU were generally supportive of these proposals. 

But your compliance team is not completely out of the woods. There are some CUSOs such as mortgage bankers which are subject to these requirements. And NCUA is likely to expand the type of activity in which CUSOs could engage. This is important because while federal law explicitly exempts the subsidiaries of national banks from the FTC’s oversight, no such provision is explicitly made for credit union CUSOs. As a result, you should review these regulations, assess the extent to which they could impact your CUSO, and update your policies and procedures accordingly.  

On that note, enjoy your weekend and I’ll be back on Monday. 

October 29, 2021 at 9:17 am Leave a comment

Can You Challenge A Hardship Declaration?

When the New York State Legislature gathered in early September and approved legislation extending New York’s foreclosure and eviction moratorium until January 15, 2022 for individuals suffering a COVID related hardship, it included a provision permitting landlords and lenders to challenge the validity of a person’s hardship claim. At the time that this bill was passed, it was unclear how much value this exception to the moratorium would actually have. We may get clarity on that issue in the near future.

The New York Law Journal is reporting that Justice Lawrence Knipel, administrative judge for civil matters in Kings County, has sent a letter informing homeowners facing foreclosure that they must attend in-person “foreclosure conferences” starting on October 25th. The letter explains to recipients that failure to attend these conferences could result in losing their foreclosure cases and informs the delinquent homeowners that they should bring any documents concerning their loan and current financial situation.

Attorneys from Brooklyn Legal Services sent a letter to the State’s Chief Administrative Law Judge, Lawrence Marks on Wednesday that these proposed hearings “plainly violate ‘New York’s foreclosure moratorium.”  Marks is responsible for the day-to-day operations of the court system in New York State.

Under the law, any party facing foreclosure and eviction can declare that their financial situation has been negatively impacted by the COVID-19 pandemic. Furthermore, these declarations are presumptively valid; this means that the burden is on the foreclosing party to prove that the delinquent homeowner is not suffering a COVID related hardship. What the lawyers seem to be questioning is whether the judge has the authority to mandate hardship conferences even in cases where lenders have not challenged these declarations. Stay tuned.

CUSOs Just Got More Powerful

You probably already know this, but in case you don’t, over the objection of Chairman Todd Harper, NCUAs Board voted two-to-one to expand the authority of Credit Union Service Organizations. The Board’s vote was the first in what may ultimately be a series of steps it takes to expand the flexibility federal credit unions have in relation to CUSO investments. Under the new rule, the list of permissible CUSO activities is being expanded to include any type of loan that an FCU may originate. The new rule also allows the Board the flexibility to grant future CUSO powers outside of the formal rulemaking process. The new rule is effective 30 days after it is published in the Federal Register.

A second regulation passed by the Board yesterday amends the CAMEL rating system by creating a separate category assessing a credit union’s sensitivity to market risk. This change puts NCUA on par with banking regulators. On that note, enjoy your weekend.

October 22, 2021 at 9:49 am Leave a comment

Three Things You Should Know To Start Your Credit Union Day

Municipal Deposit legislation, A8289, gained a key sponsor yesterday when the new Chairwoman of the Assembly Banks Committee became the prime sponsor of the legislation in that chamber.

Assemblymember Pat Fahy is the new chairperson of the Banks Committee. She replaces former Bronx Assemblymember Victor Pichardo who resigned from the Legislature this past summer. Pichardo’s departure means that the legislation will have to be reconsidered by the Banks Committee. Last year the legislation advanced to the Assembly Ways and Means Committee.

Assemblymember Fahy is a familiar face in the Capital Region who represents parts of Albany and Bethlehem. In September, the Association met with her office to discuss credit union priorities.

Court Clarifies Foreclosure Notice Requirements

When it comes to foreclosing in New York, minute mistakes can make a huge difference. Most readers of this blog know that state law requires mortgage holders to mail a 90 day pre-foreclosure notice to delinquent homeowners before commencing foreclosure (RPAPL 1304). When there are multiple borrowers, how is this requirement satisfied? In this recent decision a New York Appellate Court addressed this issue for the first time. It ruled that lenders must mail a separate 90 day notice to each borrower in separate envelopes.

Is this arcane? You bet it is. But if this procedure isn’t followed, a foreclosure will be dismissed, at least in Long Island, Westchester, Brooklyn, Queens and Staten Island over which this court exercises its jurisdiction. Wells Fargo Bank, N.A. v Yapkowitz, 2021 N.Y. Slip Op. 05139, 2021 WL 4448061

Yellen Continues To Push For Transaction Monitoring

Treasury Secretary Janet Yellen continues to insist that requiring banks and credit unions to report almost every account transaction by their members is no big deal. Ironically, she is making this argument even as America wakes up to the danger of Facebook controlling so much of our personal information. People don’t trust the IRS any more than they trust Mark Zuckerberg, although it might be close at this point. 

Yellen’s continued advocacy underscores that we have to continue to tell anyone that will listen that intrusive transaction reporting is a bad idea.

I will be back on Tuesday.  Enjoy your long weekend. This year’s World Series prediction, which has been certified as acceptable Secondary Capital by the NCUA, is the Milwaukee Brewers against the Houston Astros, with the Brewers winning in a seven game classic.

October 7, 2021 at 9:55 am Leave a comment

Four Things You Need To Know To Start Your Credit Union Day

For the first time in a while, I am overflowing with news you need to know to start your credit union day. As long time readers know, what follows is a series of quick hits, any one of which would be worthy of its own blog on a quieter day.

Treasury Pushes For Expanded Reporting Responsibilities

Anyone who thought we were out of the woods after the House Ways and Means Committee approved a plan to pay for a $3.5 trillion spending package that did not include increased reporting requirements for banks and credit unions is mistaken. Treasury Secretary Janet Yellen and IRS Commissioner Charles Rettig have written letters urging Congress to include the proposal in the final budget package.

With the caveat that there has been no language officially proposed, the idea under consideration would mandate that financial institutions report gross report flows of income in and out of accounts that exceed $600.

Clearly this would impose an onerous new mandate on credit unions and alienate more than a few members. Stay tuned for more information from the Association.

How Was Your Examination Service?

The NCUA announced yesterday that federal credit unions will be asked to submit a post examination survey that will be administered by the NCUAs Ombudsman’s office as part of a pilot program.

If you have fantasies about using the survey to vent after a rough examination, you will be disappointed. The letter explains that “examination disagreements or reports of waste, fraud, or abuse should not be reported through the survey response.” At the risk of being branded a heretic, the industry spends way too much time obsessing over the examination process.  After all, disagreements are inevitable and it’s actually a sign the system is working.

FHFA Makes It Easier To Finance Investment Property

The Federal Housing Finance Administration and Treasury announced that they were suspending certain agreements entered into this past January which placed caps on the number of investment property mortgages that Fannie Mae and Freddie Mac could purchase. This is the latest in a series of moves by the new leadership at the FHFA to use the GSEs to more aggressively provide aid for homebuyers.

Acting Director Thomson discussed the changes at NAFCUs Congressional Caucus. In a closely related development, the FHFA is also proposing changes to the capital requirements for the GSEs.

Let The Redistricting Games Begin

Yesterday marked the first formal step in the once-a-decade political blood sport that is redistricting. By the time the process is complete, the Legislature will have approved new Congressional and Legislative Districts that will shape the direction of politics and policy for decades to come. This morning’s Times Union is reporting that the bipartisan commission designed to propose the initial redistricting plan has instead proposed two separate plans. One supported by Republicans, the other by Democrats. It boldly predicted that a partisan stalemate looms in New York redistricting, which is tantamount to Claude Rains’ character Captain Renault claiming to be shocked that gambling is taking place in a casino. 

September 16, 2021 at 10:14 am Leave a comment

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Authored By:

Henry Meier, Esq., Senior Vice President, 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. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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