Posts filed under ‘New York State’

More Bad News For Taxi Credit Unions

Bad news continues to trickle out about the taxi medallion industry.

Section 39 of New York’s Banking Law gives the DFS authority to regulate “unsafe and Unsound practices.”   In the last couple of days there have been several reports about a supervisory order issued on July second by the NY  DFS in consultation with the NCUA,   which orders Melrose Credit union to swiftly take several steps to improve management oversight and develop a plan to reduce its exposure to medallion loans.

Most importantly, the credit union, which has specialized in making taxi medallion loans for several decades, was given 90 days to develop a plan, that must be approved by the regulators , to “prudently reduce and manage its taxi medallion loan concentrations in New York Philadelphia and Chicago to the extent feasible given market conditions, the existing loan portfolio and the credit union’s authority to restructure or refinance loans. “

In addition, the credit union is tasked with developing a classified action plan to reduce the credit unions portfolio of poorly performing  assets.  Specifically the credit union must either reduce charge off selloff or improve these  classified assets.

With the order regulators also have taken firm control of the credit union’s management structure, including mandating that it hire a new CEO (which it has already done) and s senior lending officer.  All senior hires are now subject to DFS  approval.

While the order has understandably gotten a lot of attention, it also underscores just how far we still have to go before its even clear how the medallion issue will resolve itself.  For instance,  any plan to  reduce medallion concentrations,  no matter how well researched, will be little more than glorified guesswork until the medallion industry stabilizes. That won’t happen until we know just how big an impact  Lyft and Uber are likely to have and we won’t know that until we know what the legal framework for the ridesharing industry is going to be.

In the immortal words of Mike Tyson “everyone has a plan till  they get punched in the face” It’s likely that the last punch hasn’t been thrown.

Fed Minutes Released

I’m less interested in reading the minutes of the Fed Open Market Committee meetings then I used to be. To me,  they show just how uncertain the guardians of stable economic growth are about the state of the economy.

It’s a lot like going for a checkup and  being told by your doctor that he’s pretty sure you’re in  great shape… but, then again,  you just might be  at  Death’s Door depending on how healthy you really are…which is anybody’s guess.  The doctor says he   should  know more in  a couple of weeks, which is the same thing he told you two weeks ago.

For those of you who are interested in the minutes here they are.

 

August 18, 2016 at 9:24 am Leave a comment

Federal Government: Pot Still Illegal

I’ve written extensively about the hazy state of pot regulation in this country and how it has virtually paralyzed credit unions and banks that might otherwise be willing to provide services to pot businesses.  So I think it is worth noting that sometime today, the DEA will reportedly be rejecting a high-profile petition seeking to remove Cannabis from the Government’s most restrictive drug classification.

New York is one of approximately half the states in the Nation and the District of Columbia that has voted to legalize marijuana to one extent or another.  But banks and credit unions have been justifiably reluctant to provide financial services to pot businesses.  This is because marijuana remains unequivocally illegal under the federal Controlled Substances Act.  In fact, pursuant to the Act, the DEA classifies marijuana as a Schedule I drug, its most restrictive classification.  Critics have argued for decades that this restriction makes it almost impossible to perform the type of scientific research that would determine what medical benefit, if any, pot has.

As explained in this analysis by the Brookings Institute, rescheduling would “not suddenly legalize marijuana” or “solve the policy disjunction that exists between states and the federal government on the question of marijuana legality.”  Those same researchers noted, however, that a successful rescheduling petition would have effects on drug policy since it would be interpreted as recognition by the federal government of accepted medical uses for marijuana.  This is why advocates ranging from U.S. Senators to the National Conference of State Legislatures have endorsed rescheduling.

On a practical level, such a shift may have allayed the fears of regulators who are reluctant to allow financial institutions to enable pot businesses to access the Federal Reserve Banking system.  The decision leaves the status quo intact.  The next big event in the pot wars will come when the Court of Appeals 10th Circuit rules on an appeal from a state-chartered credit union in Colorado that was denied access to the Federal Reserve System and Share Insurance by the NCUA.

America’s Uneven Housing Recovery

Another issue which I have obsessed about in this blog is the state of America’s housing market and the causes that may lie behind its relatively sluggish rebound during this so-called recovery.  Lest you think these are just the concerns of a curmudgeonly blogger with a glass half-empty perspective, you should read the lead story in today’s Wall Street Journal, which explains that the recovery that began in 2012 has “left behind a broad swath of the middle class, threatening to create a generation of permanent renters and sowing economic anxiety and frustration for millions of Americans.”  This is not an op-ed penned by Bernie Sanders, but a front page article that is worth a read.

Hanging with the kids tomorrow.  See you Monday.

August 11, 2016 at 8:53 am 2 comments

Just Who Gets Those Pesky Foreclosure Notices, Anyway?

In Monday’s blog, I talked about new regulations clarifying your responsibility to send out federally mandated notices to Successors-in-Interest in real property – people who have a right to property by operation of law but who may or may not decide to assume responsibility for the property.  The CFPB adopted an expansive definition of successors-in-Interest and wants you to continue to provide them necessary notices – such as loss mitigation options, if their property is delinquent.

The CFPB’s regulations got me thinking about a recent case my colleagues at OwnersChoice Funding, the Association’s mortgage arm, gave me a heads-up on.  It underscores that for those of you responsible for mortgage compliance, you need two separate charts:  one detailing your federal requirements and a second outlining your NYS obligations.

As many of you know, New York Law requires the following:  Notwithstanding any other provision of law, with regard to a home loan, at least ninety days before a lender, an assignee or a mortgage loan servicer commences legal action against the borrower, including mortgage foreclosure, such lender, assignee or mortgage loan servicer shall give notice to the borrower in at least fourteen-point type.  See N.Y. Real Prop. Acts. Law § 1304 (McKinney).  The statute mandates that the notice is to be sent to the borrower by registered or certified mail and by first class mail to the last known address of the borrower.  Proper notice is a condition precedent to a foreclosure. 

Incidentally this notice requirement was imposed long before the general public had any idea who Elizabeth Warren was, let alone her wacky idea of creating a federal consumer watchdog agency. As a matter of fact, New York was one of the states that informed the CFPB’s loss mitigation regulations.

The problem is that the statute doesn’t define who a borrower is and this has created the opportunity for mischief-making as more lawyers get involved in foreclosure defense, which not too many years ago was an oxymoron, as farfetched as a Trump Presidency.  For example, what happens if a parent dies with an outstanding mortgage?  The property is willed to the kids, who become successors-in-Interest, but they don’t assume the mortgage or take out a new one.  A few years later the bank decides it’s time to foreclose on the property.  Do they have to send out a pre-foreclosure notice to the kids? This is exactly what happened in US Bank N.A. v. Levine, No. 54232/2015, 2016 WL 3677195, at *2 (N.Y. Sup. Ct. July 11, 2016).  The court said the answer is no.  The judge adopted the logic of a similar earlier ruling, which explained that “While the statute does not define that term, logic dictates that a ‘borrower’ is someone who, at a minimum, either received something and/or is responsible to return it.”

Chalk one up for common sense.  But all this comes with a huge caveat.  No appellate court – the ones that set most binding precedents – has addressed the issue, so if you find yourself foreclosing on an estate, you may find yourself having to deal with similar arguments for years to come. 

 

 

August 10, 2016 at 9:24 am 1 comment

3 Things You Should Know About Because I Said so

Just joking. But there really is some interesting news today.

Oracle Breach Shows We Are Even More vulnerable Than We Think

Word is trickling out of a data breach which is potentially more troubling than most. Krebs on Security, the Uber reliable blog of former Washington Post reporter Brian Krebs, reported yesterday that Russian cybercriminals have hacked into hundreds of computers at Oracle and may well have compromised a customer support terminal for   Oracle’s MICROS point-of-sale credit card payment systems.

Judging by Oracle’s website, the  MICROS  system is used by a wide range of industries ranging  from  Cruise ships and hotels to restaurants and retailers .  Avivah Litan, a leading cyber security expert at  Gartner, believes that the breach may explain why so many shops, hotels, and retail outlets have suffered breaches at their point of sale systems in the past months.

As the internet becomes more deeply embedded into not only commerce but everyday machines and appliances expect more breaches that impact a wider array of products. The breach is already following familiar patterns indicating it will be even bigger then it now appears.  For one thing, Oracle only confirmed the breach after being confronted by Krebs,  who does more to alert the public to cyber threats than any of those   laws  requiring companies to notify government and the public of   data breaches.  Oracle is involved in so many different parts of the cyber infrastructure that we will be lucky if only its POS operations were compromised.

NY AG announces $100 million Libor settlement

New York Attorney General Eric T. Schneiderman announced that Barclays had reached a $100 million settlement with 44 states to resolve claims that it manipulated the London Interbank Offered Rate and other benchmark interest rates.  According to the AG Barclays is the first bank under investigation by AG’s to settle LIBOR claims. It won’t be the last.

The LIBOR scandal hasn’t gotten the attention it deserves. LIBOR was set on a daily basis by banks reporting what they were being charged by other banks to borrow money.  Since so many financial products were tied to the LIBOR it became too tempting for banks  to submit false  prices.  In addition, as the financial crisis kicked in,  Barclays ordered its employees to submit false  information about how much they were being charged to borrow money.     I didn’t see how big a piece of the settlement NY is getting but it’s safe to say  that banker malfeasance has been a boom to the state’s coffers.

Olympian Gag Orders

This has absolutely nothing to do with your credit union or the financial industry but it’s one of my pet peeves. As really erstwhile readers of this blog l know I’m not a big fan of the Olympics.  The athletes are great but  a wonderful  sporting festival  has evolved into a made–for- TV reality show produced to entice the non-sports fan into watching sports they otherwise wouldn’t care about in the slightest but for the fact that America is going for the Gold.   It’s like the NCAA basketball tournament  on steroids. If you harbor any doubts about just how commercial this celebration of amateur athletics is read this article on trademark restrictions.

“Participating athletes themselves may not tweet or post about a sponsor in an advertising context that implies their association with the games, unless they’ve gained prior approval, according to U.S. Olympic Committee guidelines. Athletes found to violate these rules could be forced to withdraw from competition or be stripped of their medals, according to the Olympic charter. “

Enjoy you day.

August 9, 2016 at 9:17 am 2 comments

Tough Times Continue For NYC Medallions

imagesCAYI602KThese are turbulent times for NYC’s taxi medallion industry .

There were several foreclosures and transfers in May and June with one medallion going for as low as $405,000 and another selling for $610,000.  Remember that  this is an industry where, until a couple of years ago,  foreclosures were as rare as a show of humility by Donald Trump.

Keith Leggett predicted in his Credit Union Watch blog that   “These transactions indicate that credit unions with New York City taxi medallion loans will likely see an increase in delinquencies, troubled debt restructured loans, and charge-offs.”     We really won’t know the full extent of the damage until we know whether or not  medallion prices are at their nadir.  Stay tuned

NY Fine tunes Direct deposits  You may want HR to take a look at regulations proposed by NYS’s Department of Labor addressing , among other things, the use of Direct Deposit by employers

Fed OK’s KeyCorp\First Niagara Merger

The inevitable consolidation of the financial services industry is on track to continue as the Federal Reserve Board approved the merger of Buffalo based  First Niagara into Ohio based KeyCorp.

Two days ago Bloomberg news reported that Senator  Schumer,  who had expressed reservations about the merger, signaled he was no longer opposed after KeyCorp  agreed  to cut no more than 250 jobs and to hire at least 500 people in the next three years.   The deal will make KeyCorp the 26th largest bank in the US and will have a direct impact on New York.  The Albany Times Union reported that the merger will result in the closure of  30 branches  with 18 closing as early as  October .

By the way, in reviewing the impact that the merger would have on financial services in the Buffalo area the Fed noted that “nine credit unions exert a competitive influence in the Buffalo market. Each institution offers a wide range of consumer banking products, operates street-level branches, and has broad membership criteria that include almost all of the residents in the market.”

So let me get this straight. According to the Banking industry, Credit union competition is a  bad thing which is why, for instance, NY municipalities shouldn’t be allowed to  place taxpayer money in credit unions;  but if it  helps banks become larger, credit union competition is  a good thing. Got it.

Just how much money will those 250 new  employees be making? JP Morgan CEO Jamie Dimon announced Tuesday that the bank  would be raising the minimum salary of its employees from $12 to $16.50 an hour depending on where they  work.  Dimon explained that “Wages for many Americans have gone nowhere for too long.”  What a guy!

Score on for Bernie Sanders on this one.

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July 13, 2016 at 9:14 am Leave a comment

How Divorce Complicates Your Mortgage Disclosures

Divorce increases the number of pitfalls for lenders who have the audacity to attempt to collect delinquent debt. Nowhere is this more true than in the great state of New York,  where a series of legal landmines masquerading  as consumer protection statutes  are waiting to attack the unaware lender.  Consistently applied and well drafted policies and procedures are crucial when it comes to loss mitigation and foreclosures .

The latest example of the dangers posed by New York’s foreclosure defense laws comes from M&T Bank v. Farrell, 2014-1913 decided July 12 in which the bank moved to foreclose on property  that a separated  Binghamton Dr. and his wife had jointly purchased in 1994.

I’ve talked about NY’s Real Property Actions and Proceedings Law Section 1304 before but it’s worth talking about again. It requires that mortgage lenders “ give notice to the borrower” at least 90 days before commencing a foreclosure. It’s  also important to keep in mind that the notice must be sent “by registered or certified mail and also by first-class mail to the last known address of the borrower, and if different, to the residence that is the subject of the mortgage. Such notice shall be sent by the lender, assignee or mortgage loan servicer in a separate envelope from any other mailing or notice “(N.Y. Real Prop. Acts. Law § 1304 (McKinney).

Remember the pre-foreclosure notice is in addition to the traditional summons and complaint required to start a foreclosure action. Courts have demanded strict compliance with 1304 and as more attorneys get involved in foreclosure defense 1304 defenses are  becoming more frequent.

In this case, at the time the pre-foreclosure notice was sent to the mortgaged property  Dr. Farrell no longer lived at the family  home and a separate  pre-foreclosure. notice was not  sent to his new address.  This invalidated the foreclosure.   M&T argued that it complied with the statute by sending the notice to the mortgage address. But the prevailing view of New York’s courts is that, as explained by the judge in this case,  the 1304  notice must be sent to the borrower’s last known address which may or may not be the mortgaged property. M & T had to start from scratch without passing Go and collecting $200

The case also underscores why it’s crucial to properly coordinate between your staff and your foreclosure attorney.  In this case M & T’s attorney submitted an affidavit stating that the 1304 notice was sent by personal and first class mail.  But this statement was inadequate to demonstrate compliance with the law since the attorney had no “first hand” knowledge of the mailing.

Cases like this demonstrate why your credit union should  have the person who prepares and sends out the 1304 notice on behalf of your credit union to swear out an affidavit the day the notice is sent to the delinquent members demonstrating compliance with 1304 based on her personal knowledge.

 

July 12, 2016 at 9:30 am Leave a comment

Send in the Clowns

Some divorces are, of course, for the best.  But others leave the divorcees in a temporary state of relief only to realize over time that the grass is not as green as they thought. 

The remarkable decision by the citizens of the United Kingdom to file for divorce with the European Union may very well end up like this.  Britain is the world’s fifth largest economy and by some measures the Capitol of International Finance.  It’s hard to see how breaking away from a free trade zone with which it does a good chunk of its trading is in its long term best interest or that of its citizens. 

Unfortunately for us, Britain’s decision is another in a series of body blows inflicted on the world economy, which help explain why economic growth in this country remains lackluster.  In her prepared testimony before Congress earlier this week, Janet Yellen explained that “One development that could shift investor sentiment is the upcoming referendum in the United Kingdom. A U.K. vote to exit the European Union could have significant economic repercussions. For all of these reasons, the Committee is closely monitoring global economic and financial developments and their implications for domestic economic activity, labor markets, and inflation.”

Governor Signs Abandoned Property Measure

On June 23, Governor Cuomo signed S.8159, the abandoned property bill that I have been talking about in this week’s blog posts.  The Governor’s action means that the law, imposing requirements on mortgage lenders to maintain abandoned property, takes effect in 180 days. 

I’ve also already mentioned the trigger for the threshold for determining whether or not these new requirements apply to your credit union.  You should also be aware that the bill applies prospectively for most impacted credit unions.  Specifically, the bill providers that “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.”

The DFS has rule making authority under this law and the sooner it starts explaining what financial institutions are impacted by this bill and to what extent, the better. 

On that note, have a good weekend.  God save the Queen.

 

June 24, 2016 at 8:36 am Leave a comment

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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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