Posts filed under ‘New York State’

And down the stretch they come…

With the legislative session scheduled to end sometime tomorrow, this is the time when most of the really important stuff is voted on, amended, or left to wither on the vine until next January.

While there are a bunch of bills that I will be talking about in the coming weeks there is of course one that continues to grab the attention of all faithful bloggers; I am talking about the Banking Development District bill which continues to advance. Yesterday it passed the Assembly without being laid aside for debate. The final tally was 83 to 9.

Remember now is the time to be contacting all those Senators and debunk all the nonsense the banks have been telling them. For one thing, credit unions do pay taxes, lots of them. You may also want to point out that this bill does nothing more than allow credit unions to participate in a program that would assist areas with a dearth of banking services.

A second issue that came up yesterday doesn’t deal with legislation, but it is a pressing concern not only in NY, but to anyone who offers mortgage loans across the country. State Comptroller, Thomas DiNapoli, issued a report calling for enhanced state/federal coordination of water quality standards. This gives me the opportunity to sound off on one of my personal pet peeves.

No one is ever going to accuse me of being a tree-hugger, but my research of issues surrounding the water contamination in Hoosick Falls and the potential ramifications of hydro-fracking has demonstrated to me that lenders must get clearer guidance from the federal government and the GSE’s in particular about baseline environmental standards including water quality.

As it stands right now any time a mortgage is sold to the secondary market the seller is making strict liability guarantees regarding the environmental safety of the area in which the property is located. If these warranties are breached the lender can be made to repurchase the mortgage. Obviously, this makes sense if someone is selling land in love canal, but most environmental issues are not as clear cut as the extreme cases that get national attention. The result is that lenders who work with the GSE’s are forced to make tough decisions about the long term environmental impacts dealing with issues such as water quality and mediation, often with little guidance from the Federal Government.

Furthermore, many of the areas in need of environmental remediation are already suffering from economic decline. The hesitancy of lenders to lend in these areas (even for a short time) makes these declines even more dramatic.

I applaud Comptroller DiNapoli for highlighting the importance of this issue, but I would suggest that any comprehensive analysis is incomplete unless it also highlights the need for the GSE’s to work more closely with lenders, lending in areas where the water quality is in need of mediation. One of the most basic things they can do is limit the scope and or length of warranties.

 

June 20, 2017 at 9:44 am Leave a comment

Banking Development District Bill Gains Traction

Legislation that would allow credit unions to participate in Banking Development Districts (BDD) (S.6700 -Hamilton)/A.6494B -Zebrowski) for the first time in two decades is gaining traction in both houses of the Legislature as we enter the final week of session. This is good news for anyone in need of greater access to financial services. The bill has advanced to the Assembly floor and has been introduced by the Senate Rules Committee, which means it can be voted on at any time by the full legislature.

The BDD program has been in existence since 1997 with the first district authorized in 1999. The basic idea of the program is that localities and financial institutions jointly apply to the DFS for designation as a BDD. In return for opening up a branch in an area underserved by banking institutions, banks and other depository institutions are eligible for low interest deposits.

The program is a great idea since it makes it more cost effective for financial institutions to provide banking services in areas which are currently lacking access to depository institutions. Unfortunately, as the DFS noted earlier this year, banks and other financial institutions “have submitted a modest number of applications over the last twenty years.” In addition, a 10 year review of the program by the Banking Department concluded that it could be “dramatically improved.” Allowing credit unions to participate in the program could provide the jolt it needs to be truly effective.

Shock of shocks, the usual suspects are trying to kill the bill. The kneejerk opposition of the banking industry, while utterly predictable, is even more cynical than usual. Despite the fact that the industry has demonstrated a lack of interest in participating in the program for almost 20 years, it is fighting to keep credit unions from enhancing the program.

This is the latest example of banks being so opposed to credit union that they are putting their own perceived interests above consumers. Despite the fact that we live in one of the wealthiest states in the nation, there are millions of New Yorker’s who have no choice but to turn to check cashers and payday lenders. Anything the Legislature can do to encourage and help persons of modest means get their monies deposited in to a financial institution is in everyone’s best interest.

 

June 16, 2017 at 9:23 am Leave a comment

Are You Prepared For Paid Family Leave?

Greetings. It is back to reality after what I personally believe was a phenomenal Annual Convention in Bolton Landing.

Judging by the dramatic dive in my readership that takes place around this time of year, I know that many of you take a break from the nuances of the legislative and regulatory developments of our industry. I call it summer hibernation.

One thing that you should be paying attention to though is the roll out of NY’s Paid Family Leave law. In case you haven’t been paying attention, starting in January 2018 New York is going to start phasing in paid family leave. For example, starting January 1,2018 – eligible employees will receive the lesser of 50 % of their weekly wage or 50% of the states average weekly wage , whichever is less, for a period of 8 weeks during any 52 week calendar period. By the time it is fully phased by 2021, employees will be eligible to receive 12 weeks of paid leave in any calendar year. This law applies to your credit union regardless of its size or charter type.

Even though the law and its benefits don’t kick in until January, New York State is giving employers the option of starting to deduct money from paychecks starting on July 17, 2017 for benefits that kick in January 2018. This is optional and I would certainly recommend checking in with HR folks to see what the best approach is for your credit union.

IF the plan works as intended its cost will be paid for through employee contributions. On June 1st the DFS issued the 2018 premium for Family Leave Benefit Employee Contributions. For coverage beginning January 1, 2018 the amount will be 0.126 of the employees weekly wage provided it doesn’t exceed the average weekly wage of NYS.

Stay tuned. This law is the HR Professional Employment Act in waiting.

June 5, 2017 at 10:36 am Leave a comment

Does NY’s Cybersecurity Regulation Apply To Your Credit Union?

With the recent ransomware attack demonstrating how vulnerable the world is to cyberattacks, I spent part of my weekend looking back over NY’s regulations and to whom they apply to. These regulations took effect in March, but there is a six month transition period, with some requirements being phased in over the next year.

What follows is one man’s opinion and not a substitute for consultation with your own counsel and compliance team.

NY’s regulations apply to “any person operating under or required to operate under a license, registration, charter, certificate, permit, accreditation or similar authorization under the Banking Law, the Insurance Law or the Financial Services Law.” This definition clearly applies to state chartered credit unions and CUSO incorporated or licensed in New York State, such as a mortgage banking or title insurance business.

What if you have a federally chartered credit union that makes mortgage loans? Here is where people part ways with my analysis. Even though originators working for banks and credit unions are exempt from state licensing requirements under Section 12C of the banking law, they still must be registered with NYS as loan originators. (N.Y. Banking Law § 599-c(3)(a) (McKinney). On its face the regulation is broad enough to be triggered by this requirement.

Persons within the industry, which whom I have discussed the regulations reach, argue that even if my interpretation is correct it is hard to see how NYS could actually enforce the regulations against a federal chartered institution. To me this argument overlooks the fact that this regulation’s requirements will impact more than your compliance system. If it works the way I think it will, it will become an integral part of your most basic business relationships.

For example the regulation will impact your third party relationships. Entities covered by the regulations must identify and perform a risk assessment on all third party vendor relationships. They also must explain the minimum cybersecurity protocols for which they expect third party vendors to comply. This requirement is broadly consistent with third party vendor guidelines. If I was drafting a contract for your credit union, reference to NY’s cybersecurity requirements could provide a useful and precise baseline for the expectations that you expect vendors to meet. This is particularly true given the increasing importance that adequate encryption plays in your cybersecurity program.

Even if NYS’s regulation doesn’t apply to you today, you don’t have to be Nostradamus to figure out that similar regulations will soon be imposed on your credit union. The ransomware attack demonstrated just how vulnerable our county is. Like it or not, NY’s regulation provides a template upon which regulators can quickly build, and my guess is they will do so.

May 22, 2017 at 9:52 am Leave a comment

Mortgage Lending Mishap You Can Easily Avoid

Yours truly is in a particularly good mood today.

Not only is it Friday, it is a sunny and warm Friday, and as someone who would gladly go the rest of his life without seeing another snowflake, it doesn’t get better than this. Thirdly, and most important for our purposes, a settlement announced yesterday between JPMorgan Chase and homeowners provides a great example of why—whether you are a federal or state charted credit union—it can get awfully expensive to disregard state mortgage law.

Under NYS law (N.Y. Real Prop. Acts. § 1921(1); N.Y.Real Prop. § 275(1)) a lender/mortgagee must present a satisfaction of mortgage for recording within thirty (30) days of a mortgage being paid off. If the mortgagee does not, it is liable for statutory damages between $500-$1500 per violation. I was around when the Legislature imposed these fines. At the time, legislators were fed up with getting calls from frustrated constituents, desperate to locate their mortgage satisfactions, which they assumed were recorded years ago.

In Bellino v. JPMorgan Chase Bank (U.S. District Court, Southern District of New York, No. 14-cv-3139), a homeowner paid off her mortgage loan on May 14, 2012. Chase sent the satisfaction of mortgage to the Westchester County clerk by Fed Ex on June 13, 2012, but the payoff was not received by the county clerk until June 15. The homeowner brought a class action law suit against the bank, seeking damages on behalf of herself and all others who took out a mortgage with Chase between 2011-2016, for whom a certificate of discharge or satisfaction was not presented to the appropriate county officer within 30 days. Yesterday Chase agreed to settle this case for more than $8 million.

A few quick takeaways as there is more going on here than meets the eye: First, Chase never denied that it was tardy with its filing, but argued that the case should be dismissed because the homeowners suffered no real harm. The court flatly rejected this argument, underscoring that those pesky little penalties that legislators like to add at the end of consumer protection laws have created a cottage industry of lawyers making a pretty good living out of nickel-and-diming financial institutions.

Second, it all comes down to process. Chase easily could have avoided this lawsuit had it just had tighter processes.

Third, just to be clear, you are not obligated to make sure that the satisfaction is recorded in thirty days, just that it is received in thirty days.

I have always thought that the credit union industry is a bit obsessed with the distinction between federal and state intuitions, at least when it comes to mortgage lending. At the end of the day you will be impacted by the laws of the state in which you are located. There are of course numerous exceptions to this statement, but a healthy understanding of your states laws and how they impact your operations is a critical part of any compliance program.

On that note, yours truly is done blogging for the week! Enjoy your weekend. Peace Out.

 

May 19, 2017 at 10:14 am 1 comment

Household Debt Hits New Record

Far be it from me to tell anyone how to do their job, but if I was involved in lending for a living I would certainly take a close look at the New York Fed’s quarterly snapshot of household debt released yesterday. Its either (a) an infliction point signaling that sustained higher growth has taken hold; (b) a high point which masks some disturbing trends; or (c) something in-between.

First, the “good” news. The American consumer is back baby! The New York Fed tells us that household debt achieved a new peak in the first quarter of 2017, rising by $149 billion to $12.73 trillion—$50 billion above the previous peak reached in the third quarter of 2008. Balances climbed in several areas: mortgages (1.7 percent); auto loans (0.9 percent); and student loans (2.6 percent). Considering that consumer spending accounts for at least 70% of the nation’s economic growth all this spending is good news. Despite the growth, credit card balances fell 1.9 percent this quarter.

Secondly, there is evidence that we have learned our lesson According to this accompanying research the country still has less mortgage debt than it did a decade ago and lenders have actually followed the credit union lead in lending to more credit worthy borrowers.

So why am I a little skeptical? It doesn’t feel like it but by historical standards we are at the back end of the growth cycle. As none other than Ben Bernanke pointed out in a speech yesterday that from a historical standpoint a recession is due in the next two to four years.   In addition much of the current economic hype is predicated on a “Trump bump” but don’t expect major Reg Relief let alone tax reform until Robert Mueller completes his Russia investigation.

Supreme Court Makes Important Bankruptcy Rule

One of the CFPB’s real pet peeves has to do with debt collectors who continue to seek repayment of debts even after the statute of limitation for their collection has expired. In addition, inquiring minds want to know if it is legal for debt collectors to submit proofs of claim in Chapter 13 bankruptcy proceedings for the repayment of such debts. Earlier this week the Supreme Court provided guidance on this issue. It ruled that debt collectors do not engage in an unfair and deceptive practice, under the Fair Debt Collections Practices Act, by submitting claims for stale debts.

MIDLAND FUNDING, LLC v. JOHNSON dealt with a creditor who submitted a proof of claim for repayment of a 10 year old credit card debt. The debtor argued that this was an unfair and deceptive practice since the debt was not collectible. Alabama has a six year statute of limitations. The Court explained that the parties to a Chapter 13 bankruptcy are sophisticated. Most importantly the bankruptcy is responsible for reviewing the validity of all claims. The court effectively held that, while a trustee has every right to reject a stale loan there is nothing to keep the debt collector from seeing if he can slip one by the goalie.

Baseball Hot Dogs, Apple Pie and Uber

Nothing says summer like hailing a ride from Uber or Lyft, or at least that is what some New York lawmakers think. They recently proposed legislation to push up the effective date of New York’s law authorizing ride hailing services from July 9th to July 3rd, just in time to get a cheap ride home from the beer infused family Fourth of July party.

May 18, 2017 at 9:18 am Leave a comment

Are NCUA’s Lending Standards Too Tough?

When state chartered credit union Melrose CU was placed in conservatorship in February, New York’s Department of Financial Services put NCUA in control. Fast forward to Friday: The WSJ is reporting that the Committee for Taxi Safety, a Long Island City-based organization advocating for the medallion industry, sent a letter to NCUA Chairman J. Mark McWatters complaining that, in the aftermath of NCUA’s takeover, Melrose’s medallion loan terms have become too severe. It is demanding large down payments, imposing high interest rates and seeking peoples’ homes as collateral. Neither NCUA nor the DFS was willing to respond publicly to these concerns. According to the committee’s President David Beier, medallion owners can survive, but only if lenders (i.e. NCUA) show more flexibility.

The letter comes at a key time for the medallion industry. One medallion sold for a new low of $241,000, but many within the industry argue that this sale was an outlier and that medallion prices are stabilizing at approximately $550,000.

Department of Homeland Security Issues Warning on Ransomware Attacks

With the world- wide ransomware cyberattack threats likely to continue today, here is a press release from the DHS urging all persons and business to do the following;

  • Update your systems to include the latest patches and software updates.
  • Do not click on or download unfamiliar links or files in emails.
  • Back up your data to prevent possible loss, whether you are at a home, work or school computer.

Movie night at the Meier house

I watched The Founder starring Michael Keaton on pay-per-view last night. Great movie for anyone interested in business, ethics, fast food or really good acting.

May 15, 2017 at 9:21 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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