Posts filed under ‘Political’
There are two reasons governments nationalize corporations: (1) The company is losing money and it is considered too important to fail; or (2) it is making lots of money and the government wants to get its hands on it. Fannie and Freddie have had such a roller coaster ride since 2008 that they have been victimized by both impulses. Since credit unions have a vital stake in the future of the secondary market, they shouldn’t shy away from voicing their opinion.
Yesterday, Freddie Mac announced a $200 million loss for the first quarter. It attributed the loss to those blasted GAAP accounting rules. (If only companies could come up with their own financial statements without accountants getting in the way, the economy would be so much stronger.) Specifically they explained that interest rate volatility, combined with the way they book their derivatives, made things look worse than they actually are. Yada, yada, yada. http://www.freddiemac.com/investors/er/pdf/2016er-1q16_release.pdf
Freddie’s announcement raises questions about the continued wisdom of an aspect of US housing policy, which has thus far received too little attention. In September, 2008 the Government handed the GSEs a lifeline and $187 million was drawn from the treasury. Congress also empowered the FHFA to act as conservator or receiver of Fannie and Freddie, and to take over the rights of any stockholder, officer, or director. The Government originally took preferred stock; but, starting in 2012, the Government started sweeping all GSE profits exceeding capital buffers. Considering that the GSEs have made lots of money in recent years, this was a good deal for the Government. In fact, it was such a good deal that the Treasury is being sued by private stockholders claiming that the Government is taking money that belongs to them. Perry Capital LLC v. Lew, 70 F. Supp. 3d 208, 217-18 (D.D.C. 2014).
But, does this policy make sense if the GSEs are losing money? “This development reinforces my concern over current federal policy regarding the GSEs, who have more than fully repaid the funds they borrowed during the 2008 financial crisis,” said Rep. Michael Capuano, D-Mass. He is a member of the House Financial Services Committee, who has emerged as a level headed voice of reason on housing policy and was quoted in this morning’s American banker as saying. “Despite this, they must continue sweeping all their profits to the Treasury Department. The policy needlessly prevents them from building a capital reserve, which leaves taxpayers vulnerable in the event of a future crisis.” http://www.americanbanker.com/news/law-regulation/freddies-quarterly-loss-renews-cries-to-end-profit-sweep-1080807-1.html
A lot happened yesterday in NYS politics. Long-serving Southern Tier State Senator Thomas W. Libous, whose career terminated following a federal perjury conviction, passed away after battling prostate cancer.
Hugh Farley has announced he is leaving the State Senate after 40 years. For decades, Farley was one of the most influential banking policy makers as Chairman of the Senate Banks Committee.
And, of course, Sheldon Silver was sentenced to 12 years in jail, in addition to a hefty fine, and ordered to pay restitution of over $5 million.
Ridesharing a Top Legislative Priority
When the Legislature returns from its late April slumber, the regulation of the emerging ride sharing industry will be a top priority according to Assembly Democrat John McDonald. In an interview published yesterday, the Cohoes Legislator argued that expanded ride sharing options and the traditional taxi medallion industry can co-exist.
“I don’t look at ridesharing as the threat to the (taxi) industry that most people think it is. Most of the taxi business here is medical transport. That’s what they do, 80 percent of it,” McDonald said. “We’re working on a parallel path with the taxi industry to Uber-ize them as well, bring them into the 21st century. It’s the technology.”
The Assemblyman’s comments are worth noting for a few reasons. First, with the biggest issues taken care of (paid family leave and the minimum wage) in the budget, ride sharing has certainly moved up the Legislative to-do list. Furthermore, the fact that an upstate Assemblyman is highlighting the issue demonstrates why it is so complex. Whereas, down-staters are understandably concerned about the regulation of New York’s existing medallion system, up-staters view ride sharing as a means of expanding transportation options. Your blogger will attest that the taxi service in the Albany area is nothing short of atrocious.
Remember that for credit unions the two big issues are proper insurance to protect the value of their auto loans and the value of medallion loans.
CFPB to Make Further Changes to TRID
In a letter to industry stakeholders yesterday, the Bureau said that it would be incorporating much of its informal guidance into proposed amendments to the TRID regulations by late July.
The Bureau has been doing a fair amount of letter writing lately. It recently responded to a letter from Tennessee Republican Senator Bob Corker, who asked the Bureau four questions:
- What is the CFPB doing to address the borrower confusion due to the discrepancies between federal and state law regarding the disclosure of title insurance premiums?
- What steps is the CFPB taking to prevent lenders from shifting liability to settlement agents?
- Will the CFPB consider forming an internal task force to identify and address issues arising from the implementation of the TRID rule? And
- Will the CFPB release technical guidance regarding what constitutes a technical error and potential remediation method?
Here is the Bureau’s response.
By the way, while lenders remain ultimately responsible for ensuring proper disclosures, there is nothing to prevent them from spreading the cost of liability to third parties, nor should there be.
Justice Department Oks KeyCorp Merger
KeyCorp and First Niagara Financial Group Inc. have agreed to sell 18 of First Niagara’s branches in and around Buffalo, New York, with approximately $1.7 billion in deposits, to resolve antitrust concerns that arose from KeyCorp’s planned acquisition of First Niagara,the Justice Department announced yesterday. Here is a list of the branch locations to be divested. https://www.justice.gov/opa/file/846646/download The Department said that with these branch sales it will no longer oppose the merger. Both Senator Schumer and Governor Cuomo have urged the federal government to block the merger which has to ultimately be approved by the Federal Reserve. They argue that it will result in a loss of jobs and financial services in the impacted regions.
I’m not running for the Republican Party’s Presidential nomination (but, unlike House Speaker Paul Ryan I am open to being drafted at the convention) . So I can say that when it comes to housing policy Ted Cruz has a point about New York values being bad for the country. We need fewer procedural hoops and more commonsense.
A report released yesterday by NYS Comptroller Thomas P. DiNapoli provides the best evidence yet of how the state’s kneejerk reaction to the 2008 Mortgage Meltdown actually did more harm than good. As legislators debate what to do about NY’s Zombie property they should also consider making adjustments to a foreclosure process run amuck to the benefit of no one but the delinquent homeowner who often has no realistic means of paying off the mortgage. With much of the CFPB’s mortgage mitigation procedures modeled after states like California and New York there are lessons in this blog for you even if you don’t live in the Empire State.
It is remarkable just how backlogged NY’s foreclosure pipeline still is. According to the Comptroller New York state has the second highest home foreclosure rate in the nation, with 1 in 21 home mortgages in foreclosure; I t also has the fourth-slowest foreclosure process in the nation, averaging over 2.5 years per property. As the report tartly notes “ It is not surprising” that New York has a disproportionately high share of mortgages in foreclosure, relative to the rest of the country” New York has the second-highest home foreclosure inventory in the nation with 4.77 percent of mortgages in foreclosure. New Jersey led the nation at 6.47 percent.
What a coincidence that the states with two of the most convoluted foreclosure processes have the biggest backlogs.
But what is wrong with regulatory and statutory safeguards intended to crack down on banker abuses such as the dreaded Robo-Signing epidemic? Funny you should ask. According to the Comptroller the requirement mandating that lenders and attorneys personally vouch for having reviewed pertinent foreclosure records has created a “shadow docket” of cases in which foreclosures had been initiated but were essentially frozen as lawyers and lenders turned gun-shy about making personal assertions, especially about vacant property. This exacerbated the rise of vacant property that have local governments so frustrated.
New York’s judicially supervised settlement conferences provide another great example of unintended consequences. Multiple meeting replete with rescheduled conferences are the norm According to the report, these conferences don’t settle many foreclosures they simply delay them. On average they take 110 days to complete downstate and eighty upstate
In reacting to the mortgage meltdown with a phalanx of legal protections New York missed the mark. The problem was never the foreclosure process itself but the fact that too many people were given houses they couldn’t afford.
Believe it or not a more efficient foreclosure system really is in everybody’s best interest. Localities will have to deal with fewer Zombies if lenders know they can quickly access property and get it back on the market and delinquent homeowners will have more of an incentive to negotiate reasonable settlements if they know they can’t drag out the foreclosure process for years.
Here is one more quote from the report worth pondering:
“ New York’s lengthy foreclosure process offers some benefits to borrowers or other people who occupy homes while the loans are delinquent. Borrowers have a right to occupy their properties until the foreclosure process is complete. Doing so enables them to avoid the costs of mortgage, tax and home insurance payments.”
Here it is:
This is no April Fool’s joke. Yesterday it was announced that Montauk Credit Union, which was placed into conservatorship by the DFS in September as a result of the dramatic decline in Taxi Medallion prices, has merged with Bethpage Federal Credit Union on Long Island.
The merger means that the Long Island based Bethpage FCU will now have a presence in New York City. According to Bethpage’s press release, Montauk headquarters at 111 West 26th Street will be converted into a full service community branch and shared service facility through the Coop Shared Branch Network. Bethpage’s asset size will increase from $6.4 to $6.6 billion. NCUA’s emergency powers give it broad authority to approve mergers involving insolvent credit unions, so long as alternatives are not reasonably available and the merger is in the public interest.
Incidentally, Bethpage started in 1941 as a credit union for Grumman employees. In 2003, responding to the loss of military contractor jobs on Long Island, it converted from a SEG based to a community based credit union.
Mindful of the need to keep New York State as business friendly as possible, the State Legislature last night approved a budget that held the line on education spending and continued to aid the growth of business in the state, which is facing increasing pressure from cheaper Southern and Western locales. April Fools!!!!!
As I write this, the Legislature is still working to pass a budget for the 2016-2017 State Fiscal Year. There is no budget I remember that will have a more direct impact on employees and employers. Most importantly, the budget includes a phase in of a regionally based minimum wage increase and a state-level paid family leave requirement.
According to the Governor’s press release, workers in New York City employed by businesses with at least 11 employees would see their minimum wage rise to $11 at the end of this year and then $2 more for each of the next two years to reach $15 an hour. Workers in New York City employed by businesses with fewer than 11 employees will see their minimum wage rise to $10.50 at the end of this year, and then see annual increases of $1.50 an hour until it reaches $15 an hour in 2019. The minimum wage for workers in Nassau, Suffolk and Westchester Counties will reach a $15 minimum wage by the end of 2021. In the rest of the state the minimum wage will increase to $9.70 at the end of this year and then increase $.70 annually until it reaches $12.50 an hour by the end of 2020. Further increases in the upstate minimum wage will be determined by the Director of the Division of the Budget in consultation with the Department of Labor.
As for paid family leave, it will be phased in between 2018 and 2021. According to the Governor’s press release, the program will be funded “entirely” through a nominal payroll deduction on employees so that it cost businesses “nothing.” Call me wacky, but I could swear the budget includes a sweep from the workers’ compensation fund to help get the program up and running. Furthermore, doesn’t it cost employers something to accommodate the absent employee? Finally, I don’t know about you but I don’t know how many more “nominal” deductions my paycheck can take.
Needless to say, there are many things that credit union employers will have to learn in the coming months and years. As we read through the budget bills, we will pass on the information.
Good morning. Today’s blog contains what I humbly believe is the perfect blend of compliance and a little politics. Here goes.
FinCEN Issues Further MSB Guidance
Mishandled MSB accounts have resulted in high profile disasters for credit unions. Consequently, for those of you who continue to have Money Service Business accounts or may open them, take a look at this recent guidance issued by FinCEN.
Money Service Businesses (MSB) are exactly what they are called. They are basically businesses that specialize in handling money such as check cashers and money transmitters. Because they are such cash intensive businesses and they provide money services for a wide range of individuals, they present special BSA/AML risks for credit unions and banks that open accounts for them. One of these challenges is the way larger ones tend to be structured. There may be a single principal money transmitter but with several agents acting on its behalf. This is a model you see, for example, with many money transmitters down in New York City.
The guidance released by FinCEN is directed at MSB principals. It stresses that to establish effective AML policies and procedures, principals must monitor the procedures and practices of their agents. They simply can’t rely on contract language making their agents responsible for engaging in BSA compliant activities.
Now I know some of the more observant compliance brethren out there are wondering how this applies to them. After all, as NCUA has expressed in its own MSB guidance, it expects credit unions to manage risks associated with all accounts, “including MSB accounts. However, credit unions are not responsible for their members’ compliance with BSA and other applicable federal and state laws and regulations.”
Well, this is just my opinion, but the fact that businesses are responsible for their own BSA compliance will be scant consolation for those credit unions that find themselves holding high volume MSB accounts administered by businesses that aren’t complying with basic regulatory requirements. Depending on the size and complexity of the MSB, I would certainly subject them to greater due diligence before opening their account. That due diligence should be ongoing and include an assessment of what steps the business is taking to ensure proper agent oversight.
The Better Angels of Our Mercy?
I don’t know if Abraham Lincoln is rolling over in his grave or on the edge of his seat watching the reality TV show called the Republican Primary. I do know that last night’s results provide some good news for New York Republicans. The primary is normally an afterthought on the political calendar, but the State’s 96 delegates are now a very tempting target for Republican candidate John Kasich, whose plans of keeping Trump from getting the nomination before the Republican convention are predicated on winning West and East Coast primaries where Republicans are believed to be more responsive to his moderate brand of Conservatism. It just so happens that April 19 is the same day on which a special election to fill the seat vacated by convicted former Senate Majority Leader Dean Skelos is taking place. It is safe to assume that a highly contested primary will bring out more Republican votes.
Incidentally, the battle for control of the State Senate took another interesting twist yesterday with the announcement that Mark Panepinto (D-Buffalo) won’t seek re-election. He won the seat in 2014 in a highly contested race.
If you are still scrambling to get your systems updated and your members are experiencing delays in closing on their mortgage loans since the new TRID rules took effect on October 3, you are not alone. This is clear from the results of a survey released by the American Bankers Association yesterday, which surveyed banks ranging in size from under $50 million to over $20 billion in assets.
Among the most surprising findings: the surveyed banks are still scrambling to make changes to their loan operating systems months after the regulations took effect. According to the American Banker, this reflects the fact that vendors are still trying to figure out what is required of lenders under these new regulations. According to the survey, 72% of respondents are still waiting because of vendor software problem defects.
The CFPB would argue that these little bumps in the road are worth it to end up with a better consumer process. As of right now, the benefit to consumers is mixed at best. For example, 77% of the respondents reported delays in loan closings because of TRID, ranging anywhere from 1 to 20 days, with an approximate average of 8 days. In addition, 40% of respondents reported that the cost of obtaining a mortgage alone has increased.
Perhaps it is time for the CFPB to wake up and smell the coffee.
Republican Party Gets Trumped
I wasn’t going to say anything about Donald Trump’s primary victories last night, all but assuring that he will be the GOP candidate for President in November, but I can’t help myself. Here are some quotes from the op-ed section of the Wall Street Journal, which summarized my feelings nicely this morning.
Conservative columnist William A. Galston wrote: “suppose we give Mr. Trump more credit than he deserves and take him at his word. It is abundantly clear that no Mexican leader or government would ever agree to pay for his border wall. What then? He would lack the legal authority to impose tariffs on countries such as China and Mexico that run persistent trade surpluses with the U.S. What then? He has proposed a massive tax cut and other programs that, according to the Committee for a Responsible Federal Budget, would add between $11.7 trillion and $15.1 trillion to the national debt over the next decade. This plan, which would be ruinous if enacted, would not be adopted, and candidate Trump has no other economic agenda. What then?”
This next quote summarizes how I feel about my fellow Americans who decided that voting for Mr. Trump was a good idea. Holman W. Jenkins, Jr. wrote: “To be honest and impolitic, the Trump voter smacks of a child who unleashes recriminations against mommy and daddy because the world is imperfect. The blaming of elites has gone too far. The American voter has a big hand in his own disappointment.”
NYC’s medallion credit unions recently suffered another legal setback in their effort to level the regulatory playing field between the heavily regulated yellow cab industry and ride sharing companies such as Lyft and Uber.( Melrose Credit Union v. City of New York, 15-cv-9042)
This morning’s New York Law Journal is reporting that on January 26th federal judge Southern District Judge Analisa Torres rejected claims that NYC’s Taxi and Limousine Commission was violating the equal protection rights of medallion owners. In its complaint the plaintiff’s contended that, by imposing onerous requirements on medallion cabs without imposing similar requirements on ride sharing networks they were being subjected to unequal treatment under the law, which has already diminished the value of their medallions by 40%.
According to the NYLJ, “Torres said the different rules for taxis and for-hire vehicles were “rationally related” and “allow the TLC to achieve the legitimate government objectives of increasing the accessibility, availability, and diversity of cost-effective transportation.”
That same day a separate court refused to block from taking effect regulations requiring half of the city’s medallion cabs to be wheelchair accessible by 2020.
So it begins
Your blear-eyed blogger had the first of several late nights last evening watching the results of the Iowa caucuses. Bernie Sanders and Hillary Clinton essentially tied-49.6 to 49.9- for Hillary and Ted Cruz soundly defeated “The Donald” who eked out a second place finish against Marco Rubio.
The line of the night was from Republican Mike Huckabee, the former Arkansas governor and past caucus winner. He announced he was quitting the race explaining that he was not withdrawing because of the vote-he finished tied for ninth-but “because of illness…obviously the voters are sick of me. ”
My take away: both parties are in for one of the most drawn out and competitive primary seasons in modern history. The electorate doesn’t know what it’s in favor of but it sure does know what it’s against, which is just about everything. We are a nation of rebels in search of a cause.