Posts tagged ‘CRA’

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

The Good, The Bad, and The Ugly as Albany’s Session Comes To A Close

Early this morning, the NYS Legislature came to its unofficial end as the Assembly passed the last measures of an extremely active session. Here is a first look at some of the key legislation that will impact CUs if it is approved by the Governor.

In a major legislative accomplishment, credit unions successfully lobbied for legislation which will allow them to participate in the Excelsior Linked Deposit program. The program gives lenders access to state deposits in return for making qualifying small business loans of up to two million dollars. Just how long have credit unions been seeking to participate in the program? Well, one of our volunteer board members lobbied for passage of the bill by showing legislators a letter he wrote in support of credit union participation to the Governor… Governor Pataki.

Credit Unions came up short on legislation which would allow municipalities to place their funds in credit unions but for the first time in at least 15 years, legislation has been voted out of the Senate and Assembly Banks committees. This means that the finance committees will be hearing from plenty of credit unions over the next year.

Finally, credit unions successfully lobbied for passage of legislation which will help bring banking into the 21st century by authorizing the use of remote online notarization. This bill is a win for consumers in general and the elderly and disabled, in particular, who will now be able to more easily get their documents notarized without having to go to a branch. The legislation would also make it easier to sell mortgages on the secondary market.

Now for the bad news. The legislature passed a measure to cap the interest that can be charged on judgements related to consumer debts at 2%. As drafted, the new interest rate would apply to judgements which have been filed but not yet executed prior to the bill becoming effective. If you think that is a recipe for a confusing mess, you’re correct.

Earlier this year, New York’s Court of Appeals wrote a series of decisions restoring a level of common sense to New York’s foreclosure process. The legislature passed a series of measures which chip away at these rulings. For example, Assembly 2502A imposes additional pleading requirements on lenders seeking to foreclose that could otherwise be waived by a homeowner.

Another bill passed by the legislature would extend CRA requirements to licensed mortgage bankers. Crucially, this bill would not apply to credit unions. It would apply to mortgage CUSOs.

Looking ahead, the table has been set for a debate over legislation to impose a California-style data protection framework on NYS. Legislation has been introduced and the Association is seeking to exempt GLB compliant institutions. Get your talking points ready for the trip to Albany next winter.

June 11, 2021 at 9:50 am Leave a comment

State Investigates Mortgage Lending Practices in Buffalo

Governor Cuomo and the New York State Department of Financial Services (DFS) issued a strongly worded report criticizing mortgage lending practices in the Buffalo area.  The DFS’ investigation was based on an analysis of HMDA data comprising the Buffalo Metropolitan Statistical Area (MSA), which includes the Counties of Erie, Niagara and Cattaraugus and the City of Buffalo. 

According to the Governor’s Press Release, “Buffalo remains one of the most racially segregated cities in the United States decades after the practice of redlining and other forms of housing discrimination were banned by law. DFS’ report found a distinct lack of lending by mortgage lenders, particularly non-depository lenders, continues today in Buffalo neighborhoods with majority-minority populations and to minority homebuyers in general.”

Although the report highlighted the Buffalo area, it reflects what is likely to be a strong push on the part of both federal and state regulators to use Fair Market Lending laws to tackle patterns of racial inequality.  For example, the Department begins the report by noting that much of the racial housing patterns in the area have their roots in government policies dating back to the Great Depression. Nevertheless, the Department concludes that mortgage lending practices should better address these disparities.

The report also highlights the fact that much of the lending in Buffalo is done by non-depository banking institutions, which are licensed by New York State.  It suggests that the State Community Reinvestment Act be amended to incorporate non-depository lending institutions such as mortgage banks.

My Good as Tier I Capital Super Bowl Prediction

On a much lighter note, yours truly is ready to make his good as gold Super Bowl prediction after having been half right in predicting that Tampa Bay would be meeting the Ravens this Sunday.  I apologize for underestimating the Buffalo Bills.  The Chiefs are favored by three points.  I say give the points, take the money:  Chiefs 38-Tampa Bay 20.  Enjoy your weekend, folks.

February 5, 2021 at 9:04 am Leave a comment

Banks Cynical Love Affair with the CRA

I want to dedicate this blog today to the banking industry. In spite of the fact that as recently as 2018, they were urging banking regulators to reform and streamline the Community Reinvestment Act (CRA), they have now seen the light. They love the statute and its regulations so much that they think it should also be made applicable to “large” credit unions. Surely, they are not so cynical that they secretly continue to believe that the CRA is an over burdensome mandate, and actually are advocating for the CRA to be imposed on credit unions because they think it might hurt credit unions and muddy the water between the important regulatory and legislative distinctions separating banks and credit unions. That would be like the president of the United States criticizing the Vice President’s son for working with a Ukrainian company while at the same time urging his personal lawyer to work with some of those same officials. Surely, our politics haven’t become that cynical.

Perhaps it is a simple misunderstanding. The newest talking point is that somehow, as credit unions grow, the CRA becomes more relevant to their existence. However, a look at the history behind the CRA demonstrates that it was not imposed on banks in 1977 because banks had grown big. The CRA was passed because by that time, banks of all sizes had intentionally discriminated against minority neighborhoods and low income areas for decades. In other words, the CRA was recognition that a for-profit banking charter did not adequately incentivize banks to do the right thing.

In contrast, credit unions have no such history of intentional discrimination. As a matter of fact, credit unions were created to counteract the discriminatory practices of banks, and today, more than half of the federally chartered credit unions in the country are low-income institutions serving an area in which “a majority of its membership (50% + one member) qualifies as Low-Income Members.”

I also find it odd that the banks now whole-heartedly support the CRA even as they take steps to make it as difficult as possible for credit unions to serve communities in need of resources. For example, New York State has for two decades encouraged banks to work with poor communities to apply for the creation of Banking Development Districts. The basic idea is that in return for committing financial resources to areas in need of banking services, the banks receive incentives including low interest public deposits. Despite the fact that the banking industry is so concerned about the needs of low income communities, it has steadfastly opposed extending the program to credit unions. Fortunately, this year, the legislature passed the bill and we are awaiting action by the Governor. Perhaps given the new-found commitment on the part of the banking industry to community investment, they are actually supporting credit unions, and I just haven’t seen their memo in support.

At the end of the day, the banks latest love affair with the CRA is so transparently cynical that it won’t gain the traction it needs to become a serious threat to credit unions based solely on bank lobbying efforts. As I said before and will say again, the real threat to credit unions comes not from legislators influenced by the banking lobby, but from the more liberal wing of the Democratic Party, which has shown signs of becoming impatient with the efforts made by the credit union industry. Their concerns are not cynical, and deserve to be addressed on their merits. Credit unions don’t need CRA to be coerced into doing the right thing, but there isn’t a credit union in the country that shouldn’t be able to explain to its senator or congressperson how it uses its tax exemption to serve members in general and persons of modest means in particular.

December 6, 2019 at 9:43 am 1 comment

Warren Wants To Apply CRA To Non-Low Income CU’s

Image result for elizabeth warrenSenator Elizabeth Warren yesterday introduced legislation that would apply the Community Reinvestment Act to all federal credit unions other than those which have been certified as low-income credit unions. I’m underlining the last sentence because the distinction is one that is being lost in the headlines this morning. There are several different ways in which this news should be analyzed.

First let’s look at the purely practical issues. The Community Reinvestment Act was passed in 1977 to address a legacy of redlining and other forms of discrimination by a mortgage industry which had a history of discriminating against minorities. The legislation requires “regulated financial institutions” to be evaluated on their “record of meeting the credit needs” of their entire service community “including low-income and moderate income neighbor hoods consistent with the safe and sound operation of the institution.” This measure and its accompanying regulations has been a thorn in the side of banks for decades and financial regulators are widely expected to propose regulations to reform aspects of the law.

Credit unions are of course by definition committed to, among other things, extending credit to persons of “modest means” so it has never made much sense to argue that credit unions should be brought within the statute’s jurisdiction. Nevertheless, the call for just such an approach has been growing not just among bankers but among community housing advocates skeptical that credit unions are living up to their end of the bargain. Besides, they point out in Massachusetts, credit unions have long been subject to CRA like requirements and the sky has not fallen. If a proposal like this every becomes law, credit unions will have to ensure that whatever regulatory framework is put in place account for  field of membership restrictions which, in some circumstances make it more difficult for credit unions to help persons of modest means in the communities in which they are located

On a purely practical level, the legislation creates yet another incentive for credit unions to examine getting their low-income designation. Simply put, there are hundreds of credit unions that qualify for low-income status which don’t get the designation. This is a real head scratcher to me. NCUA has made the process simple for federal credit unions and the DFS has even changed its regulations so that state chartered credit unions are evaluated using the same criteria.

On a political level, at the very least, credit unions should view this as a wakeup call. The industry is quick to pounce on even the hint of a suggestion that some obscure legislator may possibly introduce legislation suggesting that credit unions be taxed. At the same time as I have argued that the industry has been tone-deaf in failing to aggressively act to the growing disenchantment coming from the left flank of the movement. Increasingly, the Elizabeth Warren’s of the world feel that credit unions, at least credit unions other than the CDFI’s, have lost their way and are increasingly indistinguishable from banks when it comes to helping people of modest means.

I believe there are answers to these criticisms and there are actions credit unions can take to demonstrate why they shouldn’t be lumped in with banks when it comes to helping people climb the economic ladder. But when a person very likely to be a major competitor in the upcoming presidential democratic primary, a primary which promises to feature some of the most progressive candidates this side of Eugene Debs, concludes it is politically prudent to implicitly criticize credit unions the industry has to reexamine the message it is sending out to the American public and quickly.

September 26, 2018 at 9:09 am Leave a comment

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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