Posts tagged ‘escrow’

Taxi Task Force to NCUA: It’s Time To Get Involved

Hello folks.

On the train back to Albany yesterday during the unofficial National Football Hangover Day, I read this much anticipated report released by the New York City formed task force which recommends solutions to the NYC Taxi Medallion crisis.

The issues surrounding medallion loans have been analyzed so much now that it’s hard to come up with any radical new proposals. To me, the most important impact of the report is that it underscores that NCUA has to get actively involved in working with both NYC and the State Legislature if there is going to be any viable plan created to help drivers holding unaffordable medallion loans. After all, according to the Task Force, NCUA holds approximately $1 billion in Medallion Loans and, if it decides to offload this portfolio en masse, policy makers will lose any ability to play a role in the loan modification process.

As a result the Task Force believes

“… it is imperative that stakeholders work quickly to develop a practical option for medallion owner debt relief. Such relief may involve collaborating with the NCUA with respect to the portfolio of medallion loans it currently owns.”

 

Escrow Litigation Heats Up

I don’t want anyone to tell me that I did not warn them that the days of federally chartered credit unions not having to pay mortgage escrow interest may very well be coming to an end.

As I mentioned in this blog, there is currently litigation, modeled after similar lawsuits in California, alleging that Federally Chartered Banks are no longer exempt from New York’s law requiring mortgage escrow holders to pay interest. Although this litigation does not involve credit unions, the legal logic underpinning the exemption for federally chartered credit unions is virtually identical to that of banks.

On January 30th, lawyers for Bank of America urged a federal court in New York to fast track the appeal of similar litigation in New York. In a letter to the court, the bank noted that a proliferation of cases challenging the escrow exemption “underscore the need” for an expedited appeal.

What does all this mean for you federally charted credit unions that provide mortgages in New York?   While the issue is still being litigated, you should certainly be taking the time to plan for the likelihood of having to pay interest on those mortgage escrows.

February 4, 2020 at 9:56 am 1 comment

Cybersecurity, Escrow, Conversions and Football Highlight a Busy Few Days

DFS Issues Cybersecurity Risk Alert

In a depressing sign of the times, New York’s Department of Financial Services has issued a cybersecurity risk alert informing credit unions that, given the recent assassination of Soleimani and Iran’s demonstrated capabilities and willingness to engage in cyberattacks against financial institutions, “US entities should prepare for the possibility of cyberattacks.”

DFS points out that in 2012 and 2013; Iranian sponsored hackers launched denial of service attacks against US banks. Consequently, it “strongly recommends that all regulated entities heighten their vigilance against cyberattacks.”

Another Credit Union Converts

Hudson Heritage Federal Credit Union has officially announced its conversion to a state charter. Regardless of whether or not a conversion is in your credit union’s plans, it is great to see DFS take the steps to make the state charter a viable option for credit unions, and banks for that matter and credit unions respond positively to these developments. Remember, a viable state charter is in everyone’s interest.

Are You Prepared for Life Without Interest on Your Mortgage Escrow Accounts?

States like New York and California have long had laws mandating that financial institutions pay interest on mortgage escrow accounts, but prior to the Dodd-Frank Act, it was settled law that these state mandates could not be applied to federally chartered institutions. That is changing.

First, let me stress that if you are a federally chartered credit union not currently providing escrow interest, you are currently under no obligation to do so. That being said, however, the signs are mounting that this privilege may not last much longer, and I do think it is worth a bit of your time to start assessing the financial impact that this change will have on your credit union.

Why so glum? As I previously blogged, a lawsuit that came about after Dodd-Frank argued that preemption of escrow accounts no longer applied to federally chartered institutions. As a result, the bank in question was violating the law by refusing to pay interest to the disgruntled plaintiffs. California’s escrow requirement is very similar to New York’s. On Thursday, this lawsuit was settled with Bank of America agreeing to pay $35 million in damages to the plaintiff class, led by Donald Lusnak (subscription to Law360 required). Additionally, it has already started paying mortgage escrow.

This is all happening as a similar lawsuit; Hymes v. Bank of America, is being litigated in New York State Federal Court.

Why Can’t We Use Technology to Figure Out When a Football Crosses the Goal Line?

This is the great question I was pondering this past weekend as I was watching one of the four playoff games, in which the refs were being forced to determine if a running back managed to get the ball over the goal line while maintaining control as he was being assaulted by a group of freakishly fast, oversized athletes. Frankly, if soccer can figure out within less than an inch whether a goal has been scored, and tennis uses similar technology to tell if the ball is in or out, why can’t the NFL do the same?

Just wondering. Enjoy your day.

January 7, 2020 at 9:19 am 1 comment

Changes in STAR Exemption Impact Mortgage Escrow Accounts

Given its size and complexity, it’s not surprising that just about every year there is a provision or two in New York State’s budget that has unintended consequences.  Unfortunately for those of you with escrow accounts, this year there is a glitch that affects you (See A.9009-c, Part A).

Under New York’s STAR program, property owners are exempt from paying a portion of their school property tax on their primary residence (see generally Section 425 of the Real Property Tax Law).  The way the program has traditionally worked, the school property tax bill that the homeowner receives, usually in early September, reflects the amount of taxes they owe after the exemption is calculated, i.e. already taken out.  This means that escrow accounts reflect the amount the member owes. 

Here’s where things get complicated.  At the urging of Governor Cuomo, this year’s budget begins a transition converting the STAR tax exemption into a STAR tax credit.  Under the new approach, taxpayers will be billed on the full amount of their school tax assessment and then receive a tax credit reflecting the amount of their STAR exemption.  In other words, they will bear the upfront costs of the assessment and get reimbursed when they file their taxes. 

These changes are generally meant to apply to new homeowners, but because of the way the language was drafted if you weren’t in your new home on tax levy day of the 2015-2016 school year, they apply to you. 

As an astute reader of my blog recently pointed out, this change creates a whole bunch of issues for mortgage escrows.  For instance, since the amount in escrow has to reflect the amount of taxes due, members will have to put more money into their escrow account than they will need.  Furthermore, holders of escrow accounts will presumably have to return this extra money to members. 

This is one we will be keeping an eye on.  Stay tuned.

April 27, 2016 at 8:45 am Leave a comment

Congress Scales Back Flood Insurance Reform

It took a little longer than anticipated but the House of Representatives passed legislation on Tuesday delaying flood insurance rate increases previously mandated by bipartisan legislation passed in 2012.  The legislation, which passed with Democratic support, was a nice victory for New York’s Staten island Congressman Michael Grimm. 

As I explained in a recent blog, the 2012 reforms have resulted in sharp increases in flood insurance rates and Congressmen were justifiably concerned that without delaying these rate increases many homeowners in flood zones would find it unaffordable to live in these communities.  As Representative Shelley Moore Caputo (R-West Virginia) said during last evening’s debate:  in some cases, the choice of homeowners “was to either spend life savings on their flood insurance bills or walk away from their house, ruining their credit.” 

However, the bill still leaves credit unions in compliance limbo.  Specifically, the federal agencies have proposed regulations mandated by the 2012 bill requiring that institutions with $1 billion or more in assets establish escrow accounts for the payment of flood insurance premiums (12 U.S.C.A 4012a).  The NCUA and other regulators issued a joint guidance opining that the escrow provision doesn’t take effect until the regulations are promulgated, which they anticipate will be finalized in sufficient time to allow lenders to implement them prior to July 2014. 

Based on my reading of the bill passed by the House, the escrow requirement, as well as other mandates regarding the acceptance of private flood insurance, remain intact.  But we won’t know this for sure until the Senate acts on the House bill, which it is expected to do shortly.  I would hope that at that point federal regulators would issue a subsequent guidance to clarify the status of flood insurance regulations.

 

March 5, 2014 at 8:37 am 1 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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