Posts tagged ‘foreclosures’

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

This Year’s Federal and State Priorities

Today marks the ceremonial start of New York State’s legislative session with the brand new Senate Majority taking over at 1:00 p.m. The Governor’s State of the State, which used to kick off the legislative session, is scheduled for later this month.

Meanwhile, the NCUA released its annual letter to credit unions detailing what its examiner priorities will be when they visit credit unions in the coming year. For you football fans out there, I like to think of this as the equivalent of the points of emphasis that the NFL tells referees to follow with the result that the first two weeks of any football season features too many penalties. Anyway, here is a look at some of the key federal and state priorities.

Meet The New Boss of New York

A historic transfer of power will take place today when Andrea Stewart-Cousins becomes the Democratic Senate Majority Leader. Just how historic is this? Since the end of WWII, except for brief spells, the Senate Majority in New York has been a Rockefeller republican majority. In contrast, since the aftermath of Watergate, Democrats have taken firm control of the Assembly and never looked back.

Against this backdrop, the Association is hopeful that this new mix brings new opportunities to advance these issues:

Municipal/public deposits; Remember, New York is one of the minority of states that doesn’t allow local government agencies to place money with credit unions. The result of this banker monopoly is that New York tax payers don’t get to see their money placed where it would generate the best returns. Last I checked choice is a good thing.

Data Security; Ideally, the federal government would take the lead on this issue but in the absence of federal action there are steps the state could take to make merchants responsible for the cost of data breaches caused by their own negligence as well as making sure that all businesses are subject to the type of baseline cybersecurity requirements to which banks and credit unions have long been subject.

Foreclosure Reform; New York State has been among the leaders in ensuring that homeowners have adequate protections when they fall behind on their mortgage payments and it should remain so. But there is a middle ground between adequate due process and excessive delays which do nothing but bring down the value of property in neighborhoods by keeping people in houses they can’t afford to maintain properly. Recently, Fannie and Freddie announced that services of mortgage loans in New York City would have 2,190 days to foreclose on delinquent property before they face penalties and 1,740 outside of the Big Apple. In contrast, there are states where lenders have as little as 420 days.

State Charter Enhancement; One other thing we will be advocating for is continuing our momentum in making the state charter a more attractive option for credit unions. We’ve already made great strides in this area but with the state’s wildcard power due to expire and operational issues arising there is still more to be done.

Supervisory Priorities

The NCUA’s supervisory priorities for 2019 contain many of the usual suspects. Of course, the Bank Secrecy Act is on the list but this year’s emphasis will be on your credit union’s policies and procedures for identifying “beneficial owners.” Other priorities include concentration of credit; HMDA data collection (See yesterday’s blog); the Military Lending Act; Regulation B compliance and “information security maturity assessments with the Automated Cybersecurity Examination Toolbox (ACET).” My God that sounds worse than a trip to the dentist. This year examiners will also be asking credit unions what they are doing to prepare for our new best friend CECL (Current Expected Credit Losses). Be sure to look at the whole list and keep this posted by your desk throughout the year.

January 9, 2019 at 9:38 am Leave a comment

Wednesday Potpourri

If at First You Don’t Succeed. . .

Visa and Target announced a settlement intended to compensate card issuers for the high profile data breach of the Minnesota retailer that compromised an estimated 40 million debit and credit cards. The price tag is reportedly $67 million. The agreement comes months after issuers, including credit unions, scuttled a proposed $19 million settlement with MasterCard. NAFCU’s Carrie Hunt is quoted in the WSJ: “This settlement is a step in the right direction, but it still may not make credit unions whole.”

Stay tuned. This will be an interesting issue to keep an eye on in the coming weeks as the specific terms are analyzed.

Foreclosures in New York: Alive and Well

NY’s foreclosure problems are far from resolved, especially in NYC’s suburban communities according to State Comptroller Thomas Dinapoli, who has the numbers to back it up. Between 2006 and 2009, the number of new foreclosure filings jumped 78%. They leveled off in 2011, hitting a low of 16,655, but shot up again. Filings climbed to 46,696 by 2013 before edging back to 43,868 in 2014, still well above pre-recession levels, according to the report.

By the end of 2015, there were over 91,000 pending foreclosures with Long Island and the Mid-Hudson accounting for a disproportionate share. The four counties with the highest foreclosure rates are all located downstate: Suffolk (2.82 percent, or one in every 35 housing units), Nassau (2.47 percent, or one in every 40 housing units), Rockland (2.26 percent, or one in every 44 housing units), and Putnam (2.10 percent, or one in every 48 housing units). Counties in Western New York and the Finger Lakes regions, in contrast, tended to have lower pending foreclosure rates and decreasing caseloads.

The good news is that these numbers most likely represent a backlog of delinquencies rather than a further deterioration of economic conditions. The Comptroller reports that there are fewer foreclosures at the beginning of the process while activity at the end of the process (notices of sale, notification that the property has been scheduled for public auction) is accelerating.

The backlog of foreclosures reflects not only the aftershocks of the Great Recession but also the inevitable result of a foreclosure process that is hopelessly byzantine and invites delay. Maybe there will be a grand bargain in which state policymakers take steps to expedite foreclosures in return for lenders having to comply with one of the nation’s most onerous and lengthy foreclosure processes. In the meantime, I’m curious if the trends persisting in New York began to spread nationally thanks to the adoption of New York style regulations on the national level. Here is a link to the report.

Time Extended for Two-Cents on Online Lenders

You have more time to sound off about the extent to which online marketplace lenders should be regulated if you are so inclined. The Treasury has extended until September 30th the deadline for responding to its Request for Information on the proper regulation of online lenders. The RFI asks a series of questions related to companies operating in three general categories of online lending: (1) balance sheet lenders that retain credit risk in their own portfolios and are typically funded by venture capital, hedge fund, or family office investments; (2) online platforms (formerly known as “peer-to-peer”) that, through the sale of securities such as member-dependent notes, obtain the financing to enable third parties to fund borrowers; and (3) bank-affiliated online lenders that are funded by a commercial bank, often a regional or community bank, originate loans and directly assume the credit risk.

Are these flash-in-the-pan industries that will fold with the next economic downturn or innovative disruptors of the banking model? If they are the later they may hit credit unions particularly hard. According to the Treasury, small businesses are already more likely than their larger peers to go online for their products and services. Online lending may provide them with a means to quickly access the cash that traditional lenders are reluctant to provide them during economic downturns.

August 19, 2015 at 8:53 am 1 comment

Beware of Zombie Properties

The great Boston Celtic Center Bill Russell once commented that fans don’t think they react.  All too often I think the same can be said of our elected representatives. 

If you make mortgages in New Jersey, you should take a look at .A347, which overwhelmingly passed that state’s assembly late last week.  The bill is the latest attempt to deal with the serious problem of so-called zombie property.  This is property which has been abandoned following the commencement of a foreclosure but for which no foreclosure has been completed.  Localities not only in New Jersey but New York have been advocating for the authority to make the foreclosing lender maintain the property during the foreclosure process.  Attorney General Eric Schneiderman is seeking a similar approach for New York.

The legislation passed by New Jersey’s Assembly mandates that a creditor that files a notice to foreclose on residential property that subsequently becomes vacant may force the lender to cure any violations regarding state or local housing codes.  Keep in mind the views I express are mine and do not necessarily reflect those of the Association, let alone the good credit unions of New Jersey.  The most troubling aspect of this approach is that the lender is being asked to take responsibility for property it does not own.  Secondly, by mandating that the abandoned property be brought up to code the lender is not being required to simply maintain property but improve it.  Finally, what is the NJ Legislature going to do in those situations where a home owner seeks to reclaim property for which the foreclosure process is yet to be completed.

According to the National Association of Realtors, as of 2013, there were 300,000 zombie properties across the U.S.  I would bet you that those properties are disproportionately in states with drawn out foreclosure processes.  Rather than make lenders responsible for property they do not own, housing advocates should take a look in the mirror and realize that so-call foreclosure protections needlessly delay the transfer of property to lenders and indirectly drive up the cost of homeownership for everyone. 

My compromise position for the good people of New Jersey is to couple any requirement for lender foreclosure maintenance with an expedited foreclosure process for the affected property.

March 3, 2014 at 8:49 am Leave a comment

When It Comes To Qualified Mortgages, Take A Deep Breath

Last week, NAFCU released the results of a survey indicating that 88% of respondents will reduce or discontinue originating mortgage products that don’t conform to the CFPB’s definition of a qualified mortgage.  Considering that slightly more than 37% of respondents reported underwriting mortgages that would not meet QM criteria in 2012, this is potentially big news and I just hope it is based on an objective assessment of the impact that the regulations will have on lending practices and not on a misconception about what the law requires.

So before you jump on the QM bandwagon, keep these points in mind.  First, a QM is granted the highest form of legal protection regulators can give it, but it is a specific type of mortgage.  In contrast, the CFPB wants all mortgages to be subject to an ability to repay analysis.  This is the true baseline criteria and for the vast majority of credit unions, it is a requirement that they already meet.  For example, how often do you not assess an applicant’s ability to repay a mortgage before you give them one?  Do you make liar loans?  Or do you actually request documentation that the person you are thinking of lending tens of thousands of dollars to actually has a job?  This is just one example of the type of criteria which Congress and the CFPB justifiably felt compelled to mandate as a result of the non-existent underwriting standards that triggered the Great Recession.

Here’s another question for you.  How many of your mortgages go into foreclosure and, of those, are you confident that your staff and lawyers understand the foreclosure process well enough to defend these foreclosures in court?  The most practical benefit of a QM mortgage is that it provides a safe harbor against a homeowner’s claim that a foreclosure action should not go forward because proper underwriting standards and legal procedures were not followed.  If you know this isn’t true, then why deny making the loan to the vast majority of members who may not qualify for QM loans but whom you are confident will repay their mortgage obligations?  In any event, given the atrocious length of time it takes to foreclose in New York State, this should be a last resort anyway.

One more question to ask yourself.  Do you reserve the right to hold mortgages that don’t meet secondary market standards?  Of course you do.  Now’s not the time to stop.  The reality is that the importance of Fannie Mae and Freddie Mac to credit union mortgage underwriting will diminish in coming years.  Those credit unions that want to engage in mortgage lending are going to have to hold more mortgages.  Does this mean that smaller credit unions will be put at a further disadvantage with regard to mortgage lending?  You bet it does.  But this has nothing to do with the decision of individual credit unions as to whether or not they should take on QM mortgages.

In addition, keep in mind that Fannie and Freddie are adopting some, but not all, of the QM criteria.  Most importantly, they are reserving for themselves the right to establish their own debt to income ratios.

The Association’s Director of Compliance, Michael Carter, and I have come to realize that your stance on the impact that these regulations will ultimately have on credit union lending reflects whether you are listening to the underwriters or the lawyers in getting ready for the new mortgage regime.  Underwriters understand that many mortgages that don’t meet QM criteria will do just fine because a member has the ability to repay the loan.  Lawyers are paid to be paranoid, and ultimately the secondary market is going to want loans that meet the higher standards of legal protection.  Both sides have a point and each credit union will be well advised to look at its own unique situation and adopt the approach that best fits its comfort level and commitment to its members.  Don’t assume that a QM is the only type of mortgage you should be offering.

May 21, 2013 at 7:28 am Leave a comment

Do Foreclosures Cost Too Much?

imagesIt should surprise no one who has attempted to foreclose on residential property in New York State that the state has arguably the most expensive and time consuming process in the country.  In a proposal floated in September, the FHFA requested comment on an initiative it is considering that would charge higher guarantee fees imposed by Fannie Mae and Freddie Mac on mortgages purchased in New York and the four other states that have “exceptionally high” foreclosure costs.  This morning’s Wall Street Journal is reporting that the agency is facing increased push-back on this idea.

Traditionally, these guarantee fees are set on a national level with regional variations not taken into account.  But statistically, in the 23 states that mandate judicial or court-involvement in the foreclosure process, foreclosures tend to be more expensive.  A look at some of the comments received on the initiative confirms what the Wall Street Journal is reporting.  According to the agency’s methodologies New York has the highest foreclosure costs in the country, followed by Florida, Connecticut, New Jersey and Illinois.  These five states been targeted as the states where the foreclosure process and resulting costs of handling property is so expensive that higher fees need to be charged to cover the costs.  New York lenders would be charged a guarantee fee representing an additional 30 basis points on a residential mortgage.  According to New York’s Department of Financial Services, on a $400,000 30-year fixed-rate mortgage this could result in an additional fee of approximately $5,000 for the life of the loan.  In addition, the Chairmen of both the Assembly Banks and Judiciary Committees wrote a letter criticizing the agency for not taking into account that New York’s foreclosure protections actually decreased the number of foreclosures and, they argue, hold servicers and lenders accountable for their malfeasance.  Finally, CUNA points out that this proposal will have its greatest impact on smaller lending institutions that are going to be more sensitive to the increased cost of providing mortgages.

All of these are valid points, but it’s about time that legislators on both the state and national level recognize that every additional requirement imposed on the foreclosure process increases the cost of providing mortgages in New York State.  It may be that the benefits outweigh the costs, but it is good to see that someone is willing to point out that the costs are real and have to be taken into account when figuring out the best approach to increased delinquencies.

January 3, 2013 at 7:44 am Leave a comment

On Foreclosures and Fiscal Cliffs

imagesIt takes a big blogger to admit when he’s wrong and it appears that this blogger may have been wrong when he predicted that the $26 billion robo signing settlement with major banks combined with new requirements being placed on lawyers in New York State to affirm the accuracy of foreclosure papers would lead to a glut of foreclosures.  So far, the dam has not broken.  As Bloomberg News reports this morning, the number of properties for sale has shrunk to its lowest level in a decade and housing prices nationally are rising at a healthy pace.

Meanwhile in New York, a report released by the State’s Office of Court Administration indicates that the number of foreclosures in New York has risen in 2012, but will not reach the State’s peak set during 2009-2010.  As a result, foreclosure actions continue to represent a significant percentage of the State’s overall caseload, but it appears to be manageable.  One interesting note:  it appears that banks are still having trouble complying with the State’s new affirmation requirements so there still is a large number of shadow foreclosures taking place, those in which the actions have been commenced but no judicial intervention has been requested.

Not surprisingly, if Congress and the President cannot agree on a deficit reduction plan, sending the Country over the dreaded fiscal cliff, the Wall Street Journal points out that this would have an impact on the number of foreclosures being carried out.  The paper points out that one of the reasons foreclosures have declined is that banks have more aggressively turned to short sales, loan modifications and principal reductions as an alternative to more lengthy litigation, but unless Congress agrees by early January federal law exempting income saved on these modifications from a homeowner’s income tax will expire.

NCUA statitstic released

NCUA released a summary of the third quarter 5300 reports.  The news is generally positive.  If I wanted to be a glass half-empty kind of guy, I would point out that the industry’s loan to share ratio continues to languish and that some credit unions are apparently making up some of the difference by aggressively moving into taking on student loans.  While it makes sense to try to tap into this growing industry, not to mention help your members and their kids, these loans are tricky and I wouldn’t be surprised to see them be a point of emphasis when your examiner comes calling.  So, in the immortal words of Phil Esterhaus, let’s be careful out there.


November 30, 2012 at 7:55 am Leave a comment

Still Cleaning Up The Foreclosure Mess

One of the many lessons we have learned over the last five years is that the system really isn’t designed to cope with a large number of foreclosures. 

No where is the disconnect between intentions and reality better illustrated than with the imposition of mandatory settlement conferences.  Under New York law, lenders must now send out foreclosure notices 90 days prior to commencing any legal action against a delinquent home owner.  In addition, mandatory settlement conferences are designed to force lenders to make a good faith effort to settle foreclosures.  Since the beginning of this system, however, there has always been a question about what exactly constitutes good faith.  New York’s foreclosure provisions were further complicated by requirements imposed by the Office of Court Administration, requiring attorneys to effectively swear that they have reviewed the documents forming the basis for a foreclosure action.  This was a direct swipe at so-called foreclosure mills and it says something about the state of New York’s foreclosure industry that the imposition of this requirement further exacerbated a burgeoning foreclosure backlog.

Unbowed, New York soldiers on.  Earlier this year, the Office of Court Administration proposed rules dealing with the so-called shadow case load of foreclosures.  Leaving aside the procedural nuances, it is possible for a lender to commence a foreclosure action without taking the next step of seeking court intervention.  As a result, these cases languish, but the mandatory requirement for a settlement conference is not triggered.  The Court system has proposed a new rule, which would increase the authority of courts to take control over these shadow cases and force them into settlement conferences.  A pilot began in Brooklyn earlier this month.  Legal groups, such as the New York State Bar Association Real Property Law Section, support the regulation in theory but feel it has to be clarified.  responsible lenders are advocating for the rules’ implementation on a statewide basis, as soon as possible.

Three points:

  • All the procedural changes in the world don’t change the fact an attorney works for a client.  To the extent that a foreclosure proceeding is not moving along, you can always ask why.
  • Over the past five years, there have been numerous proposals dealing with defects in the foreclosure process, but lost in all the robo-signing inspired proposals has been the fundamental fact that people are losing houses because they can’t afford them.  Modifications are of little use to someone without a job or who paid too much for a house to begin with.
  • It is possible that all these additional new procedures have done more harm than good.  Slowing up foreclosure hurts the community in which the house is located, the lender seeking to redeem its collateral, and even the borrower, who can’t get on with his life.  By all means, let’s make a good faith effort to help people out when we can, but let’s not impose additional regulations which in the end will benefit no one.

May 21, 2012 at 8:25 am 1 comment

Just another manic Monday

Maybe it’s because there’s still one more game to go before who we know which team is going to be the national champion this year (read on for my definitive “bet the mortgage” special), but as I go through this morning’s papers and regulatory notes it seems that today can be categorized as a reminder of unfinished business.

Foreclosures —  even though the federal government and state’s attorneys general reached a $26 billion settlement with the nation’s five largest mortgage servicers to definitively address shoddy foreclosure practices, it appears that more still needs to be done.   The New York Times is reporting that a top official of the Federal Reserve is recommending fines against eight other large banks “raising concerns about how deep foreclosure problems run through the banking industry.”  The paper also reports that judges and lawyers are still frustrated that people are losing their homes despite improper documentation and other flaws in the foreclosure process involving these firms.  This should serve as a reminder that there is still a huge backlog of foreclosures in the pipeline, but let’s face it, all the fines in the world aren’t going to clean up the process completely.

Data Breach — On Friday, it was reported that the nation’s seventh largest payment processor was victimized by a data breach compromising up to 1.5 million credit card accounts.  Payment processors specialize in setting up accounts with banks for the purpose of processing credit and debit card payments on behalf of merchants.  This morning, the Credit Union Times is reporting that VISA and MasterCard have begun to warn financial institutions, including credit unions and CUSOs, of yet another major breach at a card payment processor.  This is yet another example of how merchants have to be held to greater account if data breaches are going to be effectively dealt with.

Now for some good news.  NCUA issued a guidance on Friday detailing how low-income credit unions can qualify for up to $25,000 in grant money made available through the Community Development Revolving Loan Fund (CDRLF) to support initiatives in five general categories, including volunteer income tax preparation and board development and training.

In the first of what will be periodic “investment” tips, here is my “bet the mortgage” special.  Kansas will not only beat the spread, but beat Kentucky outright in tonight’s NCAA final, 70-67.  Call me old fashioned, but I think if a team is going to win the national championship, they should be able to hit a basket more than five feet away from the hoop.

April 2, 2012 at 7:28 am Leave a comment

Another HARP Turkey?

I hope everyone had a healthy and happy Thanksgiving and that the L-tryptophan has worn off sufficiently so that you can delve into the intricacies of the refurbished HARP program without dozing off again.

As you may recall from a previous posting, both Fannie Mae and Freddie Mac, at the urging of President Obama, have agreed to loosen the eligibility requirements for HARP, which has  been an abysmal failure.  Fannie Mae and Freddie Mac have each come out with new guidelines and on the Monday before Thanksgiving, Freddie Mac held a conference call.  

Since HARP II  has been portrayed in the media as allowing homeowners to refinance their mortgages with about as much ease as a child might raid a candy dispenser, and since the borrowers will be able to fill out HARP II applications starting December 1st, here are some key points to keep in mind as you review details of the refurbished program.

  • First, the program is not intended to aid homeowners behind on their payments.  HARP II is available for borrowers who have not been delinquent in the past six months and have had no more than one thirty-day delinquency in the last year.
  • HARP I was not available for mortgages that exceeded 125% of a property’s value.  HARP II has no maximum loan-to-value limit for fixed-rate first lien mortgages up to 30 years.
  • When credit unions sell mortgages to Fannie Mae or Freddie Mac, they make certain representations or “warranties,” the violation of which constitutes grounds for Fannie and Freddie to demand that the credit union repurchase the mortgage; this is no small consideration in an age of foreclosures with  both GSE’s in conservatorship.  As an added incentive, HARP II waives certain underwriting warranties provided that several conditions are met, including that the data presented to Fannie and Freddie is complete, accurate, and not fraudulent.  I sense some equivocation and you may want to reach out to get further clarification as to what exactly is being waived with regard to representations.

As this broad outline shows, HARP II is designed to assist conscientious homeowners making their payments notwithstanding the fact that their house is hopelessly underwater.  It has been estimated that there are 2 million homes so designated and the hope is that by eliminating the previous loan-to-value cap the refurbished program will provide a quick jolt to the housing market and dissuade homeowners from walking away from their houses.

The dangers are obvious:  since both Fannie and Freddie are being kept alive only with the backing of the American taxpayer, in the season of giving the American taxpayer will be on the hook for even more housing debt pursuant to underwriting criteria no financial institution should consider sound.  Even if it works, it will do nothing to alleviate the millions of pending foreclosures.  Furthermore, this doesn’t seem like the time to be loosening underwriting standards given the potential threat of another hit to the economy caused by the European recession, continued political uncertainty in this country, and in a worst-case scenario, the demise of the Euro in the financial crisis, which would make the fall of Lehman Brothers look like a G-rated Disney movie.

November 27, 2011 at 9:28 pm 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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