Posts tagged ‘mortgage forbearance’

Fast And Furious: New COVID Guidance

Remember how in early July we were deluding ourselves into thinking that we were fast approaching a post-COVID nirvana in which we could all frolic freely without needing face masks, debating vaccine mandates or worrying about holding backyard barbecues?

Fast forward to mid-November and regulators are adjusting to a world in which COVID is a chronic condition and we have to adjust to this new normal. For credit unions in general, and compliance folks in particular, this means updating policies and procedures to make sure that you are keeping up with the latest COVID inspired dictates. Here are some of the latest developments I’ve spotted over the last week and a half:

  • The NCUA announced that it was extending the authority of federal credit unions to hold meetings remotely provided they have adopted the appropriate bylaws and send the appropriate notices to their membership. Remote flexibility is one of the good things to come out of the pandemic and I for one am glad to see that credit unions can continue to take advantage of this common sense measure.
  • Federal regulators, including the NCUA, recently announced that mortgage servicers were no longer going to be given a “get out of jail free card” when it comes to complying with RESPA’s mortgage servicing rules.

              In April of last year the same group of regulators issued a joint statement explaining that, “the current crisis could cause temporary business disruptions and challenges for mortgage servicers, including staffing challenges.” As a result, the regulators announced that they were giving servicers greater flexibility to comply with Regulation X. The same group of regulators now feels that the adjustment period has ended. The other day they announced that “servicers have had sufficient time to adjust their operations… agencies will apply their respective supervisory and enforcement authority to address any non-compliance with Regulation X”.  This one is a bit of a head scratcher to me because I could swear there is still plenty of evidence that staffing shortages persist and that members are still in need of enhanced forbearance assistance.  At least according to the CFPB.   

  • Never to be ignored, on October 28th New York’s Department of Financial Services issued its own guidance detailing its continuing expectations for mortgage servicers to work with consumers impacted by the pandemic. The guidance also encouraged servicers to participate in a new program being unveiled to provide financial support for eligible borrowers. I will have more about this program in the coming days.

On that note, visualize your post-COVID happy place and get to work.

November 16, 2021 at 9:24 am Leave a comment

What Will the Next Nine Months Bring To Your CU?

Will the next six months bring about a rise in delinquencies as government support begins to wane or will your credit unions be in store for a boom in lending activity as consumers break out of the plastic bubbles otherwise referred to as their houses and break out the credit cards, splurge on big ticket items and generally feel better about their economic prospects? Even as NCUA understandably makes examining your credit union’s ALLL policies it’s top priority for 2021, there is mounting evidence that the more optimistic scenario is the one most likely to unfold. 

Most importantly, credit unions have been telling me for a long time that the problem isn’t deposits, it’s getting members to spend some of that money.  How right they are.  Worldwide consumers have squirreled away an extra $2.9 Trillion in savings with the Unites States alone accounting for half of the total.  In fact, according to Bloomberg if consumers decide to spend all that extra savings, the economy would grow at a 9.6% rate this year.  While such speculation is crazy talk, the increased savings are in addition to the checks that many of your members will be receiving, assuming Congress passes another economic relief package within the next couple of weeks.

In another sign that things are going to end up better than anyone would have predicted a year ago, many states are not suffering the decline in tax revenue they anticipated.  In fact, the New York Times ran this front page story yesterday reporting that by some measures many states will end up with almost as much revenue this year as they took in last year.  Some states have even benefitted from the crisis with Idaho seeing an increase in population and tax revenue.  So much for my Own Private Idaho. 

To be sure, there are also signs that for many the economic recovery is not strong enough.  On Monday, the CFPB released a report detailing the millions of Americans dependent on forbearance programs to stay in their homes and Janet Yellen has been quick to point out that the economy is still down ten million jobs.  Still, my guess is that the biggest concern that your credit union will face in the coming year will be interest rate risk as examiners turn their attention from the adequacy of the reserves to the possibility that inflation will once again start appearing on the horizon.

Legislature to Scale Back Governor’s Powers

The Legislature has agreed to pass legislation to curb the Governor’s power to issue Executive orders which he has used to run the state since the COVID crisis started last March.  According to the Times union the new restrictions “will prohibit the governor from unilaterally issuing new executive orders related to the pandemic without legislative review. He will retain the ability to tweak or renew existing orders relating to slowing the spread of COVID-19, including the state’s mask mandate or business restrictions”

We will have to examine just how this will affect Executive Orders that have impacted CU operations.  For example, as readers know, the Governor has established the criteria for vaccine shot eligibility and he has authorized the use of remote notarization. In addition, even though the Legislature has passed mortgage forbearance legislation-Section 9X of the Banking Law-these protections expire with the end of the EO’s.  We will keep you posted.

March 3, 2021 at 9:32 am Leave a comment

For New York, Things Are Worse Than They Appear

Yesterday, the Federal Housing Finance Agency highlighted just how long the pandemic has lasted by announcing that mortgages backed by Fannie Mae and Freddie Mac may be eligible for an additional forbearance extension of three months. Although the agency cautioned that other conditions may apply, the extension will generally apply to borrowers who are on a COVID-19 forbearance plan as of February 28th, 2021. By extending forbearance plans through May, GSE forbearance policies are now more consistent with New York State’s forbearance requirements for non-GSE loans held by your credit union. Remember that in early January, the State Legislature passed legislation granting forbearance extensions to individuals claiming to have been negatively impacted as a direct result of COVID-19. 

The announcement underscores that on a national level, the economic conditions under which credit unions will operate remain unclear, even as the vaccination rollout picks up speed. This uncertainty is particularly true for credit unions in New York. The state has been among the hardest hit by the pandemic – for example, New York currently has an unemployment rate of 8.2%, the fifth highest in the country. In addition, New York has some of the highest numbers of delinquent mortgages in the country, with New York City standing out among other metropolitan areas for its reported number of mortgages past due. 

Of course, these statistics are as predictable as they are depressing. In October 2020, the Empire Center reported that New York’s second quarter GDP dropped 36.3%, marking the biggest decline on record in New York state history. To put it in perspective, New York’s drop was almost five percent higher than the national average for the same period. 

On that inspiring note, enjoy your credit union day. 

February 10, 2021 at 9:22 am Leave a comment

Everything You Need to Know about Foreclosures but have been Too Afraid to Ask

The only thing more confusing than the latest government pronouncements about the proper response to the pandemic has been trying to figure out the status of foreclosures in New York State. There has been a multitude of guidance ranging from emergency regulations to pronouncements by the Department of Financial Services on the state level to federal legislation and industry letters from the GSEs on the federal level. These competing orders each have their own end dates and nuances, creating the perfect storm for compliance departments trying to do the right thing. Fortunately, there are signs that the confusion is beginning to come to an end as the courts step in and clarify the scope of all these competing requirements. 

Against this backdrop, the case that I think you all should read this morning is Money Source, Inc. v. Mevs, in which Judge Thomas Whelan wrote an extensive analysis describing the state of foreclosure law in New York. Although a court decision in Suffolk county does not bind the rest of the state, it can be used as persuasive authority for those of you still trying to figure out how to deal with foreclosures during the pandemic. Before I get into the weeds, the Judge succinctly summarizes the state of New York’s foreclosure laws as follows: 

“(1) that the moratorium of the CARES Act has expired; (2) the Governor’s most current EO, that is, 202.48, only precludes enforcement of commercial foreclosure proceedings; and (3) the most recent and controlling AO from the CAJ, that is, AO/131/20 (as amended), only remains in effect for such time “as state and federal [*8]emergency measures addressing the COVID-19 pandemic amend or suspend statutory provisions governing foreclosure proceedings…” There is no longer any state prohibition on pre-COVID-19 residential foreclosure proceedings and the new state legislation, detailed above, is addressed to initiation of new proceedings.”

The first source of confusion were the Governor’s executive orders. To be clear, much of this confusion was unavoidable since executive orders must be renewed every 30 days, and must be amended to reflect changes in law. Originally, EO 202.14 prohibited residential foreclosure actions stipulating that there should be “no initiation of a proceeding or enforcement of a foreclosure action.” Yours truly has always read this order conservatively. Specifically, since the order applied not only to foreclosure actions, but to proceedings “leading to foreclosures,” it is my opinion that the order not only prevented foreclosures, but the sending of pre-foreclosure notices mandated by Section 1304 of New York’s Real Property and Proceedings Law. 

Fortunately, this is no longer a valid concern. On June 7th, the Governor issued EO 202.48, which recognized that the executive orders were now superseded by the creation of Section 9-x of the Banking Law. This law applies to individuals in need of residential mortgage forbearances beginning in March 2020 and will be in existence on a county by county basis until there are no restrictions on non-essential gatherings of any size in the county in which the residence is located. According to the court, “there is little doubt that the new statute is designed to address mortgages affected by the COVID-19 pandemic, and should not apply to borrowers who defaulted before March 7, 2020.” Remember, where the law does apply, lenders seeking to go forward with foreclosures must demonstrate that they have complied with 9-x. 

Section 9-x does not apply to federally-backed mortgages. In other words, if you are servicing a mortgage loan and holding it in your portfolio, 9-x applies, but if you are simply servicing a loan that has been sold off to the GSEs, federal standards apply. 

This seems clear enough at first. After all, the CARES Act only provided a moratorium on foreclosures through May 15, 2020. The GSEs, however, are technically private companies that can set their own standards. I say technically because they are also bankrupt and are overseen by the Congressionally created Federal Housing Finance Agency. The FHFA recently announced they would not foreclose on property until at least December 31, 2020.

September 29, 2020 at 9:39 am Leave a comment

New York State Considers Extending Forbearance to Commercial Properties

Yours truly is back and better than ever!

Unfortunately, I have some potentially bad news for New York State charters.  Yesterday, the Assembly Banks Committee voted in favor of a bill, A.10532/S.08744, which would extend forbearance protections to persons who have mortgage loans or lines of credit on small commercial and investment properties.  Specifically, if a borrower has a mortgage loan on investment property or rental property containing up to four units, the property holder would be eligible for up to a year of mortgage forbearance upon a showing that they have been negatively impacted by the COVID-19 pandemic if 30% of their income is derived from these rentals.  This would apply to second homes which your member is renting out.

At first glance measures like this have a certain facial appeal; after all, no one wants to see a business fail and the measure is similar to previous legislation extending protections to homeowners.

But there is a fundamental distinction between the legislature taking steps to keep consumers in their homes as opposed to forcing banks and credit unions to effectively subsidize business arrangements which have traditionally been negotiated without government interference.  Absent evidence that a financial institution is not acting in good faith to work with commercial property owners, the legislature should not be involved.  If we aren’t careful, virtually all property in New York State on which state chartered institutions have a security interest will be shielded from collection.

The legislature seeks to address the potential harm that measures like this could inflict on state chartered lending institutions by allowing them to seek an exemption from its provisions by demonstrating to the DFS that it cannot comply with this mandate in a safe and sound manner.  Obviously this is of little benefit to institutions simply trying to avoid liquidity problems in the first place.

Right now there are less than 20 state chartered credit unions in New York State.  Although the Cuomo Administration has taken important steps in recent years to make the state charter more attractive, if the legislature continues to pass measures which go far beyond what is required under federal law, the legislature may find itself having no banking institutions left to regulate.

The bill is now before the Assembly Codes Committee.  We will keep you posted.

July 14, 2020 at 9:41 am Leave a comment

Seven Things You Need To Know To Start Your CU Day

Today’s blog is tailor-made for those of you with ADHD.  There’s lot of information I want to get to you on a broad range of topics.

Governor Signs Mortgage Forbearance Bill – Governor Cuomo has signed into law legislation I have been telling you about regulating mortgage forbearances for homeowners impacted by COVID-19.  Here’s where it gets a little confusing.  You should read S.8243C in conjunction with PART C of A.10530 which amends S.8243C.  This is what New York State calls a Chapter Amendment.    I would certainly take a close look at these new requirements which are effective immediately.

Governor Declares Juneteenth A State Holiday—Governor Cuomo issued an EO recognizing Juneteenth as a holiday for state employees tomorrow.  June 19th marks the day in 1865 when Federal troops informed African American slaves in Texas that slavery had ended more than a year earlier following the end of the Civil War.

Meet The New Boss—On Monday the Trump Administration announced that it intends to nominate Kyle Hauptman, of Maine, to be a Member of the National Credit Union Administration Board.  He will replace current holdover board member J. Mark McWatters whose previous term expired August 2019.  If confirmed, Hauptman would serve through at least August 2025. Hauptman is currently an economic policy advisor to Senator Tom Cotton (R-Arkansas).

Don’t Forget The Money—Board Member McWatters used a gracious goodbye statement to the industry, to remind credit unions that they still have some money coming their way from the conserved credit unions as outlined on NCUAs website available here.

DFS Issues Guidance On Credit Reporting And Credit Reporting Agencies—As the sugar rush from the PPP loans and the stimulus checks begin to wear off, you can expect more and more issues to arise about your members credit.  Yesterday the New York State Department of Financial Services issued a guidance on credit reporting which is based on a set of principles the department negotiated with the CRAs.  It also will have some impact on what banks and credit unions report when acting as furnishers of credit information.

This Is One Wacky Economy; Retail Sales Surge—Any expert who tells you they know what to expect from the economy should bring you as much comfort as the weatherman confidently predicting what the weather will be like seven days from now.  Yesterday, retail sales bounced back with a vengeance.  Does this mean that a V-shaped recovery is once again possible? Or simply that people are anxious to get out of the house, anxious to spend some of that free money from the Federal Government knowing that the hard times are right around the corner?  The answers to these questions will of course have a profound impact on the financial health of credit unions large and small in the coming months.  Right now unfortunately, the economy is analogous to a 5,000 piece jigsaw puzzle with all the pieces spread across the table.

New York Primaries Worth Watching—With the state seemingly turning bluer by the day, and national pundits seeking to figure out how much staying power AOC has, here is a great piece of analysis from long time Albany hand Bruce N. Gyory handicapping the upcoming primaries in New York’s 16th Congressional District where longtime Congressman Eliot Engel is facing the proverbial spirited challenge from political unknown Jamaal Bowman and in the 15th Congressional District where the winner is all but assured of replacing retiring Congressman Jose E. Serrano.

 

June 18, 2020 at 10:04 am Leave a comment

State Passes Mortgage Forbearance Legislation  

Good morning folks.  I don’t know about you but that was one long and depressing weekend.

On Friday the legislature approved measures placing modifying forbearance requirements on state chartered institutions holding primary mortgages.  Although the bill is far from perfect, it’s an improvement over legislation that had been acted on just days earlier.  It still must be signed by the Governor.

Here’s what the legislature did (PART C of A10530).  Individuals suffering financial hardship as a result of COVID-19 would be eligible for a forbearance for up to 180 days and a possible additional six month extension.  Individuals applying for this forbearance would have to demonstrate that they are suffering a financial hardship.  In other words, a borrower is not eligible for an automatic one year forbearance.  If your borrower has already been granted a forbearance pursuant to the Executive Order, then that constitutes compliance with this new measure.    Once a forbearance is granted, it forbids financial institutions from collecting “all monthly payments” due on the mortgage.  A previous version of the bill mandated that all interest be waived.

With regard to modifying the loan, the parties can negotiate to change the terms but in the event that an agreement cannot be reached between the lender and borrower, the outstanding payments will be owed as a separate loan payable at the end of the mortgage.

The most unique part of the final bill is that it allows financial institutions to effectively apply for a waiver by demonstrating to the Department of Financial Services that granting forbearances would constitute an unsafe and unsound practice.

And just the Governor’s previous Executive Order, the bill only applies to state regulated institutions holding mortgages which are not backed by GSEs.

June 1, 2020 at 9:36 am Leave a comment

New York State Releases Emergency Mortgage Regulations

Good morning folks, with a special shout-out to our sleep deprived federal lobbyists who are eagerly awaiting final passage of the massive stimulus package reportedly agreed on by Senate negotiators early this morning.

While we wait to see what is tucked away in the trillion-dollar stimulus package, New York’s governor continues to impact banking operations on a daily basis.  Late yesterday afternoon, the Department of Financial Services released emergency regulations that lay out the legal obligations of New York State regulated institutions that have members suffering a financial hardship because of the COVID-19 pandemic.  Today’s blog is a high level snapshot with more analysis forthcoming, particularly as the Association fields questions regarding its implementation.

What does the Regulation require?

            It requires financial institutions to provide 90-day mortgage forbearances for New York State residents with New York State property who have a demonstrated financial hardship as a result of the COVID-19 pandemic.  In addition, such institutions must also waive ATM, overdraft and credit card fees for such individuals.  This last requirement applies to ATMs that are owned and operated by the banking organization.

By when do I have to get this program up and running?

            You have up to ten days to provide notice to your members of these options.

How do I determine if someone qualifies?

              You develop the criteria that can include an examination of an individual’s financial resources.  This means that you have to develop an application for individuals seeking to apply.  Denials have to be in writing and members have to be given notice of the opportunity to contact DFS to challenge a negative determination.

Does it apply to my credit union?

            This answer involves some gray area.  What we know for sure is the mortgage regulations do not apply to mortgages owned or being serviced on behalf of the GSEs.  We also know unequivocally that the mortgage regulations only apply to New York State property owned by New York State residents.  In contrast, these regulations apply to:

“…any New York regulated banking organization as defined under New York Banking Law and any New York regulated mortgage servicer entity subject to the authority of the Department.”

The gray area involves an assessment as to whether or not this definition extends to exempt organizations subject to registration requirements under New York Law.

Stay safe. Stay healthy, and remember, if you are reading this blog, you have a roof over your head and a safe place from which to wait out this bizarre period in our history.

March 25, 2020 at 9:37 am Leave a comment

New York State Releases Emergency Mortgage Regulations

Good morning folks, with a special shout-out to our sleep deprived federal lobbyists who are eagerly awaiting final passage of the massive stimulus package reportedly agreed on by Senate negotiators early this morning.

While we wait to see what is tucked away in the trillion-dollar stimulus package, New York’s governor continues to impact banking operations on a daily basis.  Late yesterday afternoon, the Department of Financial Services released emergency regulations that lay out the legal obligations of New York State regulated institutions that have members suffering a financial hardship because of the COVID-19 pandemic.  Today’s blog is a high level snapshot with more analysis forthcoming, particularly as the Association fields questions regarding its implementation.

What does the Regulation require?

            It requires financial institutions to provide 90-day mortgage forbearances for New York State residents with New York State property who have a demonstrated financial hardship as a result of the COVID-19 pandemic.  In addition, such institutions must also waive ATM, overdraft and credit card fees for such individuals.  This last requirement applies to ATMs that are owned and operated by the banking organization.

By when do I have to get this program up and running?

            You have up to ten days to provide notice to your members of these options.

How do I determine if someone qualifies?

              You develop the criteria that can include an examination of an individual’s financial resources.  This means that you have to develop an application for individuals seeking to apply.  Denials have to be in writing and members have to be given notice of the opportunity to contact DFS to challenge a negative determination.

Does it apply to my credit union?

            This answer involves some gray area.  What we know for sure is the mortgage regulations do not apply to mortgages owned or being serviced on behalf of the GSEs.  We also know unequivocally that the mortgage regulations only apply to New York State property owned by New York State residents.  In contrast, these regulations apply to:

“…any New York regulated banking organization as defined under New York Banking Law and any New York regulated mortgage servicer entity subject to the authority of the Department.”

The gray area involves an assessment as to whether or not this definition extends to exempt organizations subject to registration requirements under New York Law.

Stay safe. Stay healthy, and remember, if you are reading this blog, you have a roof over your head and a safe place from which to wait out this bizarre period in our history.

March 25, 2020 at 9:31 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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