Posts tagged ‘servicing regulations’

New York CU Authorized To Offer Lease Escrow Accounts

The other day, one of my most helpful readers forwarded to me a copy of a NCUA legal opinion which provides good news to New York based credit unions and may provide a road map for credit unions in other states to follow.

First, some background. Interest on lawyer trust accounts (IOLTA) are escrow accounts that many states mandate attorneys establish in order to place a client’s funds in escrow. Prior to 2015, credit unions were extremely limited in their ability to offer such accounts because membership eligibility was based on the qualifications of each individual person who’s funds were being escrowed rather than the membership eligibility of the attorney opening the account. This meant that most credit unions could not provide the share insurance necessary to house such accounts.

Many readers may recall that all this changed in 2015 when Congress passed the Credit Union Share Insurance Parity Act permitting credit unions to offer IOLTA accounts so long as the attorney qualified for membership. If he or she did, then share insurance coverage would be passed through to the clients whose funds were being aggregated. Crucially, for purposes of this fascinating post, this statute not only permits credit unions to offer IOLTA’s but “other similar escrow accounts.”

Which brings us to the present day. On February 1st, NCUA sent this letter to ESL Federal Credit Union in New York, authorizing to offer escrow services for “lease security accounts.” Under New York law, landlords holding security deposits are required to place such deposits in escrow. See NY General Obligation Law §7-103 et. seq. The NCUA agreed with ESL Federal Credit Union that such accounts are similar to traditional IOLTA’s. At the same time it stressed that it’s “analysis does not apply to other similarly named accounts where the factual and legal circumstances differ, even slightly, from those presented in the subject instance. Rather, the conclusions reached in this opinion are expressly limited to the specific facts and circumstances surrounding the subject account.” Still, it’s a nice victory for New York Credit Unions and is clearly beneficial to other credit unions seeking to offer a similar product in other states.

CFPB Releases Servicing Reg Q&A

As a follow-up to my blog from the other day, I’m happy to report that the CFPB has released a helpful Q&A further explaining how financial institutions are to implement the successor in interest/bankruptcy regulations which take effect on April 19, 2018. I’m glad to see I’m not the only one more than a little confused about the seemingly straightforward requirements.

The Q&A is extremely helpful but it underscores that credit unions are not out of the woods when it comes to complying with both these regulations and the bankruptcy law. Here’s what I’m talking about. One of the questions asked is, “Does a servicer receive a safe harbor under the Bankruptcy Code by sending periodic statements in compliance with the Bureau’s rules?” The answer won’t exactly fill you with confidence: “A servicer does not receive a safe harbor under the Bankruptcy Code by sending periodic statements to a borrower in bankruptcy in compliance with Regulation Z, § 1026.41(e) and (f)” the Bureau explains because it does not have authority over the bankruptcy law. But it goes on to explain that, “Based on this research and outreach, the Bureau does not believe that a servicer is likely to violate the automatic stay by providing a periodic statement in circumstances required by § 1026.41(a) and (e) that contains the information required by § 1026.41(c) and (d) as modified for bankruptcy by § 1026.41(f).”

Translation: Get ready to push back against the attorney who accuses you of violating his client’s automatic stay.

March 21, 2018 at 9:07 am Leave a comment

New York to Nation: Thank Us for the Mortgage Regs

I have some good news for anyone in New York responsible for sifting through the mortgage servicing regulations released by the CFPB yesterday.  We have a huge advantage over other parts of the country because the framework for much of what the CFPB is proposing has been in New York State regulation since 2010.  In fact, the CFPB noted in the preamble to yesterday’s rule that New York’s “regulations impose obligations on servicers with respect to, among other things, consumer complaints and inquiries, statements of accounts, crediting of payments, payoff balances, and loss mitigation procedures.”  If you’re from another part of the country, brace yourself, you have a lot of work to do.

Here are some of the similarities where New York is ahead of the curve.

  • New York already requires prompt crediting of mortgage payments.
  • The new servicing requirements mandate that servicers respond in writing with explanations as to why members do or do not qualify for modifications or other forms of debt relief.
  • A major thrust of the new regulations is to ensure that members have a contact person that they can get a hold of when trying to work through mortgage problems.
  • Most importantly, New York statute and regulation already require pre-foreclosure notices and impose a legal obligation on lenders to make a good faith effort to work with delinquent borrowers prior to commencing a foreclosure.  Don’t fool yourself, there is a good faith standard in what the CFPB outlined yesterday.  For example, depending on the time frame “a borrower may appeal a denial of a loan modification program so long as the borrower’s complete loss mitigation application is received 90 days or more before the scheduled foreclosure sale.”

Now, I don’t want to overstate the case.  There are a lot of details in the federal regulations that aren’t in New York law, so I’m by no means suggesting you put the CFPB’s proposal on the back burner.  Credit unions that don’t meet the 5,000 or fewer mortgages exemption will have to send out monthly statements to their members as opposed to the annual requirement imposed by our regulations, but I know there is at least one servicer that already does this.

In addition, the CFPB’s attempt to end dual track modifications/foreclosures is going to propose even more procedural hurdles to an already cumbersome foreclosure process. The bottom line is that as envisioned by CFPB’s new regulations, a foreclosure cannot be completed until the servicer responds in writing to a member’s written mitigation request provided such request is sent at least 37 days before the foreclosure.  In addition, if you gave a member an adjustable rate mortgage, they will have to get at least 210-240 days advance notice before the mortgage resets for the first time.  I’ve been told by people who do this sort of thing for a living that this time frame makes it impossible to provide accurate information since you don’t know what the rate is going to be down the road.  Don’t worry, the CFPB knows this and is allowing you to estimate what the new rate would be.

I recently did a blog pointing out that the Federal Housing Finance Administration wants to impose additional fees on mortgages purchased from New York because of expenses imposed by our foreclosure process.  Perhaps when Dodd-Frank is fully implemented, everyone can have an expensive, cumbersome foreclosure process with the potential for keeping people in houses long after they can realistically afford to live there.  As New York goes, so goes the nation.

Armstrong Should be a Bank CEO

Now that Lance Armstrong has admitted he cheated and lied to build up his stellar reputation as America’s best cyclist ever, he is more than qualified, at least with his chutzpah and clear lack of contrition, to become a CEO at one of America’s largest investment banks.  After all, is Armstrong’s “everyone did it so let me get on with my life defense” any different than the grudging apologies offered by the captains of industry after the financial crisis only to go on the attack against any regulations holding them accountable for what they actually did?  I’ll be impressed with Armstrong if he offers to give back the 100’s of millions of dollars he’s made off his cheating.  On that note, have a nice weekend.

January 18, 2013 at 8:23 am Leave a comment

Deviants of the World, Unite!

Good morning fellow deviants! 

I always considered myself a fairly conservative guy (you know, wife and kids, suburban house), but little did I know I am working for an industry of deviants.  Last week, a consortium of state bankers’ associations created a Friends of Traditional Banking PAC, dedicated to making Congress listen to the concerns of the traditional banking industry and their customers.  You know, the ones that didn’t cause the financial crisis but yet are being victimized by Dodd-Frank.  Although they don’t mention credit unions by name, somehow I don’t think we fit their definition of traditional banks.  When I hear bankers complain that they just don’t have enough political influence in Congress, it kind of makes me wonder if they just hired Vladimir Putin’s political consultant. 

Why am I bringing this up now?  Well, an online article in yesterday’s CU Times quotes former lobbyist Marvin Umholtz saying credit unions have nothing to fear from this new PAC, which has been mislabeled a super PAC and will function “more like a scalpel than a battle axe.”  He pointed out that the new PAC will simply be focusing on one or two key races each cycle, so really we have nothing to be concerned about since we share many of the same goals as the members of the new PAC. 

Well, it’s advice like this that made Jimmy Hoffa a corner-stone of old Giant stadium (come on Jimmy, get in the car, we’re just going for a nice Sunday drive. . .).  First, regardless of how they want to label the PAC, the new super PAC will be able to take both unlimited contributions and make unlimited expenditures to support or oppose specific candidates.  You see, before 2010, Congress could limit the ability of third party advocacy groups to support or oppose specific candidates.  But now, after the U.S. Supreme Court’s Citizens United decision, individuals can give all the money they want to third party PACs so long as they don’t directly coordinate with the actual campaign.  It is this ruling that has enabled a Vegas casino tycoon to single-handedly finance the vanity tour that is, or was, the Newt Gingrich campaign.  The only entity that can really prevent coordination is the Federal Election Commission (FEC), which isn’t exactly strong-arming politicians these days.  All this means is that a group of wealthy bankers giddy on their martinis could break out the check books and single handedly finance a campaign against a politician who has the audacity to support credit unions.  Now Mr. Umholtz says that the one or two campaigns to be financed per election cycle is really no big deal, but as anyone who has been around politics should be able to tell you, if the word gets out that the bankers are able to defeat even one candidate for supporting credit union legislation, the reverberations will be felt by every member of Congress. 

So what can we do about this?  I would like to say we should form our own super PAC, but the reality is that unless Edward Filene can be brought back to life, bankers will always be able to find deeper pockets than we can.  So, at the risk of getting on a soap box, we have to double down and make sure that everyone who can contribute to the credit union PACs does so.  Also, we should point out loudly and clearly, that the bankers are literally trying to buy Washington on behalf of all those traditional bankers and their members.

CFPB to Outline Servicing Reform Proposals

The CFPB will be laying out its proposals for servicing reform today.  Material already on the CFPB’s web site indicates that the Bureau plans to examine disclosure requirements, foreclosure prevention efforts, and forced placed insurance.  New regulations are planned to be effective January 1, 2013.  I’ll hold my fire until I have the chance to read through the material, but I hope the CFPB remembers that for the vast majority of credit unions, servicing is a crucial component of their lending strategy, enabling them to cost effectively offer mortgages to their members.  If it makes this heavily regulated industry even more expensive, the Bureau could really end up doing more harm than good.

April 10, 2012 at 7:41 am 2 comments

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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