Mortgage Lending Update

Mortgage Lending Update

By David A. Wolfe, Esq.

In the wake of the 2008 financial crisis, mortgage lending is currently undergoing a major legislative overhaul.  The purpose of the increased regulation is to create strong incentives for responsible lending and borrowing and to help borrowers get home loans that are less likely to result in hardship or default, which will most certainly have the added effect of increasing costs to borrowers. 

The Dodd-Frank Financial Reform Bill requires mortgage lenders to retain a 5 percent share of each loan they originate, but Qualified Residential Mortgages (QRMs) will be exempt from the new risk-retention rules.  The legislation specifically identified loans guaranteed or originated by FHA, VA, and USDA as qualified for exemption but left other products, including loans written by Fannie Mae and Freddie Mac, up to federal regulators to determine.  A joint effort between six federal agencies, including the Department of Housing and Urban Development, Federal Deposit Insurance Corp., Federal Housing Finance Agency, Federal Reserve, Office of the Comptroller of the Currency, and the U.S. Securities and Exchange Commission, the QRM definition is of great importance because it will determine the types of mortgages that will be generally available for borrowers in the foreseeable future. 

The current QRM definition proposed at the end of March would require an 80% or less loan-to-value, (at least a 20% down payment); limiting the mortgage payment to 28% of gross income and all debts to 36%. Further, while no credit score requirement is included, a mortgage loan would qualify as a QRM only if the borrower is not currently 30 or more days past due on any debt obligation; borrowers could not have been 60 or more days past due on any debt obligation within the preceding 24 months; and during the preceding 36 months borrowers could not have been through bankruptcy, foreclosure, engaged in a short sale or deed-in-lieu of foreclosure, or subject to a Federal or State judgment for collection of any unpaid debt.  The proposed definition is subject to public comment through June 10, 2011, and will then be reviewed by Congress.

In a recent speech, Federal Reserve Chairman Benjamin Bernanke urged lawmakers to avoid “imposition of ineffective or burdensome rules that lead to excessive increases in costs or unnecessary restrictions in the supply of credit.”  However, a restrictive QRM definition will work against homeowners.  The longest recession since the Great Depression has been the cause of high unemployment and under-employment, leading a high debt-to-income ratio for many borrowers and devastated credit scores.  These factors combined with falling property values will prevent many U.S. homeowners from refinancing into a QRM.  Without the ability to secure a 20% down payment, the capital reserve retention rules will subject borrowers to higher costs for the additional risk and will combine with higher mortgage rates for many to add additional roadblocks to sustainable home ownership, especially those in the hardest hit areas of the country.

David A. Wolfe is an associate in Consumer Collections who practices within the Consumer Collections, Corporate & Financial Services, Credit Union, Collateral Recovery/Replevin and Litigation & Defense Groups of Weltman, Weinberg & Reis Co., LPA. He is based in the Detroit office and can be reached at 248.362.6142 or dwolfe@weltman.com.

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Generation Y: A New Kind of Employee

Generation Y: A New Kind of Employee

By David S. Brown, Esq.

Over the next decade, 64 million skilled workers will be able to retire.  Additionally, many Generation X workers are opting out of long hours in exchange for more family friendly positions.  This means that marketing to Generation Y, also known as the Millennials, Generation Next, the Net Generation, Echo Boomers, the iGeneration, and the Google Generation will become a high priority for many businesses.  Generation Y is made up of individuals born between 1977 and 2002.  With 79.8 million members born between 1977 and 1995, they outnumber the baby boomers and are more than three times the size of Generation X.  This article will help you understand who they are; how they think; how to attract them to your company; and how to keep them happy and productive as long term employees.

Who Are They?

“Generation Y combines the can-do attitude of Veterans, the teamwork ethic of Boomers and the technological savvy of Generation X.”  They are the most diverse generation in history as they were born to the most diverse mix of parents in history.  For example, one third of the generation was born to single, unwed mothers.   Additionally, Generation Y is less white and more brown than any generation to come before it.

The great majority of Generation Y are the children of Baby Boomers.  As a result, they grew up in a very structured, busy and over planned world involving all sorts of lessons, camps and group activities.  This slew of activities contributed to Generation Y being more tolerant of racial and cultural differences than their parents’ and grandparents’ generations.  For example, gay rights and non-traditional gender roles are more widely accepted by this generation than any other generation.  They also tend to work best in groups and enjoy collaborating on projects, rather than handling tasks on their own.  Generation Y places high value on developing good interpersonal skills and in “getting along”, and the activities of their youth taught them to be polite and to believe in manners.

These same activities have caused Generation Y to exhibit a great deal of anxiety as well.  Specifically, individuals of this generation tend to crave structure, attention and feedback from their superiors.  As one observer put it, “Gen Yers have grown up getting constant feedback and recognition from teachers, parents and coaches and can resent it or feel lost if communication from bosses isn’t more regular.”  Another expert opines that “The millennium generation has been brought up in the most child-centered generation ever.  They’ve been programmed and nurtured.  Their expectations are different.  The millennial expects to be told how they’re doing.”  Certainty and security are key for this Generation.  To this end, “Gen Yers want to know everything up front as far as what is expected and what criteria will be used to evaluate their performance.”

Generation Y has been described as ambitious and highly motivated.  They aim to work faster and better than other workers and they want to make an important impact on day one.  Bruce Tulgan, the founder of leading generational-research firm Rainmaker Thinking described Generation Y by stating “This is the most high-maintenance workforce in the history of the world.  The good news is[,] they’re also going to be the most high-performing workforce in the history of the world.  They walk in with more information in their heads, more information at their fingertips – and, sure, they have high expectations, but they have the highest expectations first and foremost for themselves.”

Perhaps Generation Y’s most distinct feature is their knack for technology.  It’s no secret that Generation Y is the world’s first native online population.  They grew up with technology and they are plugged-in twenty-four hours a day, seven days a week.  They’ve mastered televisions, gaming systems, dvd’s, cd’s, mp3’s, iPod’s, laptop computers, cell phones, e-mail, the internet, instant messaging, text messaging, Facebook and much more.  They’ve even proven successful in launching viable online businesses – Facebook and Napster are two great examples.  A recent survey indicates that ninety percent of Gen Yers in the U.S. own a PC, while 82 percent own a cell phone.  Their familiarity with technology and media has lead to a generation of multitaskers who are able to conduct assignments quickly while listening to music, surfing the internet, or watching movies.

How Generation Y Thinks

The first thing that has to be understood when marketing to Generation Y is that they want to work, but they don’t want work to be their life.  Unlike their parents generation, which tends to put a high priority on career, today’s youngest workers are more interested in making their jobs accommodate their family and personal lives.  They want jobs with flexibility, telecommuting options and the ability to go part time or leave the workforce temporarily when children are in the picture.

When it comes to loyalty, the companies that they work for don’t receive high priority.  In fact, some experts have opined that Generation Y puts their employer at the very bottom of their list – behind their families, their friends, their communities, their co-workers and, of course, themselves.  Early research indicates that the average Gen Yer has been changing jobs every 1.1 years. 

Generation Y’s quick to jump ship attitude can be explained at least partially by their world view.  From day one, Gen Yers have been told that they can be anything they can imagine.  It’s an idea they’ve clung to as they’ve grown up and as their outlook was shaken by the Columbine shootings and 9/11.  More than the nuclear threat of their parents’ day, those attacks were immediate, potentially personal, and completely unpredictable.  Add in a never ending news reel of stories about global warming, the impending budget crisis and the certain failure of Social Security and its easy to understand Generation Y’s outlook.  They know that they are not promised a healthy, happy tomorrow – so, they’re determined to live their best lives now.

To further complicate matters, Generation Y is working with the largest safety net this world has ever seen.  More than half of new college graduates move back to their parents’ homes after collecting their degrees.  This parental support gives Gen Yers the financial support and time that they need to pick the job that they really want.  Thus, companies are being forced to think more creatively about how to offer positions with better work-life balance, while maintaining profits and still cutting costs.
How to Attract Gen Yers and How to Keep Them Happy Once You Do

Benefits, technology, family friendly hours, and an inclusive and comfortable work environment seem to be the keys to attracting the most promising members of Generation Y.  A survey by the Diversified Investment Advisors of Purchase, NY reported that 37 percent of Generation Yers expect to start saving for retirement before they reach 25, with 49 percent who say retirement benefits are very important when accepting a position.  Among those eligible, 70% of Generation Y respondents contribute to their 401(k) plan.  It’s important to remember that Generation Y has grown up through massive layoffs in the 1980’s, the dot-com bust, the Enron Scandal and most recently, the real estate bubble which resulted in the worst economic downturn since the Great Depression.  Thus, security and benefits are often more important to Generation Y than their hourly rate – although I’m not suggesting that they’ll work for free.

While Boomers may expect a phone call, or an in person meeting, Generation Y would much rather communicate via e-mail, or instant messaging.  Thus, it’s imperative that employers offer up-to-date computer systems, work from home capability, and cell phone plans that include data and texting.  After all, it feels natural for Generation Y to check in by BlackBerry all weekend as long as they have flexibility during the week.

Flexible hours can come in many forms.  Some companies have instituted a four day work week consisting of four ten hour days.  Others permit flextime, which allows their employees to arrive and depart during hours that are more convenient for them than the traditional work hours.  Some companies go as far as allowing each employee to work from home at least one day a week – or for a period of time after an injury or the birth of a child.  Whatever form it takes, flexible hours are a real hit with Generation Y.

With respect to dress, Generation Y is used to going casual.  They’ve spent four to ten years attending college and graduate school classes in their sweat clothes and pajamas, so jumping right to a suit and tie can be quite a drag.  Many of them feel they can be just as, or more productive than their predecessors while sporting flip-flops and capri pants.  Oh yeah, they have lots of tattoos and piercings too.  In fact, Generation Y is all about quietly expressing themselves with small statements that won’t cause trouble – a funky T-shirt under a blazer, artsy jewelry, silly socks.

The most important thing to remember after you’ve successfully recruited a few Gen Yers, is that you have to make them feel like they are a contributing member of your team from day one.  Feeling like they are making a difference is the single most motivating factor for Generation Y employees.  This can be done by assigning them significant tasks and following up with as much feedback and guidance as possible.  If your company is unable to make them feel like they are making a difference, or show them the attention that they desire in the form of guidance and feedback, they’ll quickly seek out another employer that they feel will be more appreciative of the skills and talents that they have to offer.  However; if you keep the foregoing tips in mind and make an effort to adapt your workplace, you will attract and keep as many Generation Y employees as you can handle. 

David S. Brown is an Associate in Commercial Collections who practices in the Commercial Banking, Commercial Business, Special Collections and Commercial/Agency Services Groups. He is based in the Cleveland office and can be reached at (216) 685-1062 or dbrown@weltman.com.
WORKS CITED:

Hira, Nadira A, Attracting the twentysomething worker, Fortune, May 15, 2007, http://money.cnn.com/magazines/fortune/fortune_archive/2007/05/28/100033934

Trunk, Penelope, What Generation Y Really Wants, TIME, July 5, 2007, http://www.time.com/time/printout/0,8816,1640395,00.html

Armour, Stephanie, Generation Y: They’ve arrived at work with a new attitude, USA TODAY, November 6, 2005, www.usatoday.com/money/workplace/2005-11-06-gen-y_x.htm

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Changes in Indiana Foreclosure Procedures

Changes in Indiana Foreclosure Procedures

By Zarksis Daroga, Esq.

As a result of Senate Bill 582 (SB 582), the Indiana legislature has made several procedural changes as to the foreclosure process effective July 1, 2011. These changes include the following:

For all residential foreclosure actions filed after June 30, 2011, the lender must provide to the Court, at the time of filing the foreclosure complaint, the debtors’ most recent contact information, such as phone number, e-mail address, and last known property address, if different than the mortgaged property address. Currently, WWR provides this information to several counties in Indiana, including Lake and St. Joseph Counties. This basically makes it an across-the-board requirement for all counties.After June 30, 2011, the language regarding the debtor’s right to a settlement conference is to be included on the first page of the summons that is to be issued with the foreclosure complaint. Currently, the settlement conference notice is included as a separate page to the foreclosure complaint. The Courts are to also send a separate settlement conference notice to the debtor, upon the filing of the foreclosure complaint. Additionally, SB 582 charged the Indiana Housing and Community Development Authority (IHCDA) with drafting the settlement conference notice language that is to be included on the first page of the summons. Per the bill, IHCDA is required to post that new language on its website on or before June 1, 2011. Once IHCDA posts the required information on its website, WWR will incorporate the same in our summons for all foreclosure cases filed after June 30, 2011.If after receiving the settlement conference notice, a debtor requests a settlement conference with the court, the request is treated as an official appearance by the debtor in the foreclosure case. WWR will be required to move for summary judgment instead of default judgment in cases where the settlement conference was unsuccessful.Once the debtor requests a settlement conference, the Court will stay the granting of any dispositive motions in the foreclosure case until the Court receives notice that the settlement conference concluded and that the parties have either entered into a foreclosure prevention agreement or were unable to agree on the terms of an agreement.SB 582 charges IHCDA to come up with a prescribed list of loss mitigation documents to use in foreclosure cases, on or before June 1, 2011. The bill also authorizes the IHCDA to amend this list in response to any changes in the federal loan modification programs, or as IHCDA deems otherwise to be necessary. WWR will provide the loss mitigation documents list to our clients, as soon as it is posted by the IHCDA.In all residential foreclosure cases after June 30, 2011, where the debtor requested a settlement conference, the debtor is required to provide to the creditor’s attorney and the court with a complete package of the loss mitigation documents, as provided by the IHCDA, by certified mail at least 30 days prior to the settlement conference. The creditor is required to provide the debtor a copy of the payment history via certified mail, substantiating the debt, plus an itemization of all amounts owed (payoff statement), at least 30 days prior to the settlement conference.Any cost associated with the settlement conference, or any fines imposed by the courts on the lender for violating a court order, may not be forwarded or passed onto the debtor. SB 582 authorizes the courts in foreclosure cases where the debtor continues to occupy the property, to require the debtor to make monthly payments. These payments are to be based on the debtor’s ability to pay, may not exceed the debtor’s monthly payments under the terms of the mortgage, the payments shall be held in trust for the parties by the clerk of the court, and payments can only be disbursed upon order of the court. Payments will be disbursed to the creditor if a foreclosure prevention agreement is reached or if the case proceeds to judgment, and the debtor shall receive a credit for any payments disbursed.SB 582 allows a non-owner of a property to come onto the property in order to visually inspect the property to see if it has been abandoned or vacated. If that individual feels that the property is abandoned or vacated, he/she may contact the necessary authorities and will be immune from any civil liability for trespassing due to the inspection.In addition to the changes made by SB 582, the Indiana House of Representatives also amended the same foreclosure statute in HB 1024 by requiring creditors to mail a copy of the foreclosure complaint, via certified mail, to the last known address of the insurance company for the property being foreclosed. The statute also states that the creditor will not be subject to any penalty, or the foreclosure proceeding will not halt if the creditor does not mail the complaint to the insurance company.

WWR will comply with this amendment and mail a copy of the foreclosure complaint to the last known insurance company, but we will have to rely on that information from the lender. As such, I suggest that if at all possible, the information be obtained from the debtor either at the closing or during any loss mitigation negotiations, prior to the foreclosure being filed.

It is very helpful for lenders to provide foreclosure counsel with the most up-to-date contact information possible on debtors, at the time of the referral. Lenders should be ready to respond to increased requests for payment histories and itemized breakdowns of all amounts owed.

If you have any questions on this matter, please contact Zarksis Daroga, Esq. Zarksis provides foreclosure services as an associate in WWR’s Integrated Real Estate

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Federal Bank Regulators Are Proposing Tougher Rules Governing Executive Compensation Arrangements for $1 Billion Plus Banks

Federal Bank Regulators Are Proposing Tougher Rules Governing Executive Compensation Arrangements for $1 Billion Plus Banks

By Francis X. Grady

On March 30, 2011, all Federal bank regulators jointly released proposed rules with respect to incentive-based compensation arrangements for banks with $1 billion or more in assets. Issued under the authority of Section 956 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), the proposed rules would align the U.S. more closely with international compensation standards by:

Prohibiting incentive-based compensation arrangements that would encourage inappropriate risks by banks providing excessive compensation;Prohibiting incentive-based compensation arrangements for covered persons that would expose the institution to inappropriate risks by providing compensation that could lead to a material financial loss;Requiring policies and procedures for incentive-based compensation arrangements that are commensurate with the size and complexity of the institution; andRequiring annual reports on incentive compensation.

The rules explicitly apply to all banks with assets of $1 billion or more. All “covered” financial institutions will be required to annually report incentive compensation arrangements to their primary Federal bank regulator within 90 days of the fiscal year end.

If issued in final form as proposed, the final rules will be burdensome. However, successful banks will not only comply with the rules but, with the right assistance, use them to gain a competitive advantage over less nimble competitors. Good incentive plans support short and long-term business goals, and the rewards of well-designed plans support shareholder and executive success.

Section 956 of the Dodd-Frank Act requires that the Federal banking agencies jointly adopt measures that:

Require the “covered financial institutions” to disclose to their appropriate Federal regulator the structure of their incentive-based compensation arrangements so the regulator can determine whether such compensation is excessive or could lead to material financial loss to the bank; andProhibit any type of incentive-based compensation that the regulators determine encourages inappropriate risk by providing excessive compensation or that could lead to material financial loss to the covered bank.

The seven agencies involved in the joint rulemaking process include the Office of the Comptroller of the Currency, the Federal Reserve Board, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, the National Credit Union Administration, the Securities and Exchange Commission, and the Federal Housing Finance Agency.
Proposed Rules on Incentive-Based Compensation

The proposed rules, which would apply to banks, brokers, dealers or investment advisers with assets of at least $1 billion, contain three elements:

(1) Annual Reporting About Incentive-Based Compensation Arrangements Under the proposed rules, a bank with assets of $1 billion or more would be required to file annually with its appropriate Federal bank regulator a report describing the firm’s incentive-based compensation arrangements. The information that would be required to be submitted would include, but not be limited to:

A narrative description of the components of the bank’s incentive-based compensation arrangements;A succinct description of the bank’s policies and procedures governing its incentive-based compensation arrangements; andA statement of the specific reasons as to why the bank believes the structure of its incentive-based compensation arrangements will help prevent the bank from suffering a material financial loss or does not provide covered persons with excessive compensation.

For purposes of the proposed rules, the term “incentive-based compensation” is defined broadly to include any variable compensation that serves as an incentive for performance. Whether the form of payment is cash, an equity award, or other property does not affect whether compensation meets the definition of “incentive-based compensation.” Compensation would not be incentive-based if it is awarded solely for, and payment is tied solely to, continued employment (e.g., salary). Incentive-based compensation includes direct and indirect payments, fees and benefits, payments or benefits pursuant to an employment contract, compensation or benefit agreement, fee arrangement, perquisite, stock option plan, post-employment, or other compensatory arrangement.

(2) Prohibition on Encouraging Inappropriate Risk

(a) General Prohibitions

The proposed rules apply to executive officers, employees, directors, or principal shareholders – “covered persons” – at a covered financial institution. Under those rules, a covered financial institution would be prohibited from establishing or maintaining an incentive-based compensation arrangement that encourages inappropriate risks by providing covered persons with excessive compensation, or that could lead to material financial loss. Incentive-based compensation for a covered person would be excessive when amounts paid are unreasonable or disproportionate to, among other things, the amount, nature, quality, and scope of services performed by the covered person. In making such a determination, the proposed rules indicate that the agencies will consider:

The combined value of all cash and non-cash benefits provided to the covered person;The compensation history of the covered person and other individuals with comparable expertise at the covered financial institution;The financial condition of the covered financial institution;Comparable compensation practices at comparable institutions, based upon such factors as asset size, geographic location, and the complexity of the institution’s operations and assets;For postemployment benefits, the projected total cost and benefit to the covered financial institution; andAny connection between the individual and any fraudulent act or omission, breach of trust or fiduciary duty, or insider abuse with regard to the covered financial institution.

(b) Incentive Compensation

The proposal states that incentive-based compensation arrangements would be deemed not to encourage inappropriate risk if they meet vague standards established under Section 39(c) of the Federal Deposit Insurance Act and guidance issued by Federal bank regulators in June 2010 setting forth principles for incentive compensation standards. The incentive-based compensation arrangement would not encourage inappropriate risk if the arrangement:

Balances risk and financial rewards, for example by using deferral of payments, risk adjustment of awards, reduced sensitivity to short-term performance, or longer performance periods;Is compatible with effective controls and risk management; andIs supported by strong corporate governance.

The incentive compensation rules on establishing or maintaining any type of incentive compensation arrangements that could lead to a material loss to the financial institution includes groups of persons who are subject to the same or similar incentive compensation arrangements and who, in the aggregate, could expose the institution to a material financial loss (e.g., loan officers who, as a group, originate loans that account for a material amount of the covered financial institution’s credit risk).

Because the Dodd-Frank Act rules on incentive-based compensation represent principlesbased regulation, not rules-based supervision, the regulations’ lack of specificity leads to nebulous standards that will be enforced through examiner leverage. When it comes to incentive-based compensation, the basis for a board’s judgment has to be documented. If the board does not document the process, the bank examiner can question the results. The financial
health of a bank will play a big part in compensation-focused exams. If the bank regulator has a safety and soundness concern with a bank and then finds that the bank is paying compensation at the upper end of the scale for similar sized institutions, that institution will be at more risk for having the incentive compensation arrangement challenged.

(3) Establishing Policies and Procedures

A covered financial institution would be barred from establishing an incentive-based compensation arrangement unless the arrangement has been adopted under policies and procedures developed and maintained by the institution and approved by its board of directors. A foundation to ensure an effective pay-for-performance relationship is to
actually model and monitor the relationship. This is an area where many banks fall short.

By documenting scenario analyses, banks can show the rationale for rewards that result from these programs. While not common practice, the board record of incentive compensation approval should reflect consideration of the following:

The complete range of compensation that would result from programs in aggregate under various performance scenarios;Relate the long-term award values received by executives to company performance relative to peers/industry over multiple years; andMonitor the level of equity/ownership by executives, employees and board members so that levels of ownership are sufficient to ensure their alignment with shareholders.

Because assessment of executive compensation is now part of the management evaluation in the CAMELS safety and soundness examination, the policies and procedures that promote compliance with the rules should:

Provide data to the board or compensation committee from management or outside sources sufficient to allow the board or compensation committee to assess if the overall design and performance of the incentive compensation arrangements are consistent with Section 956 of the Dodd-Frank Act; andMaintain sufficient documentation regarding the establishment, implementation, modification and monitoring of incentive compensation arrangements to determine compliance with Section 956 of the Dodd-Frank Act.

Although the requirements under the proposed rule are not anticipated to become effective until late this year or early next year, it is not too early for financial institutions to begin to prepare for the requirements. We recommend that banks take the following actions:

Inventory the compensatory arrangements of all covered persons to identify those that would constitute “incentive-based compensation”;For those arrangements that would constitute incentive-based compensation, begin compiling the information required to analyze the factors under Section 39(c) of the Federal Deposit Insurance Act that would be used to determine whether the compensation could be deemed “excessive”;Determine the subset of covered persons and groups of covered persons who would be covered by the prohibition on incentive-based compensation that could lead to material financial loss;Review the compensation committee’s charter and consider revising the compensation committee charter to ensure that the charter scope includes the approval of incentivebased compensation arrangements of applicable non-executive officers;Create a plan for implementing or revising policies and procedures governing the award of incentive-based compensation;Determine the appropriate risk-management, risk-oversight and internal-control personnel to be involved in the process of designing incentive-based compensation arrangements and assessing incentive-based compensation policies; andConsider the process required to prepare the annual report that would be submitted to the appropriate Federal bank regulator.

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HAMP Single Point of Contact

HAMP Single Point of Contact

By Alan C. Hochheiser, Esq.

On May 18, 2011, The Treasury Department issued Supplemental Directive 11-04 under the Home Affordable Modification Program (HAMP).  The purpose of this Directive is to require servicers of non-GSE mortgages to have a single point of contact for dealing with customers who are currently in or may be eligible for HAMP programs on first mortgages.  Second Mortgages are not covered under this Directive. 

The single point of contact (SPC) must be in a position to communicate with the borrower about a resolution for their delinquency.  The SPC must be in place for the entire delinquency or the imminent default resolution process including any home retention or non-foreclosure liquidation options, and if the loan is subsequently referred to foreclosure, the relationship manager must be available to respond to the borrower’s inquiries regarding the status of the foreclosure.  In addition to HAMP, this will be required with the Home Affordable Unemployment Program (UP) and the Home Affordable Foreclosure Alternatives (HAFA) program.  The effective date of this Supplemental Directive is September 1, 2011.

Please be advised that for those borrowers who are in the process of being evaluated for HAMP, UP or HAFA, who are in a trial period plan or a UP forbearance plan, or who have executed a short sale or deed in lieu agreement by the effective date, the Supplemental Directive must be signed by the relationship manager by no later than November 1, 2011.  In addition, borrowers who were originally ineligible for any of the aforementioned programs prior to September 1, 2011 and re-request an evaluation after that time, must be assigned a relationship manager if the servicer determines there has been a significant change in the borrower’s circumstances that merits the re-evaluation. 

Under this Supplemental Directive, the relationship manager must provide the borrower, in writing within five (5) business days of being assigned to the borrower, a notice which includes a toll free number and at lease one other means of contact for the relationship manager.  The notice must also provide the preferred means for the transmission of any required documentation from the borrower to the servicer.  Please note, that if circumstances arise where the relationship manager should change, written notice of said change and contact information must be communicated to the borrowers. 

Additional information in regard to Supplemental Directive 11-04 may be obtained through the US Treasury’s website at treasury.gov.

Weltman, Weinberg & Reis Co., LPA will keep you advised on issues pertaining to HAMP and other bankruptcy matters.

If you have any questions, please contact Alan C. Hochheiser, Esq. Alan is the Managing Partner of the Bankruptcy Practice Group of Weltman, Weinberg & Reis Co., LPA located in the Brooklyn Heights, Ohio office. He can be reached at 216.739.5649 or ahochheiser@weltman.com.

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Current Issues in Credit Unions Episode #60.

Current Issues in Credit Unions Episode #60.

Andrea Stritzke from PolicyWorks joins Hal, Guy, Katherine and Rob on the show this month.  Also, we say goodbye to our good friend Anthony who has left the show (because of a terrific promotion).  Here are the topics:

–CFPB Shenanigans.
–EW on The Daily Show.
–Interchange
–Model forms
–Politics.

–Update on the Texas CUSO rule.
–ADA Compliance dates for ATMs.
–Bylaws best practices.
–Big K Roundup.

Sound editing by Victor Khaze

The CIiCU hosts are:

Brian Witt
Hal Scoggins
Farleigh Wada Witt,
Attorneys at Law
121 SW Morrison Street, Suite 600
Portland, Oregon 97204
Telephone:   503-228-6044  503-228-6044  Fax: 503-228-1741
http://www.fwwlaw.com

Guy Messick
Katherine Weber
Messick & Weber P.C.
211 North Olive Street
Media, PA 19063   
Telephone  610-891-9000  610-891-9000  Fax 610-891-9008
http://www.cusolaw.com

Faith Anderson
American Airlines Credit Union
P.O. Box 619001
MD 2100
DFW Airport, TX
75261-9001
(800) 533-0035  (800) 533-0035    
https://www.aacreditunion.org/default.asp

Robert Rutkowski
Shareholder
Weltman, Weinberg & Reis Co., L.P.A.
323 W. Lakeside Avenue, Suite 200

READ MORE - Current Issues in Credit Unions Episode #60.

Update on Debit Card Interchange Fees

Update on Debit Card Interchange Fees

by John B.C. Porter, Esq.

On December 16, 2010, the Federal Reserve Board (“Board”) released its proposed rule to implement the Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act, which was enacted on July 21, 2010.  The Durbin Amendment amends the Electronic Fund Transfer Act by adding a new section 920 regarding interchange transaction fees and rules for payment card transactions.  Comments on the proposed rule were due by February 22, 2011, and the rule goes into effect July 21, 2011.  The Board was supposed to release its final rule on April 21, 2011, but that date has passed and a final rule has not materialized.  The proposed rule capped debit card interchange fees at $0.12 per transaction for institutions with assets exceeding $10B.

There is speculation that the Board is playing a waiting game with Congress, as two bills to delay implementation of the Durbin Amendment (one for two years and the other for one year) have been sponsored in Congress, S. 575 and H.R. 1081 respectively. 

Debbie Matz, Chairman of the National Credit Union Administration (“NCUA”), wrote a letter to Ben S. Bernanke, Chairman of the Board, dated April 29, 2011, in which she furthers the comments of the NCUA with respect to the Board’s proposed rule on interchange fees.  In her letter, Ms. Matz outlined the results of data collected from credit unions of various asset sizes relative to the direct costs of processing debit card transactions.  This data does not include indirect costs such as labor, facilities, equipment and other overhead costs related to operating a debit card program.  Based on this data, Ms. Matz concludes that the cost per debit card transaction for institutions with assets of less than $100M exceeds the $0.12 cap within the proposed rule.  In conclusion, Ms. Matz urged the Board to modify the proposed rule on interchange fees to provide meaningful exemptions for smaller card issuers related to network exclusivity and merchant routing.

Interchange Cost Chart

Senator Richard Durbin continues to defend his amendment, despite unprecedented opposition from financial institutions from multi-billion dollar banks down to the smallest credit unions, and penned an open letter to JPMorgan Chase CEO Jamie Dimon in which he wrote:  “[T]here is no need for you to threaten your customers with higher fees when you and your bank are already making money hand-over-fist.  And there is no need to make such threats in response to reform that simply tries to spare consumers from bearing the cost of interchange fees that are anticompetitive and unreasonably high.”  This was partly in response to Dimon’s letter to shareholders in which he stated that the proposed fee caps are akin to “price fixing” and “downright idiotic.”  It is not entirely clear who will benefit from the interchange cap, consumers or merchants, but it is abundantly clear that the big loser in all of this will be credit unions.  With the effective date quickly approaching and uncertainty as to what the fee cap will be or when it will be implemented, this promises to make an interesting, if not rocky, summer for us all.  Stay tuned….

John B. Porter is the managing attorney of the Credit Union Group in the Columbus office. He can be reached at 614.857.4488 or jporter@weltman.com.

READ MORE - Update on Debit Card Interchange Fees