NYSBD Banking Board Meeting Richard H. Neiman Superintendent of Banks September 2, 2010

1. NYSBD Banking Board Meeting Richard H. Neiman Superintendent of Banks September 2, 2010

2. Mortgage Loan Servicing Update Jane Azia Director Of Non-Depository Institutions and Consumer Protection

3. Report on Progress in Two Areas • Regulation of mortgage loan servicers • Adoption of MLS business conduct rules 2. 90-Day Pre-Foreclosure Notice Filing System • Launching of online system

4. Regulation of Mortgage Loan Servicers • Mortgage Lending Reform Law of 2008 – amended Article 12-D of the Banking Law • Required Registration of Mortgage Loan Servicers • Required Mortgage Loan Servicers to conduct business in accordance with rules promulgated by Banking Board or Superintendent • Part of New York’s efforts to comprehensively regulate the mortgage industry

5. Two-pronged Regulatory Approach • Part 418: Registration and Financial Responsibility Standards • Part 419: Business Conduct Rules

6. Part 418 - Registration • First adopted on emergency basis July 1, 2009 • Transition period for those servicers in business in New York as of June 30, 2009 and applied for registration by July 31, 2009 • 41 applications for registration • More than 200 exempt organizations • Banks, credit unions, mortgage lenders, mortgage brokers, insurance companies • Not required to be registered, but must comply with financial standards and business conduct rules

7. Part 419 – Conduct of Business Rules • Applies to all mortgage loan servicers doing business in New York • Draft proposed rule issued in December 2009 • Comments received and meetings held with industry and consumer groups • Adopted as an emergency rule July 29, 2010 • Published in State Register August 18, 2010 • Compliance required as of October 1, 2010

8. Part 419 Highlights • Part 419.11 (Loss Mitigation Standards) • Duty to make reasonable and good faith efforts to engage in appropriate loss mitigation, including loan modifications, to avoid foreclosure • Requires servicers to have adequate staffing, written procedures for handling borrower inquiries and complaints • Requires servicers to consider a loan modification where borrower demonstrates that he or she is in default or imminent risk of default and the net present value (NPV) of the modified loan is expected to be greater than the NPV of foreclosure

9. Part 419 Highlights (continued) • Part 419.11 (Loss Mitigation Standards) • Establishes timelines and procedures for acknowledging requests and for making decisions • Requires that servicers have an escalation process • Requires servicers to avoid initiating a foreclosure action if the borrower has requested or is being considered for a loss mitigation option

10. Part 419 Highlights (continued) • Creates a duty of fair dealing (419.2) • Requires prompt handling of consumer complaints and establishment of toll free number for complaints and inquiries (419.4) • Sets standards for prompt crediting of payments from borrowers and handling of late charges (419.6) • Payments credited as of date received. Cut off time of 5:00 pm considered reasonable • Late payments credited before late charges collected

11. Part 419 Highlights (continued) • Requires annual plain language account statements, including unpaid principal balance (419.7) • Clarifies fees that may be charged and limits late fees (419.10) • Provides for regular reporting, including quarterly reporting on loss mitigation and delinquencies (419.12 and 419.13) • Prohibits deceptive practices, force placing insurance without notice and where reason to know borrower has effective policy (419.14)

12. Implementation of RPAPL 1306: 90-Day Pre-Foreclosure Notice Filings • 2009 Mortgage Lending Reform Law added a new section 1306 to RPAPL • Requires filing with Department within thee business days of sending a 90-day pre-foreclosure notice • Such subsequent filings as Superintendent may reasonably request • Dual Purpose • Help at risk borrowers • Track foreclosures in the State • Requires development of electronic database capable of receiving the required filings

13. Pre-foreclosure Notice Filing System • Went into effect February 13, 2010 • Step One Filings initially accepted via email • Lenders required to make a filing within three business days of sending the 90-day pre-foreclosure notice • Information regarding • Borrower, lender, servicer • Loan details: type of loan, loan term, amount to bring loan current, length of delinquency, current interest rate and monthly payment, whether investor owned

14. Goal: To Capture Information at Three Stages • Step 1: At time of 90-day pre-foreclosure notice mailing • Step 2: At time of lis pendens filing • Step 3: at time of entry of judgment of foreclosure and sale

15. Launched Online Electronic Database • Online system launched on Monday, August 2nd • Hosted two training webinars on Monday, August 2nd and Wednesday, August 4th • Close to 200 people attended the training. • A recording of the training was posted online • Questions and Answers from the sessions were answered and posted online also • The system now accepts filings in Step 1 of the process (90-day notice)

16. Data Capture and Sharing • Since February 13th, information on 143,945 90-day pre-foreclosure notices has been collected • 383 servicers or lenders are registered with User IDs and Passwords on the system • Sharing data with 10 different non-profit counseling agencies throughout the State

17. Next Steps • The system will begin accepting Step 2 filings in early October (lispendens filings) • The system will begin accepting Step 3 filings in February 2011 (foreclosure information) • We are accepting feedback from users and continuously looking for opportunities to make enhancements • Quarterly public reports • First report June 10 (covered filings from February 13 through May) • Next report September (will cover filings from February 13 through August)

18. Q&A

19. The Dodd-Frank Act – Selected Issues for State Regulators: The Consumer Financial Protection Bureau Marjorie Gross General Counsel

20. In Federal Reserve, but functions as autonomous agency for regulatory purposes Director appointed by President (with consent of Senate) for 5-year term Until Director is confirmed, Secretary of the Treasury authorized to perform the functions of the Bureau. See § 1066 All consumer financial protection functions of Fed, OCC, OTS, FDIC, and NCUA are transferred to CFPA Consumer Financial Protection Bureau

21. Funding Will receive annually a fixed percentage of the total operating expenses of the Federal Reserve System beginning at 10% in FY 2010 and rising to 12% for FY 2012.  If Director determines CFLB’s funding needs exceed this amount, after submitting reports to President and Congressional appropriations committees, may receive additional $200 million in appropriations for each fiscal year through 2014. Consumer Financial Protection Bureau

22. Supervise Covered Persons for compliance with Federal Consumer Financial Law and take enforcement action to address violations, subject to §§ 1024-1026 Issue rules, orders, and guidance implementing Federal Consumer Financial Law Conduct financial education programs Collect, investigate, and respond to consumer complaints Collect, research, monitor, and publish information relevant to the functioning of markets Perform necessary and useful support activities CFPB Primary Functions (§1021)

23. Defining “unfair, deceptive or abusive acts and practices” Taking action to prevent covered persons from engaging in them Prescribing rules regarding disclosures related to consumer financial products Promulgating model forms Prescribing registration requirements for covered persons (other than insured depository institutions and credit unions) Specific Functions

24. Any person that offers or provides a consumer financial product or service Any affiliate of such a person if the affiliate acts as a service provider to the person What is a Covered Person?

25. When offered for use by consumers primarily for personal, family or household purposes: Extending credit Acquiring, purchasing, selling, brokering, or servicing loans or other extensions of credit Leasing or brokering financing leases; Providing real estate settlement services, other than insurance or electronic conduit services; Performing appraisals of real estate or personal property; Deposit-taking, money transmitting, or money services; Selling, providing, or issuing stored value in any electronic format if the seller exercises substantial control over terms and conditions of the stored value; Check cashing, check collection, and check guaranty services; Financial data processing and transmission services; Providing financial advisory services, including credit counseling, to consumers Providing services regarding debt management or settlement, modifying loans, or with avoiding foreclosure What is a Consumer Financial Product or Service?

26. Almost all federal laws regulating activities of consumer financial product and service providers, including: Alternative Mortgage Transaction Parity Act; Consumer Leasing Act Electronic Fund Transfer Act (EFTA) Equal Credit Opportunity Act (ECOA); Fair Credit Billing Act Fair Credit Reporting Act (portions); Home Owners Protection Act Fair Debt Collection Practices Act (FDCPA) Home Mortgage Disclosure Act (HMDA) Home Ownership and Equity Protection Act (HOEPA) Real Estate Settlement Procedures Act (RESPA) S.A.F.E. Mortgage Licensing Act (SAFE Act) Truth in Lending Act (TILA) Truth in Savings Act New mortgage reform provisions in Title XIV of Dodd-Frank Act What is Federal Consumer Financial Law?

27. Nondepository covered persons, Persons that originate broker or service mortgage loans, loan modifications and foreclosure relief services, Persons that offer or provide private education loans, Persons that offer or provide payday loans, “Larger participants” in the market for other consumer financial products or services, Persons CFPB determines have engaged in conduct that poses risks to consumers Insured depositories and credit unions with assets > $10 billion Insured depositories and credit unions with assets < $10 billion CFPB has differing authority over three classes of Covered Persons

28. CFPB has direct supervision over Very Large Banks (incl. savings assns and credit unions) with assets more than $10 billion, and their affiliates who act as service providers for them Nondepository institutions involved in origination, brokerage or servicing of mortgage loans, loan modifications and foreclosure relief services, “Larger participants” in the market for other consumer financial products or services, Private education loans, Payday loans, and Covered Persons CFPB determines have engaged in conduct that poses risks to consumers CFPB has Supervisory Authority over Designated Entities

29. CFPB has exclusive authority to enforce Federal Consumer financial law against them Prescribe rules, issue guidance, conduct examinations, require reports, issue exemptions Non-depository Covered Persons

30. CFPB has exclusive authority to require reports and conduct examinations on compliance with Federal consumer financial law CFPB is primary authority for enforcement of Federal consumer financial law, but other federal agencies have back-up enforcement authority DIs, Credit Unions with Assets > $10 Billion

31. Prudential regulators of depository institutions have primary supervision CFPB may require reports and include its examiners "on a sampling basis" on exams performed by prudential regulator Prudential regulators retain exclusive enforcement authority over these DIs, but CFPB may make a referral to recommend enforcement action it believes DI has engaged in a material violation of Federal consumer financial law. DIs, Credit Unions with Assets≤ $10 Billion

32. Rules of CFPB do not preempt state standards unless inconsistent Not considered inconsistent because they are more protective State AGs may bring civil actions to enforce CFPB rules against state and federally chartered entities Must first consult CFPB and entity’s prudential regulator State agency may only bring actions against state-chartered or licensed entities to enforce Title X, CFPB rules Preemption of State Law

33. In conducting periodic exams, CFPB must consider extent to which covered persons are subject to oversight by State authorities for consumer protection. CFPB must coordinate supervisory activities with the supervisory activities conducted by State bank regulatory authorities, including establishing their respective schedules for examinations and requirements regarding reports. Cooperation with State Regulators

34. Q&A