Filed under: Current Issues in Credit Unions | Tags: Bank Transfer Day, Carla Decker, cloud computing, finCEN SAR Trend Analysis, MBL Loan Cap, Office of Consumer Protection, SAFE Act Renewals
Thank you very much to the National Association of Federal Credit Unions for allowing us to do our very first live show in Orlando, Florida. Faith, Catherine & Rob covered the following topics:
–Cloud Computing
–SAFE Act Renewals
–Member Business Loan Cap Update
–FinCEN SAR Trend Analysis
–Carla Decker nomination to NCUA Board
–NCUA Letter to Credit Unions on Office of Consumer Protection
–Bank Transfer Day
–State of the Credit Union Movement
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 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 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
https://www.aacreditunion.org/default.asp
Robert Rutkowski
Shareholder
Weltman, Weinberg & Reis Co., L.P.A.
323 W. Lakeside Avenue, Suite 200
Cleveland, Ohio 44113
Telephone: 216-739-5004 Fax: 216-739-5642
http://www.thatcreditunionblog.com
http://www.weltman.com
Subcribe to the show via iTunes Music Store:http://phobos.apple.com/WebObjects/MZStore.woa/wa/viewPodcast?id=151785964&s=143441
(Per Rob Rutkowski) Credit unions do care where their members are domiciled for BSA purposes, as well as when they are presented with administration documents associated with an estate.
By Amanda R. Yurechko, Esq.
The Twelfth District Court of Appeals recently considered the issue of domicile versus residence in Middletown v. Myers, 193 Ohio App.3d 632, 2011-Ohio-2470. The Defendant alleged that his domicile was “God’s earth” although he acknowledged that for the tax years in question, he had in fact, as the Court noted, “ate, breathed and slept at his Middletown residence”. He also unquestionably received the city’s water service at that address. While a somewhat absurd example, the Court did perform a thorough review of the arguments of residence versus domicile to reach its conclusion.
Residence, which denotes the place in which one physically lives for a period of time, is embodied in the definition of domicile. Domicile has traditionally been defined as a “residence in fact, combined with the intention of making the place of residence one’s home for an indefinite period.” Cleveland v. Surella (1989), 61 Ohio App.3d 302. The primary distinction between the two is that while a person can have only one domicile at any given time, he or she may have more than one residence. Saalfeld v. Saalfeld (1949), 86 Ohio App. 225. Moreover, once a domicile has been established, it is presumed to continue until it is shown by a preponderance of the evidence that is has been abandoned in favor of a new one. Cleveland v. Surella (1989), 61 Ohio App.3d 302; Saalfeld, supra, 226.
The Ohio Revised Code defines someone as having a “domicile” in Ohio if they 1) have only one home, 2) it is located within Ohio, and 3) they live in it year-round. If a person owns other homes in other states, or spends significant time living out of the state, disclosure of this information is required for tax purposes, and it is the burden of the tax filer to prove they lived in the Ohio home for the required amount of time to establish residency. If a person spent her entire year outside of the state of Ohio, she did not have a domicile in Ohio that year. If a person spent some of his time domiciled in Ohio and some time domiciled elsewhere, the ORC provides a formula to measure “contacts” within the state of Ohio to determine if residency standards are met. Domicile, for Ohio income tax purposes, is defined in House Bill 73, Section 24, I (1), and the ORC, Section 5747.24.
In order to impose local taxes on a person who lives and works outside a municipality, but who maintains what appears to be a permanent residence inside the same municipality, be prepared to demonstrate evidence that the person intends to return to the municipality. For example, where a person has moved outside the municipality during a separation, for school or for a temporary job, evidence of their intent to return may include their remaining family residing at the permanent residence, his or her children continuing to attend a local school, utility bills continuing in his or her name at the permanent address, as well as maintaining the driver’s license and voter registration at that permanent address.
Additionally, review how often the person returns to the permanent residence and stays at that location. While there is no bright line test to determine whether a person is domiciled within a municipality, so as to be considered a resident for tax purposes, all of the above factors, when viewed together, can create a situation where a person who has taken temporary residence outside the municipality, and earns income elsewhere, may be liable to the municipality for local taxes.
In Middletown v. Myers, the Defendant’s assertion that while his residence was in Middletown, he was not domiciled there was rejected in light of clear evidence to the contrary. Likely, the issue you will face with residents of your community will not be so clear. Be prepared to demonstrate evidence that the person intends to return to the municipality. For example, where a person has moved outside the municipality during a separation, for school or for a temporary job, evidence of their intent to return may include their remaining family residing at the permanent residence, his or her children continuing to attend a local school, utility bills continuing in his or her name at the permanent address, as well as maintaining the driver’s license and voter registration at that permanent address.
Additionally, review how often the person returns to the permanent residence and stays at that location. While there is no bright line test to determine whether a person is domiciled within a municipality, so as to be considered a resident for tax purposes, all of the above factors, when viewed together, can create a situation where a person who has taken temporary residence outside the municipality, and earns income elsewhere, may be liable to the municipality for local taxes.
If you have any questions on this matter, please contact Ms. Amanda Yurechko, Esq. Amanda is an associate in Consumer & Commercial Collections of Weltman, Weinberg & Reis Co., LPA located in the Cleveland office. She can be reached at 216.685.1060 and ayurechko@weltman.com.
Filed under: garnishment
By John B. C. Porter, Esq.
I created a worksheet as a guide intended to help Ohio credit unions calculate the amount to be remitted to court upon receipt of a garnishment under the new federal rules with respect to the protected amount of federal benefits. Go here for a copy of the worksheet.
If you have any questions, please contact me. I am an associate managing the credit union group in the Columbus office of Weltman, Weinberg & Reis Co., LPA and can be reached at 614.857.4488 or jporter@weltman.com.
The Federal Housing Finance Agency has now expanded the program by allowing homeowners to refinance regardless of how much their house has fallen in value. Originally, the program was limited to borrowers whose mortgages were no greater than 125 percent of the value of their homes. Under the program, borrowers must still be making on-time payments. The program also only applies to loans owned or guaranteed by Fannie Mae or Freddie Mac.
HAMP has received significant criticism as the number of homeowners participating in the program permanently that modified their mortgage is significantly lower than expected. The most recent statistics released by the Treasury Department in October indicated that the program helped 691,000 homeowners. The projected goal of the program was to help over 4 million homeowners. With the expansion of the program, the number of homeowners able to modify their mortgage may increase.
David Yunghans is an associate in the bankruptcy group at Weltman, Weinberg & Reis Co., LPA. For more bankruptcy news and information, please visit WWR’s Bankruptcy Blog at wwrbankruptcy.com.
Filed under: credit unions, opinion | Tags: credit unions, International credit union day, opinion
By: Rob
Back in 1986, I got my first credit card from Lake County Educational Credit Union. I used it throughout college and when I needed car loans, while I was in school, the credit union was there. Eventually, around 1994, I ran for the board of directors, was elected and served until 1998 when I joined WWR. That move catapulted me into the best job of my life: getting to serve credit unions as their attorney. Credit union people, like the industry they serve are down to earth and some of the nicest people you’ll ever meet. Hokey? Yes, but as a volunteer and then as counsel, I am privileged to be involved with the movement.
Last year, dire predictions were in the air. Credit unions may decline in number by 50% and so on. Now, amazingly, and through the most unlikely series of events, people are flocking to credit unions again. Who would have thought that as a side effect of the Durbin Amendment to the Dodd-Frank Act that some banks would raise debit card fees and that this would cause consumers to vote with their feet and join credit unions. I certainly would not have guessed that in a million years. And yet, here we are.
But grass roots efforts are about as crunchy credit union as you can get. Remember 1151? Pro credit union folks marched on Washington and change happened. Today’s challenges are a whole lot more amorphous, but at the end of the day, the message of people helping people hits a chord. When I speak before credit union audiences, I always try to be positive and the message lately has been that credit unions grew dramatically around the time of the Depression. It’s kind of sad when a reference to the Depression is supposed to be upbeat!
But it’s not hard to connect the idea that not-for-profit cooperatives that pool member money for member loans while giving a voice to members is appealing. It’s not much of a leap to see the appeal of a financial institution where member service is not only important, but it’s in the DNA of the organization.
What do I owe the credit union movement? Nothing short of everything I have. Maybe credit unions don’t always have the latest bells and whistles that multinational conglomerates can muster, but you can always look at a credit union balance sheet and understand what’s going on. Moreover, even with the largest credit unions you can understand who they serve, where they came from and what their priorities are. Member service is always there because, by definition, it’s the member’s money and it’s the member’s credit union. This year, for the first time in a few years, credit unions really do have something to look forward to: rediscovery by the people they were made to serve.
Filed under: computers, Internet banking, quantum mechanics, technology, Uncategorized | Tags: bill pay, cloud computing, contracts, definitions, legal aspects, quantum mechanics
from XKCD
by: Rob
Cloud computing is made of hype. Yet, it’s also the future of computing. Like some spooky quantum mechanics experiment, it is both. Credit unions already are taking advantage of cloud computing apps by offering home banking to their members. There will be other examples of how credit unions can use cloud computing coming soon. It’s important, however, to get some type of definition in place to understand just what the heck we are talking about when we throw around the cloud computing buzz phrase.
Fortunately, there’s a good one out there. TheNational Institute of Standards and Technology (“NIST”), the federal technology agency that has been closely studying cloud computing for the purpose of providing guidance on securing unclassified government systems defines cloud computing as :
“[a] model for enabling convenient on-demand network access to a shared pool of configurable resources, for example, network servers, storage applications and services that can be rapidly provisioned and released with minimal management effort or service provider interaction.” It identifies the five essential characteristics of cloud computing as: On-demand self service; Broad network access; Resource pooling; Rapid elasticity; and Measured service.
We can drill down further and break up cloud computing into Infrastructure as a service, Platform as a service and Software as a Service.
“Infrastructure as a service” uses shared facilities, computer hardware and networks to hold and move data. Customers may use their own operating systems and software, but the provider will determine where the data is stored(including, in some cases, moving data from server to server or data center to data center as computing space, and the
customer, permit) and how to configure networks to allow the fastest and most secure movement of data. Amazon, Rackspace and Vertica are among the providers of infrastructure services.
“Platform as a service” allows customers to share a computing platform and operating system. The provider determines the programming language (such as Java or .Net) and provides a web-based computing environment; customers use that environment to develop and configure applications to suit their individual needs. Platform services
may be combined with infrastructure services to offer all of the elements required for a customer to develop and implement its own applications. Providers include Google App Engine and CollabNet.
“Software as a service” is the type of service traditionally associated with both outsourcing services and web-based consumer services like Yahoo and Google. In software as a service, the vendor provides software designed to perform a specific function, like email or social networks, billing, logistics or financial account management, or law firm matter management. Oracle On Demand and Salesforce.com are among the many providers of software services.
See Contracting in the Cloud: A Primer, Peter M. Lefkowitz, 54 B.B.J.9 (Summer, 2010). I would posit to you that most credit unions will be looking at cloud computing via the software as a service model. Bill pay with its ubiquitous access and account information falls into this category.
Now that we know what we’re talking about, we can begin to speculate where it all is going. Apple has given us a big clue with the release of its iOS 5 and by embracing the cloud with a capital C. This new mobile operating system lets people have that ubiquity of access across all of their apple devices. I never started out being an Apple fan boy; I build computers for fun so I’m more of an omnivore. Yet, I now sport a MacBook Pro, an iPad, an iPod Touch and I still have an old iPod lying around that I use as a back up when recording podcasts. So Apple captured a big part of my computer market share and now with its cloud servers, I can have all my data all the time. So who cares? Your members care. Your members want the same thing. They are using bill pay and it will go further into mobile payments. Mobile payment via smartphone or whatever is a cloud app.
Where does it end? We cannot predict what new invention will reshape our lives because to do so, we would have to conceive of it before its inventor does, thereby potentially becoming its inventor. We can watch where things are going and see possibilities and that’s about it. Does cloud computing mean that credit unions will need to buy or lease their own server farms to provide their members with their own membership-based clouds? I don’t think so because what would the members use it for? We can see why Apple created huge data centers in North Carolina because it sells music and video and the users of its products want to store their data on Apples servers.
Credit unions store vastly smaller amounts of data for their members, but data that is far more important. Yes, it’s bad when your digital music collection gets wiped out. Apple now has you covered on that front. It’s far worse when your credit union account gets hacked. In Cloud computing, security then becomes far more relevant to credit unions than vast amounts of ubiquitous storage. Fortunately, that’s nothing new. There are things to be aware of, though, when a credit union looks at a cloud computing contract. Such things as: services to be provided, service level agreements, transitioning data, location of data, warranties, limitation on liability, indemnification, termination and remedies, ownership of data, disclosure of data to law enforcement and of course data security, privacy and breach notification. For an in-depth discussion of these issues and more, see Brenda Barrett Healey’s most excellent article: Cloud Computing Agreements: How can counsel make certain that every “cloud” really does have a silver lining?
As a final caution or advisory or what have you, this really is like a quantum mechanics experiment. Cloud computing may change the way your credit union does business or it may not, or, it may change the world around you and leave you undisturbed. Like Schrödinger’s cat, it may depend upon you to be the observer as to where it is going and then to act on it accordingly.
Filed under: bankruptcy
by Alan C. Hochheiser, Esq.
NBKRC: Bankruptcies Down Thru Third Quarter 2011
According to statistics from the National Bankruptcy Research Center (NBKRC), bankruptcy filings have declined through the first three quarters of 2011. Total consumer bankruptcy filings totaled 144,722, which was down approximately 10% from the first three quarters of 2010. In addition, bankruptcy filings in September 2011 declined substantially, down 17% over the same period of last year. Bankruptcy filings for September 2011 totaled 108,517. Although filings continue to decline, the NBKRC still projects an estimated 1.35 million bankruptcies for 2011. Many factors have contributed to the 2011 decline in bankruptcy filings, including the lack of available credit to consumers, foreclosure moratoriums and reduced spending by debtors.
New Bankruptcy Rules and Forms effective December 1st: Is your organization ready?
On December 1, 2011, certain bankruptcy rule changes and new forms will become effective. These changes primarily deal with the filing of a Proof of Claim and relate to mortgage creditors as well as debt buyers. However, the change in the Proof of Claim form will affect all entities who file Proof of Claims in bankruptcy proceedings.
The major change to the form involves attachments that are required to lay out certain fees and costs, and a breakdown of arrearages on the mortgage claims. It also requires that mortgage creditors provide an escrow statement as of the date of the bankruptcy filing. The new form provides for payment change notifications to be filed with the Court and the specific form that needs to be used.
The new rule also changes the procedures that are necessary when a Trustee finishes paying a mortgage through a Chapter 13 Plan. Weltman, Weinberg & Reis Co., L.P.A. (WWR) will be providing extensive information and training sessions for clients through webinars over the next two months to ensure that you are ready for the changes.
In addition to the changes to the procedures and forms pertaining to Proof of Claims, there has also been a change in the Reaffirmation Agreement form. The B240 form has been altered by a technical amendment to clarify some of the language on the form. This does not affect the procedure and the information needed within the reaffirmation agreement itself. The additional language is as follows and can be found in the form on the United States Courts website:
“Even if you do not reaffirm and your personal liability on the debt is discharge because of the lien your Creditor may still have the right to take the property securing the lien if you do not pay the debt or default on it. If the lien is on an item of personal property that is exempt under your State’s Law or that the Trustee has abandoned, you may redeem the item rather than reaffirm the debt. To redeem, you must make a single payment to the Creditor equal to the amount of the allowed secured claim, as agreed by the parties or determined by the Court.”
The changes in this language indicate that the redemption, pursuant to 11 U.S.C. § 722, must be made by a single payment. It also changes the language to say that “the amount of the allowed secured claim which is different from the current value of the property”. This now becomes consistent with the language contained in § 722 of the Bankruptcy Code. Although this change does not affect the information that must be included in the Reaffirmation Agreement as to balances, interest rates, monthly payments and arrearages, it is important when preparing a Reaffirmation Agreement after December 1, 2011, that the correct B240A-B alt form is used.
WWR will continue to keep you advised as to breaking news and trends in bankruptcy proceedings. Should you require further information please do not hesitate to contact Alan C. Hochheiser, Managing Partner of the Bankruptcy Group.
Filed under: Consumer Financial Protection Bureau | Tags: assets, banks, CFPB, credit unions, Dodd-Frank, run
By: Rob
This whole idea is picking up steam along with the Occupiers. The concept is that on November 5th, consumers can vote with their feet and express dissatisfaction with banks by moving their money to a credit union. To people stung by new fees, one would think such a proposal would have the chance to go viral. I don’t think it will because people really need to be mad to generate enough will power to overcome the inertia of changing their bank accounts. Ironically, the new fees are the result of The Dodd-Frank Act and the creation of the CFPB which was initially supposed to reform Wall Street but now sees itself as providing consumer protection. People are mad, but they aren’t that mad.
Let’s assume for the sake of argument that a good percentage of the population actually did get that mad and moved their money in one day. What would happen? It’s actually easy to predict: utter chaos. It turns out that having too much by way of assets is not a good thing for a credit union. The influx of cash to the credit union movement would immediately plunge the receiving credit unions into a state of ill-health.
Meantime, on the bank side, we have historical evidence of what happens when everyone takes their money out of the banks at once. It’s called a run. During the depression, many banks went out of business for that reason. The exposure would be so great that the Federal Reserve would act, most likely, to close down consumers’ access to banks and credit unions until the dust settled. You think people are mad now? Imagine hundreds of millions of people not being allowed access to their bank accounts for a week!
Now if such a shift occurred gradually, over time credit unions could manage the capital and banks would not have the immediate pain of a run. Certainly, many credit union advocates have sought this over the years. Timing is everything though and so is being careful what you wish for.
Edit: According to CU Times, the Bank Transfer person is not affiliated with the Occupiers.
by Emily Honsa Hicks, Esq.
An owner of commercial property defaults on the underlying mortgage. Tenants, uncertain of who to pay, and what will happen next, begin to look for other space. Rents trickle to a stop, repairs are delayed, and the property’s condition declines. Spaces are vacated, and eventually, the property is sold by sheriff at a deeply discounted cost.
It doesn’t have to be this way.
It is in both the borrower’s and lender’s best interest to consider receivership or enforcement of an assignment of rents, long-standing remedies that have re-emerged as effective tools for recoveries involving income producing residential or commercial properties or businesses.
In some cases, rental income may be available that would mitigate the creditor’s loss. Property will usually benefit from continuous occupancy, and a new owner inherits stable tenants. With receivership, the lender can maximize these benefits while avoiding liabilities associated with ownership, possession or management.
In Ohio, receivership is governed by the contract between the parties and by statute (O.R.C. 2735). The receiver can provide continuity, objectivity, and oversight in what might otherwise be a confusing situation.
The receiver, as an officer of the court, can perform any or all acts in the purview of the order granted by a judge—his or her power is limited only by the court’s order and direction of the judge. (O.R.C. 2735.04). This can include authority to protect the property, collect the rents, and may even authorize the receiver to sell property and distribute proceeds. Because of this latitude, essential to the efficacy of your receivership is a comprehensive Order, drafted by a knowledgeable and experienced creditor’s rights attorney.
In many counties, any party in interest can request a specific receiver for appointment. Legal knowledge, finance background, property management and real estate expertise are desirable in a receiver.
In some counties, however, judges, in the tradition of cronyism, may appoint a receiver that is less than cost effective. Also, where rental income is limited or where the property is in an advanced state of disrepair, fees charged by a receiver may exceed the income or value preserved.
Where both parties are act in good faith and in concert, an assignment of rents alone may preserve regular income and maintenance without a receiver.
Emily J. Honsa Hicks is an associate practicing in the Integrated Real Estate Default Group at Weltman, Weinberg & Reis co., LPA. She can be reached at 216.685.1083 and ehonsa@weltman.com.
Filed under: foreclosure, mortgages | Tags: American Bankruptcy Institute, MERS, Mortgage Electronic Registration Systems
by Emily J. Honsa Hicks, Esq.
Since I drafted this article for the American Bankruptcy Institute, one sentence mentioned has ballooned into full-fledged legal challenges. Merscorp has been sued for avoiding recording fees in both Texas, by the District Attorney for Dallas County, and California. In an economic environment where local and state governments are pinching pennies—and some are considering bankruptcy—it is easy to see more and more administrations considering such action against MERS in an attempt to fill otherwise empty coffers.
But in good news for MERS, in Phoenix, AZ, U.S. District Judge James A. Teilborg in Phoenix, dismissed claims that would invalidate foreclosures based on MERS documentation, opining that the Plaintiffs did not demonstrate that MERS assignments are defective. The Federal Appeals Court upheld the decision in September, finding that there were no violations of state law or injuries to the Plaintiffs caused by MERS. (In re Mortgage Electronic Registration Systems (MERS) Litigation, 09-md-2119, U.S. District Court, District of Arizona (Phoenix); appellate case, Cervantes v. Countrywide, 09- 17364, U.S. Court of Appeals for the Ninth Circuit (San Francisco).) MERS itself offers selected decisions on their website at http://www.mersinc.org/downloads/index.aspx?id=19.
Stay tuned for more developments on the hotbed of MERS, and enjoy the article.
A Nation Mired in MERS
Mortgage Electronic Registration Systems, Inc. (MERS) is the leading electronic registry for mortgage lenders, and is linked more and more each day to the foreclosure crisis. MERS has been recently challenged in state foreclosure actions, frequently to different ends creating a “patchwork of conflicting laws and court decisions in different states.” Read the full article.
Emily J. Honsa Hicks is an associate practicing in the Integrated Real Estate Default Group at Weltman, Weinberg & Reis Co., LPA. She can be reached at 216.685.1083 and ehonsa@weltman.com.
