Tag Archives: Department of Financial Services

Reiss on Lawsky’s Departure from DFS

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Bloomberg interviewed me for Lawsky Leaving After $3 Billion in Fines Makes a Mark. The article reads in part,

When Ocwen Financial Corp. (OCN) shares soared on the news that regulator Benjamin Lawsky, who’s probing the company, will step down, Bill Miller shrugged.

The next head of New York’s Department of Financial Services will probably be as aggressive as Lawsky, continuing the uncertainty for Ocwen, said Miller, who runs the $2.2 billion Legg Mason Opportunity Trust. (LMOPX) Lawsky’s investigations of nonbank mortgage servicers such as Ocwen have caused their shares to plunge.

“Ocwen has been rallying on the view that with him gone that will lift the burden, but I would be surprised if the next person didn’t at least follow through in the way Lawsky was going to,” said Miller, whose fund, which invests in Nationstar Mortgage Holdings Inc., has gained an annual 38 percent since 2011.

In three years as New York’s financial watchdog, Lawsky extracted more than $3 billion in fines from global banks, called for the firing of executives and questioned whether the lightly regulated nonbank servicers are properly handling modifications and defaults. As the department’s first superintendent, Lawsky hired experienced lawyers from the New York Attorney General’s office, creating a strong enforcement culture that will continue after he’s gone, said Kathryn Judge, an associate professor focusing on financial institutions at Columbia University Law School.

“Similar to what we saw Eliot Spitzer doing as attorney general, being in New York allowed Lawsky to step in where federal regulators hadn’t,” Judge said. “By stepping into this role at a formative stage for the regulator, he created a footprint. That legacy will survive.”

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The superintendent’s work has reflected favorably on the governor, said David Reiss, a professor who specializes in real estate and consumer protection at Brooklyn Law School. That will encourage Cuomo to select a successor who’s equally dynamic, Reiss said.

Cuomo will want to build on Lawsky’s record of protecting homeowners from improper foreclosures and holding mortgage servicers accountable, said Reiss.

Chief of staff Anthony Albanese, general counsel Daniel Alter, and capital markets division head Maria Filipakis are among the top people that Lawsky brought to the department. One of them may be in a position to replace him, according to a lawyer who has had extensive dealings with the superintendent. The lawyer asked not to be named because he’s not authorized to speak publicly about the matter.

The successor will have to focus more on regulation and finding answers to the issues the department uncovered with nonbank servicers and insurers, said Eric Dinallo, who served as New York’s superintendent of insurance from 2007 to 2009.

“Each superintendent or commissioner wants to put their unique stamp on the agency,” he said.

Reiss on State Enforcement of Dodd Frank

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Auto Finance News quoted me in The Mess at Condor Capital Signals Stiffer State Oversight. It opens,

Legal action brought by New York State last month against Condor Capital Corp., a Long Island subprime lender accused of bilking customers out of millions of dollars, could signal an increase in state prosecution under Dodd-Frank federal laws.

Legal experts say the case, even though it involves wildly egregious practices by Condor, could be the first of many by states against auto lenders, even if the lender’s nefarious actions are more modest than Condor’s.

In April, New York’s Department of Financial Services (www.dfs.ny.gov) obtained a temporary restraining order in federal court against Hauppauge, N.Y.-based subprime auto lender Condor Capital Corp. (www.condorcap.com) and owner Stephen Baron. The case is being handled in U.S. District Court for the Southern District of New York.

The state’s complaint paints a picture of a company run with disregard for compliance. However, a former senior Condor employee told Auto Finance News that Condor’s practices might have been even worse than what was described in the state’s complaint. The former manager of Condor’s collection department told Auto Finance News that management thumbed its nose at the very notion of compliance.

Plain and simple, the federal law provides state regulators with a new tool according to Law Professor David Reiss from Brooklyn Law School.

“States have historically identified new forms of unfair, deceptive, or abusive acts and practices before they get on the radar of national regulators, so states are likely to be quicker to take action than their federal counterparts,” Reiss said. “In all likelihood, the New York case, as well as a case from the attorney general in Illinois, are just the tip of a burgeoning enforcement iceberg.”