New York State Court of Appeals follows urging of Firm clients, American Bankers Association and New York Bankers Association, in significant mortgage lending case.
news | October 18, 2012
On October 18, 2012, the New York State Court of Appeals ruled that the Federal Credit Union Act (FCUA) does not exempt federal credit unions from paying New York’s mortgage recording tax when making new mortgage loans in the state of New York. Hudson Valley Fed. Credit Union v. New York State Dep’t of Taxation and Fin., __ N.E.2d __, 2012 WL 4932654 (N.Y. Oct. 18, 2012). On behalf of the American Bankers Association and the New York Bankers Association, Hollingsworth LLP filed an amicus brief with the Court supporting the New York Tax Department’s position that both the language and the legislative history of the FCUA do not exempt federal credit union “mortgages” or “loans” from state taxation. The amicus brief also pointed out that the mortgage recording tax at issue is paid by every other financial institution lender in New York (usually by passing the cost on to the borrowers) and that federal credit unions (including appellant Hudson Valley Federal Credit Union) were actually seeking an unwarranted competitive advantage over all other lenders. In its ruling, the Court of Appeals expressly noted the competitive advantage that credit unions stood to gain at the expense of banks if federal credit unions were found exempt from New York’s mortgage recording tax (MRT):
Instead of causing the negative consequences predicted by Hudson Valley, the elimination of the MRT on credit union mortgages could conceivably lure mortgage business away from banks by offering lower closing costs to credit union borrowers, thereby giving credit unions a competitive advantage over the banking industry in New York. Had Congress intended to alter the mortgage-lending playing field between federal credit unions and banks, it could have stated such an intention.
The Court of Appeals ruling is a major victory, not only for the defendants in this litigation, but for all commercial banks providing mortgage loans in the state of New York.