NYDFS Adopts Emergency Regulation Requiring COVID-19 Mortgage Loan Forbearance
On March 24, 2020 the New York State Department of Financial Services (NYDFS) adopted on an emergency basis a regulation that requires New York-regulated banking organizations and New York-regulated mortgage servicers subject to the authority of the NYDFS (regulated institutions) to provide mortgage loan forbearance relief.
Forbearance. In addition to adhering to the NYDFS servicing requirements set forth in Part 419 of its rules, the emergency regulation requires that regulated institutions must:
- Make applications for forbearance of any payment due on a residential mortgage of a property located in New York, widely available to any individual who resides in New York and who demonstrates financial hardship as a result of the COVID-19 pandemic; and
- Subject to the safety and soundness requirements of the regulated institution, grant such forbearance for a period of ninety (90) days to any such individual.
The requirement is tied to the duration specified in Executive Order 202.9, which is until April 20, 2020, but that timeframe may be extended. Regulated institutions are not limited to offering this specific relief.
The forbearance requirements do not apply to and do not affect “any mortgage loans made, insured, or securitized by any agency or instrumentality of the United States, any Government Sponsored Enterprise, or a Federal Home Loan Bank, or the rights and obligations of any lender, issuer, servicer, or trustee of such obligations, including servicers for the Government National Mortgage Association.” The carve-out does not appear to expressly cover whole mortgage loans owned by Fannie Mae or Freddie Mac.
Advising Borrowers of Forbearance Availability. The emergency regulation requires that, as soon as reasonably practicable, and in no event not later than 10 business days following the promulgation of the regulation on March 24, 2020, all regulated institutions must email, publish on their website, mass mail, or otherwise similarly broadly communicate to customers how to apply for COVID-19 relief and provide their contact information.
COVID-19 Relief Qualifications. The emergency regulation provides that the criteria developed by regulated institutions for individuals to qualify for COVID-19 relief must be clear, easy to understand, and reasonably tailored to the requirements of the regulated institution to assess whether it will provide COVID-19 relief, consistent with the goals of Executive Order 202.9 and the emergency regulation, applicable state and federal law, and the principles of safe and sound business practices.
Additionally, if a regulated institution receives an application for COVID-19 relief that omits any information that the institution reasonably needs to process the application, the institution must promptly communicate to the applicant the nature of the missing information and how it can be provided to the institution.
Processing Applications and Communications With Applicants. The emergency regulation requires that regulated institutions process and respond to requests for COVID-19 relief immediately, and in no event not later than 10 business days after the regulated institution receives all information it reasonably requires to process the application. The emergency regulation does not appear to acknowledge that regulated institutions may be facing staffing challenges, as well as high levels of communications from borrowers, because of the COVID-19 crisis.
Regulated institutions must develop and implement procedures for the expedited processing of applications for COVID-19 relief for any individual who reasonably establishes an exigent circumstance and requests the expedited processing of the individual’s application.
The emergency regulation requires that all determinations on applications for COVID-19 relief must be communicated to the applicant in writing where reasonably feasible and warranted, and must state whether the regulated institution granted the application. If the application was granted, the institution must advise what, if anything, the applicant must do to secure the relief. If the application was denied, the institution must provide the reason it was denied and include a statement that the applicant may file a complaint with the New York State Department of Financial Services at 1-800-342-3736 or http://www.dfs.ny.gov if the applicant believes the application was wrongly denied.
Unsafe and Unsound Business Practice. The emergency regulation notes that Executive Order 202.9 modified Section 39 of the New York State Banking Law was modified to provide that it shall be an unsafe and unsound business practice if, in response to the COVID-19 pandemic, any regulated institution does not grant a forbearance of any payment due on a residential mortgage for a period of 90 days to any individual who has applied for such a forbearance and demonstrated a financial hardship as a result of the COVID-19 pandemic, as described in the emergency regulation.
In assessing whether a regulated institution has engaged in an unsafe or unsound practice by denying an application for such a forbearance, the NYDFS will consider (1) the adequacy of the process established by the regulated institution to process such forbearance applications, (2) the thoroughness of the review afforded to the application, (3) the payment history, creditworthiness, and the financial resources of the borrower, and (4) the application of any state and federal laws or regulations that would prohibit the grant of a forbearance, as well as the safety and soundness requirements of the regulated institution.
Recordkeeping. Regulated institutions must maintain copies of all files relating to their implementation of the emergency regulation for a period of seven years from the date of creation and to make such files available for inspection at the next examination of the regulated institution by the NYDFS.
Fee Relief. Subject to safety and soundness requirements, for any individual who demonstrates financial hardship from COVID-19, regulated banking organizations must (1) eliminate fees charged for the use of automated teller machines (ATMs) that are owned or operated by the regulated banking organization, (2) eliminate overdraft fees, and (3) eliminate any credit card late payment fees. This relief also applies during the duration of Executive Order 202.9.
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