The New York Department of Financial Services ("NYDFS") promulgated regulations ("Part 119") on March 24, 2020, to provide financial relief to individuals who can demonstrate a financial hardship as a result of the COVID-19 pandemic (the "Mortgage Forbearance Regulation"). The regulation establishes the scope of requests that regulated institutions must consider, and standards and procedures that regulated institutions must follow in their review of requests for relief.
On March 21, 2020, Governor Cuomo signed an Executive Order, No. 202.9, Continuing Temporary Suspension and Modification of Laws Relating to Disaster Emergency (the "Executive Order") which modifies Section 39(2) of the New York Banking Law to provide that it is an unsafe and unsound business practice for any bank subject to the NYDFS to not grant a forbearance to any person or business who has a financial hardship as a result of the COVID-19 pandemic for 90 days. The Mortgage Forbearance Regulation was adopted pursuant to that Executive Order.
The Mortgage Forbearance Regulation
Applications for Forbearance to be Made Widely Available. Under the Mortgage Forbearance Regulation, regulated institutions are required to (i) 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 (ii) 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.
- Notably, Part 119 is not applicable to, and does not affect any mortgage loans made, insured, or securitized by any agency or instrumentality of the U.S., 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 regulation also does not apply to commercial mortgages or any other loans not otherwise described in the regulation.
- "Regulated institution" is defined as any New York regulated banking organization as defined under New York Banking Law and any New York regulated mortgage servicer entity subject to the authority of the NYDFS.
Fee Forbearance. Under the regulation, New York regulated banking organizations must also provide the following financial relief to any individual who can demonstrate financial hardship from COVID-19 (subject to safety and soundness considerations):
- eliminating fees charged for the use of ATMs that are owned or operated by the regulated banking organization;
- eliminating any overdraft fees; and
- eliminating any credit card late payment fees.
Additional Reasonable and Prudent Relief Efforts. Regulated institutions are also encouraged to take additional reasonable and prudent relief efforts for individuals, consistent with safe and sound banking practices.
Publication Requirement. Regulated institutions must, within ten (10) business days following March 24, 2020, e-mail, 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.
Criteria and Procedures for Processing Applications for COVID-19 Relief
Regulated institutions must develop criteria to determine whether an applicant is eligible for COVID-19 relief that is "clear, easy to understand and reasonably tailored to the requirements of the regulated institution." The regulation sets forth the contours of the procedures related to the processing of applications for COVID-19 relief as follows:
- Regulated institutions must reply promptly (within ten (10) business days) to submitted applications providing all information reasonably required.
- Regulated institutions must develop and implement procedures for the expedited processing of applications for those reasonably demonstrating exigent circumstances.
- Regulated institutions must communicate determinations on applications for COVID-19 relief in writing "where reasonably feasible and warranted." Any notice should state (i) whether the application was granted, and (ii) if denied, the rationale for such a determination and information about how applicants may file a complaint with the NYDFS.
Evaluation of Certain "Unsafe and Unsound" Business Practices under NYBL Section 139
The regulation details the manner in which the NYDFS will determine whether a regulated institution has engaged in such "unsafe and unsound" business practices in receiving and reviewing mortgage forbearance requests. Specifically, the NYDFS may consider:
- the adequacy of the procedures for the processing of such applications,
- the thoroughness of review afforded to the application,
- the payment history, creditworthiness and financial standing of the borrower,
- any state/federal laws preventing such forbearance, and
- the safety and soundness of the regulated institution.
In addition, NYDFS examiners may not criticize prudent and reasonable efforts to grant forbearance of residential mortgage payments pursuant to the regulation and safe and sound practices.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.