New York and Other States Promulgate Regulations and Guidance on Forbearance and Other Consumer Protections in Response to COVID-19

On March 21, 2020, New York Governor Andrew Cuomo signed Executive Order 202.9 (the “Order”), temporarily modifying the Banking Law in New York and empowering the Superintendent of New York State’s Department of Financial Services (“DFS”) to promulgate emergency regulations relating to the outbreak of COVID-19.  Importantly, a March 24, 2020 emergency regulation issued by DFS requires residential mortgage forbearance and forgiveness of certain banking fees and clarifies the applicability of the emergency relief.

Specifically, Governor Cuomo’s Order modifies the Banking Law as follows: 

• deems it an unsafe and unsound business practice if, in response to the COVID-19 pandemic, any bank which is subject to the jurisdiction of the DFS[1] does not grant a forbearance to any person or business who has a financial hardship as a result of the COVID-19 pandemic for a period of ninety days;
• directs the Superintendent of DFS to ensure that consumers facing financial hardship due to the COVID-19 pandemic are provided with opportunities for forbearance of mortgage payments, and grants the Superintendent authority to promulgate emergency regulations;
• grants the Superintendent of DFS the power to promulgate emergency regulations directing that ATM fees and credit card late fees be restricted or modified, provided that the it takes into account the financial impact on the New York consumer, the safety and soundness of the licensed or regulated entity, and any applicable federal requirements.

The Order specifies that its mandates and directives are effective through April 20, 2020. 

On March 24, 2020, DFS issued an emergency regulation requiring that, for the period specified in Governor Cuomo’s March 21 Order – presently though April 20, 2020: 

• New York State regulated financial institutions must provide residential mortgage forbearance on property located in New York for a period of 90 days to any individual residing in New York who demonstrates financial hardship as a result of the COVID-19 pandemic, subject to the safety and soundness requirements of the regulated institutions;
• New York regulated banking organizations must eliminate fees charged for the use of Automated Teller Machines (ATMs) that are owned or operated by the regulated banking organization, overdraft fees, and credit card late payment fees for any individual who demonstrates financial hardship as a result of the COVID-19 pandemic, subject to the safety and soundness requirements of the regulated banking organization.

DFS clarified that this emergency regulation is not applicable to, and does 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 DFS emergency regulation further advises that it does not apply to any commercial mortgage or any other loan not described in the regulation.

In addition to New York, other states including California, Indiana, Iowa, Kansas, Massachusetts, New Hampshire, New Jersey, South Carolina, and Washington D.C. have also implemented procedures limiting or otherwise preventing foreclosures, and we anticipate additional states will continue to implement such procedures as the COVID-19 pandemic persists. 

Note

[1] The Order applies to the following: “any banking organization, bank holding company, registered mortgage broker, licensed mortgage banker, licensed student loan servicer, registered mortgage loan servicer, licensed mortgage loan originator, licensed lender, licensed casher of checks, licensed sales finance company, licensed insurance premium finance agency, licensed transmitter of money, licensed budget planner, out-of-state state bank that maintains a branch or branches or representative or other offices in this state.”  Banking Law § 39(2).