COVID-19 Update: New York Residential Mortgage and Other Banking Relief

On March 21^st New York Governor Andrew Cuomo issued an executive order which seeks to protect individuals who experience financial hardship as a result of the COVID-19 pandemic. The executive order does the following:

1. Modifies New York Banking Law to provide that any New York state-licensed or state-chartered bank will be deemed to be engaged in “an unsafe and unsound business practice” if it does not grant a 90-day forbearance to any person or business who is experiencing a “financial hardship” as a result of the pandemic. The bank may be subject to a fine for their violation.
2. Charges the Superintendent of the New York Department of Financial Services (“DFS”) with issuing regulations that require entities that it licenses or regulates to permit individuals in New York facing “financial hardship” due to the pandemic to apply for a forbearance of their mortgage payments. Both banks and mortgage servicers are subject to this order.
3. Charges the Superintendent with promulgating emergency regulations modifying or restricting state-licensed and state-chartered banks from charging certain fees “for the period of this emergency.”

Linda A. Lacewell, Superintendent of Financial Services, has since issued New Part 119 3 NYCRR, a regulation to further clarify the executive order. Here’s what you need to know:

1. Forbearance of mortgage payments is for a period of 90 days and only applies to residential mortgages on property located in New York State. The directive only applies to lenders licensed or regulated by DFS, which does not include mortgages made, insured, or securitized by any agency/instrumentality of the United States, any Government Sponsored Enterprise or a Federal Home Loan Bank.
2. State-licensed and state-chartered banks, so long as they are in sound financial condition, are instructed to (i) eliminate fees charged for the use of their ATMs, (ii) eliminate overdraft fees and (iii) eliminate credit card late payment fees for individuals that can demonstrate financial hardship as a result of the pandemic.
3. Within 10 business days following the promulgation of this regulation, institutions regulated by DFS must announce their process to apply for relief and provide their customers with their contact information. Applications for relief must be processed within 10 business days of the institution receiving a complete application.
4. Applicants must be told why their application was denied. Applicants are entitled to file a complaint with the DFS if they believe that their application was wrongly denied.

Questions remain:

1. The criteria used by regulated institutions to determine whether an individual has suffered a “financial hardship” as a result of the pandemic is not yet known and will be set by the institution itself, meaning that it will vary from institution to institution.
2. The supporting documents and information needed to file an application for relief remains uncertain and may be unduly cumbersome to gather. The DFS has not provided information regarding the appeals process for applications that are not accepted.
3. The executive order and regulations do not indicate when the 90-day forbearance period will begin following the approval of an individual’s application and what the emergency period is during which certain banking fees will be suspended.