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New York Guidance, Order and Regulation Providing Borrower Protections in Response to COVID-19 New York Guidance, Order and Regulation Providing Borrower Protections in Response to COVID-19

New York Guidance, Order and Regulation Providing Borrower Protections in Response to COVID-19

Governor Cuomo and New York’s Department of Financial Services (“DFS”) have taken a number of actions designed to protect New York borrowers who suffer demonstrated financial hardship as a result of the COVID-19 pandemic in New York. These actions impose obligations on certain financial institutions urging or requiring them to provide impacted borrowers the ability, under appropriate circumstances, to defer payments, renegotiate terms and avoid foreclosure and other default remedies.

On Thursday, March 19, the DFS issued guidance to regulated financial institutions (the “Consumer and Business Borrower Guidance”) and regulated and exempt mortgage servicers (the “Mortgage Guidance”, together with the Consumer and Business Borrower Guidance, the “Guidance”) to protect various borrowers and other debtors from adverse impacts caused by the COVID-19 pandemic in New York.

The Consumer and Business Borrower Guidance urged all regulated financial institutions during the outbreak to do their part to alleviate the adverse impact caused by COVID-19 on those consumers and small businesses that can demonstrate financial hardship caused by COVID-19. Such regulated financial institutions are urged to take reasonable and prudent actions to support impacted New Yorkers by, among other things, providing new loans on favorable terms, waiving late fees for loan balances, offering payment accommodations, such as allowing customers to defer payments at no cost and modifying loan terms to avoid delinquencies or triggering events of default. The Consumer and Business Borrower Guidance also urges all regulated financial institutions to work with and provide financial accommodations to all borrowers during the pandemic to the extent reasonable and prudent, including refraining from exercising rights and remedies based on potential technical defaults that might be triggered by the pandemic.

The Mortgage Guidance urges all regulated and exempt mortgage servicers to alleviate the adverse impact caused by COVID-19 on consumer mortgage borrowers who can demonstrate financial hardship caused by COVID-19 and demonstrate they cannot make timely payments, including taking reasonable and prudent actions to support those mortgage borrowers (subject to related guarantees and insurance policies) by, among other things, forbearing on mortgage payments for 90 days from their due dates, offering mortgagors an additional 90-day grace period to complete trial loan modifications and ensuring that late payments during the pandemic do not affect such borrower`s ability to obtain permanent loan modifications, waiving late payment fees for 90 days and postponing foreclosures and evictions for 90 days.

On Saturday, March 21, in a further response to the ongoing COVID-19 pandemic in New York, Governor Andrew Cuomo signed Executive Order 202.9 (the “Order”), which lasts through April 20, 2020, subject to possible further extensions.

The Order declares, in part, that any bank subject to the jurisdiction of the DFS will be deemed to be engaging in an “unsafe and unsound business practice” for purposes of the New York Banking Law if that bank does not grant at least a 90-day forbearance to any person or business who has a financial hardship as a result of the pandemic. Section 39 of the Banking Law provides the Superintendent of the DFS (the “Superintendent”) with the right to cause any such bank to cease engaging in any unsafe and unsound business practice.

The Order also declares that the Superintendent shall ensure under reasonable and prudent circumstances that any licensed and regulated banking organizations and any related mortgage servicer entities (“Regulated Entities”) provide to any consumer in New York facing a financial hardship due to the pandemic an opportunity for forbearance on mortgage payments. The Order directed the Superintendent to adopt emergency regulations to require that the application for such forbearance (requests for relief) shall be widely available and shall be granted in “all reasonable and prudent circumstances solely for the period of such emergency.”

Pursuant to the Order, on Tuesday, March 24, the Superintendent issued a regulation (the “regulation”) specifying protections for certain individual residential mortgage borrowers, and the regulation prevails over the Guidance to the extent of any inconsistencies. The regulation reiterates the Order`s intent that residential mortgage borrowers in New York receive, subject to the safety and soundness requirements for the financial institutions, the requested 90-day payment forbearances. The regulation also provides certain standards and procedures that Regulated Entities must follow in their: (a) processing and review of requests for relief by residential mortgage borrowers with respect to loans secured by mortgaged property located in New York and (b) determinations to provide financial relief to such mortgage borrowers. The regulation does not apply to or protect any borrower in respect of commercial mortgage loans or mortgage loans made, insured or securitized by any instrumentality of the United States, any government sponsored enterprise or any Federal home loan bank. The regulation gives Regulated Entities until April 7 to communicate to customers (which may be a publication on their website) how to make a request for relief. Interested residential mortgage borrowers not receiving any such communication should check the website of their mortgage lenders for relevant details. Responses by Regulated Entities to any requests for relief must be made immediately and in any event within ten business days after any completed application.

To stay up to date with the latest laws and orders, please visit Ice Miller’s COVID-19 Resource Center, available here: https://www.icemiller.com/landing-pages/coronavirus-(covid-19)-resource-center/.

Ice Miller LLP attorneys can recommend measures that your business should implement to minimize legal risk and respond effectively to executive orders and laws enacted relating to COVID-19.  For further information and guidance, please contact the Ice Miller COVID-19 Task Force or call the New York State COVID-19 hotline at 888-364-3065.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.
 
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