New York Senate Bill S8243C and New York Senate Bill S8428 were delivered to the Governor on June 5, 2020. If signed, Senate Bill S8243C will add a new Section 9-x of the Banking Law of New York and Part C of Senate Bill S8428 will amend that new section. Both will be effective immediately. These bills are legislative expansions on the previously issued Executive Order 202.0 and emergency regulation 3 NYCRR Part 199 related to COVID-19 financial hardship.
The S8243C bill requires New York regulated banking organizations to make applications for forbearance for residential mortgages available to qualified mortgagors during the period in which the NY on PAUSE order is in effect in the county wherein the qualified mortgagor is located and to grant such applications for a period of 180 days.
S8428 amends the definition of a “qualified mortgagor,” by removing the requirement that the individual reside in New York with their “principal dwelling” in New York, and replacing it with the requirement that the individual’s “primary residence” must be in New York; and provides the option to extend the forbearance on monthly payments one hundred eight days provided the borrow demonstrates continued financial hardship.
The dates effected run from March 7, 2020 to the date upon which the restrictions are lifted under the Executive Orders.
Under the Senate Bill S8243C, the original carve out from the relief options included mortgage loans “made, insured or securitized” by any federal agency, the GSEs, or a federal home loan bank, or to “the rights and obligations of any lender, issuer, servicer or trustee of such obligations,”. Senate Bill S8428 modifies the carve out in two respects by adding (1) “a corporate governmental agency of the state constituted as a political subdivision and public benefit corporation” to the list of entities, and (2) loans “purchased” by any of the listed entities.
Senate Bill S8428 amends the grant of forbearance section of 9-x of the Banking Law to require “all monthly payments due” be included in the initial 180 day forbearance period and subjects the ability of a qualified mortgagor to obtain an additional forbearance period to demonstrating a continuing financial hardship. Additionally, if the qualified mortgagor had already received a forbearance pursuant to Executive Order 202.9, the total forbearance period would include the period of the forbearance already received under the Executive Order 202.0. The Senate Bill also removes the requirement that the mortgagor be in arrears, on a trial period plan or have applied for loss mitigation.
Senate Bill S8243C provided for three options to be made available with regard to any mortgage forbearance granted by a regulated institution to a qualified mortgagor pursuant to the bill, Executive Order 202.9, as a result of financial hardship. Option(a) the mortgagor shall have the option to extend the term of the loan for the length of the period of forbearance. The regulated institution shall not charge additional interest or any late fees or penalties on the forborne payment; or Option (b) the mortgagor shall have the option to have the arrears accumulated during the forbearance period payable on a monthly basis for the remaining term of the loan without being subject to penalties or late fees incurred as a result of the forbearance; Option (c) the mortgagor and regulated institution cannot reasonably agree on a mutually acceptable loan modification, the regulated institution shall offer to defer arrears accumulated during the forbearance period as a non-interest bearing balloon loan payable at the maturity of the loan or at the time the loan is satisfied through a refinance or sale of the property. Any late fees accumulated as a result of the forbearance shall be waived. Senate Bill S8428 adds a fourth option, to negotiate a “loan modification or other option that meets the changed circumstances of the qualified mortgagor.” The use of these options cannot be negatively reported to the credit bureaus.
Senate Bill S8243C subjected the obligation of a regulated institution to include in the options offered to a qualified mortgagor an option to defer the arrearages in the form of an interest free balloon loan to the option being consistent with the safety and soundness of the institution, Senate Bill S8428 removes the safety and soundness element with respect to the option and adds an overall safety and soundness provision. Under the safety and soundness provision, the obligation of a regulated institution to grant forbearance relief is subject to the regulated institution “having sufficient capital and liquidity to meet its obligations and to operate in a safe and sound matter.” It must notify the New York Department of Financial Services within five business days, if it cannot operate in a safe and sound manner, including specific information surrounding that assessment. At the same time, the regulated institution must notify the qualified mortgagor that the application for relief was denied and provide a statement and contact information for complaints to the New York Department of Financial Services.
Failure to comply with the legislation will be a defense to the foreclosure and will likely subject the institution to regulatory review.
For more information regarding this legislation, please contact Deborah Gallo, Director of Operations at [email protected]