Gov. Cuomo has reportedly signed Bill S8243c and S8428 (which slightly modifies the former) into law. The bill, which creates new Section 9-x of the Banking Law, appears to reflect the NY Legislature’s desire to afford NY homeowners with the same forbearance relief that the CARES Act provided on the federal level. As is often the case, the legislature hastily put a concept to paper seemingly without consideration for how it would function in practice. Not surprisingly, it is now up to the judiciary to determine the intent and apply the law as intended.
The statute provides for 180 day forbearances for qualified mortgagors (which can be made retroactive to as early as March 7, 2020) and the ability to extend the forbearance another 180 days upon the demonstration of a continued hardship. A mortgagee can only refuse to grant such forbearance to a qualified mortgagor if it would violate the safety and soundness provision; this is defined as “having sufficient capital and liquidity to meet its obligations and to operate in a safe and sound matter.”
The statute specifically excludes loans “made, insured or securitized by any federal agency, GSE, federal home loan bank.” An amendment has been made to also include “purchased by” as one of the qualifiers. The plain language here infers that any loans you purchased that were originated as a FNMA, FHLMC, HUD loan etc. would not be covered. The addition of “purchased by” will likely be a source of much litigation. One would argue that this extends the exclusion to not only loans originated by GSE/government agencies, but also any loans that have them in the assignment chain.
The statute intends to provide relief for mortgagors that were impacted during the “covered period” commencing March 7, 2020 with a to-be-determined end date. Based on a plain language reading, one would assume that the statute covers any missed payments within that period (as well as relief for those who have been paying but have a hardship and need the forbearance within the covered period).
There are more questions that are raised by the legislation that will result in additional litigation and the Court’s interpretation of the intent. For questions, please contact Director of Operations, Deborah Gallo at [email protected]