COVID-19 Update: NY Governor Issues Executive Order on Mortgage Forbearance Actions

New York State Governor Andrew Cuomo has signed an Executive Order stating that, in light of the COVID-19 outbreak, any bank that is regulated by the New York State Department of Financial Services (“DFS”) must grant a 90-day mortgage forbearance to any person or business with a financial hardship as a result of the outbreak.

Is your mortgage with a bank that is subject to regulation by the DFS? All state-chartered banks are subject to regulation by the DFS. State-chartered branches and are likely covered by the forbearance requirement. National banks, as well as federal branches and agencies of foreign banks, are NOT subject to the Executive Order, as such financial institutions are licensed, regulated or organized under federal law, not state law. By mandating forbearance on certain banks, the Executive Order goes beyond recent guidance at the federal banking level.

DFS is to ensure that “any licensed or regulated entities provide to any consumer in the State of New York an opportunity for a forbearance of payments for any mortgage for any person or entity facing a financial hardship due to the COVID-19 pandemic.” The Executive Order also requires the DFS to issue “emergency regulations” to require that applications for forbearance relief be made widely available for affected consumers, and that such applications be granted in “all reasonable and prudent circumstances solely for the period of such emergency.”  These regulations were issued in the State Register on April 8, 2020 and are available here: https://www.dos.ny.gov/info/register/2020/040820.pdf.

The Executive Order was issued after DFS urged all regulated and exempt mortgage servicers to mitigate the adverse impact caused by COVID-19 on those mortgage borrowers who demonstrate that they are unable to make timely payments, and, subject to the requirements of any related guarantees or insurance policies, to support those adversely impacted borrowers by:

• forbearing mortgage payments for 90 days from their due dates;

• not reporting late payments to credit rating agencies for 90 days;

• offering borrowers an additional 90-day grace period to complete trial loan modifications, and ensuring that late payments during the COVID-19 pandemic do not affect their ability to obtain permanent loan modifications;

• waiving late payment fees and any online payment fees for a period of 90 days;

• postponing foreclosures and evictions for 90 days;

• ensuring that borrowers do not experience a disruption of service if the mortgage servicer closes its office, including making available other avenues for borrowers to continue to access and manage their accounts and to ask questions; and

• proactively reaching out to borrowers via smart phone application announcements, text, email or otherwise to explain the help being offered to borrowers.

Forbearances are not automatic and must be applied for with your bank. Please contact your bank to obtain the application form. You may possibly obtain such a form on-line at the bank’s website or via an application on your smart phone. You may even be able to apply on-line at the bank’s website or via your smart phone.

The forbearance will end in 90 days at which time borrowers will have to become current on their loans and pay the past due amounts. Of course, this may be very difficult for many borrowers to do. Extending your mortgage to cover the missed payments may be an available option. Note that these banks are not required to extend any mortgage loans beyond the original intended payoff date. However, your bank may agree to do so.

These requirements may change over time, so if you believe that you may be in need of a forbearance, please contact your bank.