In response to the coronavirus (COVID-19) crisis, New York Governor Andrew Cuomo has issued two executive orders that place temporary restraints on the ability of banks, residential mortgage servicers, and landlords to exercise remedies under certain agreements, mortgages, and leases.
On March 20, 2020, the Governor Cuomo issued Executive Order 202.8, which includes a statement that “there shall be no enforcement of either an eviction of any tenant residential or commercial, or a foreclosure of any residential or commercial property for a period of ninety days.” As such, landlords cannot seek to evict any tenants in New York State for a 90-day period, and lenders cannot proceed with foreclosure on residential or commercial mortgages on New York properties for a 90-day period.
On March 21, 2020, this action was followed by Executive Order 202.9, which includes two major actions.
First, Order 202.9, under Governor Cuomo’s own authority, temporarily modifies Section 39 of the Banking Law from March 21, 2020, to April 20, 2020, to provide that “it shall be deemed an unsafe and unsound business practice if, in response to the COVID-19 pandemic, any bank which is subject to the jurisdiction of the Department shall not grant a forbearance to any person or business who has a financial hardship as a result of the COVID-19 pandemic for a period of ninety days.” The provision applies to banks subject to New York Department of Financial Services (DFS) jurisdiction. In general, these include banks organized under or subject to the New York Banking Law. The provision is inapplicable to national banks, federal savings banks, and nonbank lenders.
Second, Order 202.9 directed the DFS superintendent to promulgate emergency regulations concerning forbearance on mortgage payments and certain banking fees for consumers facing financial hardships relating to the COVID-19 pandemic. On March 24, 2020, DFS issued emergency regulations, adopted pursuant to Executive Order 202.9 (the Regulations) to address these two areas. See the chart summarizing the key points from the Regulations.
The Regulations require that, through April 20, 2020, DFS-regulated banks (that is, state banks chartered under New York law) and DFS-licensed residential mortgage servicers grant 90-day forbearances on certain residential mortgages on property located in New York to any New York consumer who applies and demonstrates financial hardship as a result of the COVID-19 pandemic. The Regulations provide that the obligation to grant a forbearance is subject to the safety and soundness requirements of the regulated institutions. The Regulations expressly exclude from their coverage any commercial mortgage loans, federally-insured loans, and loans “made, insured, or securitized by” Fannie Mae, Freddie Mac, Ginnie Mae, or the Federal Home Loan Banks. Many of these excluded residential mortgage loans are already in practice covered by previously-announced broader forbearance relief.
For the residential mortgage servicers to which the Regulations apply, compliance with the forbearance provisions becomes a matter of de facto federal law by virtue of the loss mitigation regulations in the mortgage servicing rules in the Consumer Financial Protection Bureau’s Regulation X, 12 C.F.R. § 1024.38.
The Regulations clarify that, with respect to residential mortgage loans, DFS-regulated banks’ compliance with the Regulations satisfies their obligations under the temporary modification of Section 39 of the Banking Law that the first part of Order 202.9 addresses.
The Regulations address and restrict other consumer banking fees for the banks to which it applies. The Regulations require that, solely for the period of this emergency and for individuals who can demonstrate financial hardship from the COVID-19 pandemic, the regulated banks will eliminate fees charged for the use of automated teller machines (ATMs) that are owned or operated by the regulated banking organizations, overdraft fees, and credit card late payment fees, subject to the safety and soundness requirements of the regulated banking organizations. The Regulations set forth requirements for the procedures to be put in place to implement the Regulations. See Chart.
These executive orders are consistent with a national trend, particularly as applicable to consumer mortgages. Recently, the US Department of Housing and Urban Development suspended eviction in foreclosure proceedings on Federal Housing Administration-insured loans, and the Federal Housing Finance Agency directed Fannie Mae and Freddie Mac to suspend eviction and foreclosure proceedings for a period of 60 days; in response, Fannie Mae and Freddie Mac went even further and have directed servicers to provide extensive forbearance relief for their borrowers adversely affected by COVID-19.
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David I. Monteiro