Relates to the forbearance of residential mortgage payments; 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.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A10351b
TITLE OF BILL:
An act to amend the banking law, in relation to the forbearance of resi-
dential mortgage payments
This bill would add a new section 9-x to Article 1 of the banking law to
require New York regulated institutions to grant 180 days of forbearance
to residential mortgagors who can demonstrate financial hardship as a
result of the COVID-19 pandemic. This new section would also allow for
any mortgagor granted forbearance to choose either to extend their loan
for the length of the forbearance, pay their arrears in monthly install-
ments, or to defer the arrears as a lump sum payment due at the maturity
of the mortgage.
SUMMARY OF SPECIFIC PROVISIONS:
Section 1 of the bill adds a new section 9-x to Article 1 of the banking
Subsection 1 of section 9-x of the banking law sets forth definitions.
Subsection 2 of section 9-x of the banking law requires New York regu-
lated institutions to grant 180 days of forbearance-with the option for
an additional 180 days-on a residential mortgage to any qualified mort-
gagor who can demonstrate financial hardship during the NY on PAUSE
Order issued in response to the COVID-19 pandemic. Mortgagors must
submit an application for forbearance which must be made widely avail-
able by the lending institution. Such forbearance is available to those
already in arrears, on a trial period plan or who have applied for loss
mitigation, and may be backdated to March 7, 2020.
Subsection 3 of section 9-x of the banking law requires banks to offer
mortgagors who have been granted forbearance because of the COVID-19
pandemic the following options: to extend the term of their mortgage for
the period of forbearance, pay their arrears in monthly installments, or
to defer the accumulated arrears as an interest-free balloon payment
payable at the maturity of the loan, consistent with the safety and
soundness of the bank. These options would prohibit a regulated lender
from charging interest or late fees or from negatively reporting the
decision to any credit bureau.
Subsection 4 of section 9-x of the banking law makes non-compliance with
this section a defense to a foreclosure action raised over payments that
would have otherwise been covered by this section.
Subsection 5 of section 9-x of the banking law specifies that this
section will not be applicable to mortgages made, insured, or securi-
tized by any agency or instrumentality of the United States, any Govern-
ment Sponsored Enterprise, or a Federal Home Loan Bank, or the rights
and obligations of any lender, issuer, servicer, or trustee of such
Section 2 of the bill sets forth the effective date.
As the COVID-19 pandemic continues to wreak havoc on New York, and with
State and local governments mandating the shuttering of all but essen-
tial businesses in the interest of protecting public health, New York
has seen a rapid and unprecedented economic decline. Many New Yorkers,
facing severely reduced or entirely lost wages, will not be able to keep
up with mortgage payments during this time. With the Governor's issuance
of Executive Order 202.9, some mortgagors were given a three-month
forbearance period, but this has only slightly averted the danger of
mass displacement still at hand. This bill would extend the spirit of
the Governor's executive order to all state-regulated mortgage lenders
and servicers, requiring them to grant a six-month forbearance period-
with the option to extend another 180 days-to any mortgagor who certi-
fies they have a loss of income during the COVID-19 crisis, including
those already struggling to make payments.
While the Governor's Executive Order provides immediate relief to some
homeowners, it still allows for mortgage lenders to collect the back
payments as soon as the forbearance period is over. Many homeowners will
not be able to pay the lump sum of their arrears once forbearance ends
if they have been unable to work. This bill requires regulated lenders
and servicers to allow mortgagors to either extend their mortgage for a
period of time equal to the forbearance, pay their arrears in monthly
installments or pay the deferred payments as a balloon payment upon the
maturity of the loan. Under this legislation, mortgagors will also be
prohibited from: charging interest during forbearance, or on the balloon
payment; charging late fees; or negatively reporting the mortgagor's
decision to a credit reporting bureau. Compliance with this law will
also be required in order for a foreclosure action to proceed against a
mortgagor for payments that would otherwise have been covered by this
By giving homeowners this flexibility, we can provide essential security
to New Yorkers, ensuring that no one will be subject to foreclosure, or
punished with fees because of the economic havoc brought on by COVID-19.
This is a new bill.
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:
This act shall take effect immediately.