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
SPONSOR: Rozic TITLE OF BILL:
An act to amend the banking law, in relation to the forbearance of resi-
dential mortgage payments
PURPOSE:
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
law.
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
obligations.
Section 2 of the bill sets forth the effective date.
JUSTIFICATION:
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
deferment period.
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.
LEGISLATIVE HISTORY:
This is a new bill.
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:
None.
EFFECTIVE DATE:
This act shall take effect immediately.
STATE OF NEW YORK
________________________________________________________________________
10351--B
IN ASSEMBLY
April 29, 2020
___________
Introduced by M. of A. ROZIC, GRIFFIN, CARROLL -- read once and referred
to the Committee on Banks -- committee discharged, bill amended,
ordered reprinted as amended and recommitted to said committee --
again reported from said committee with amendments, ordered reprinted
as amended and recommitted to said committee
AN ACT to amend the banking law, in relation to the forbearance of resi-
dential mortgage payments
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. The banking law is amended by adding a new section 9-x to
2 read as follows:
3 § 9-x. Mortgage forbearance. 1. As used in this section, the following
4 terms shall have the following meanings:
5 (a) "Covered period" means March 7, 2020 until the date on which none
6 of the provisions that closed or otherwise restricted public or private
7 businesses or places of public accommodation, or required postponement
8 or cancellation of all non-essential gatherings of individuals of any
9 size for any reason in Executive Orders 202.3, 202.4, 202.5, 202.6,
10 202.7, 202.8, 202.10, 202.11, 202.13 or 202.14, as extended by Executive
11 Orders 202.28 and 202.31 and as further extended by any future Executive
12 Order, issued in response to the COVID-19 pandemic continue to apply in
13 the county of the qualified mortgagor's residence;
14 (b) "qualified mortgagor" means an individual who resides in New York
15 whose principal dwelling is encumbered by a home loan pursuant to para-
16 graph (a) of subdivision six of section thirteen hundred four of the
17 real property actions and proceedings law or whose principal dwelling is
18 a co-operative unit whose shares are encumbered by any loan otherwise
19 meeting the requirements of a home loan under paragraph (a) of subdivi-
20 sion six of section thirteen hundred four of the real property actions
21 and proceedings law, from or serviced by a regulated institution;
22 (c) "regulated institution" means any New York regulated banking
23 organization as defined in this chapter and any New York regulated mort-
24 gage servicer entity subject to supervision by the department; and
25 (d) "trial period plan" means an agreement whereby the mortgagor is
26 required to make trial payments in full and on-time in order to be
27 considered for a permanent loan modification.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD16167-13-0
A. 10351--B 2
1 2. Notwithstanding any other provision of law, New York regulated
2 institutions shall:
3 (a) make applications for forbearance of any payment due on a residen-
4 tial mortgage of a property located in New York widely available to any
5 qualified mortgagor who, during the covered period, is in arrears or on
6 a trial period plan, or who has applied for loss mitigation and demon-
7 strates financial hardship during the covered period; and
8 (b) grant such forbearance for a period of one hundred eighty days to
9 any such qualified mortgagor who is in arrears or on a trial period
10 plan, or who has applied for loss mitigation and demonstrates financial
11 hardship, with the option to extend an additional one hundred eighty
12 days.
13 (c) Such forbearance may be backdated to March seventh, two thousand
14 twenty.
15 3. Notwithstanding any other provision of law, any mortgage forbear-
16 ance granted by a regulated institution pursuant to executive order
17 number 202.9 of two thousand twenty, this section, or any other law,
18 rule or regulation to the qualified mortgagor as a result of financial
19 hardship during the covered period shall be subject to the following
20 provisions:
21 (a) the mortgagor shall have the option to extend the term of the loan
22 for the length of the period of forbearance. The regulated institution
23 shall waive interest on the principal for the term of the forbearance
24 and waive any late fees accumulated as a result of the forbearance; or
25 (b) the mortgagor shall have the option to have the arrears accumu-
26 lated during the forbearance period payable on a monthly basis for the
27 remaining term of the loan without being subject to penalties or late
28 fees incurred as a result of the forbearance; or
29 (c) if the mortgagor is unable to make mortgage payments due to mort-
30 gagors' demonstrated hardship and the mortgagor and regulated institu-
31 tion cannot agree on a mutually acceptable loan modification, the mort-
32 gagor shall have the option to defer arrears accumulated during the
33 forbearance period as a non-interest bearing balloon payment payable at
34 the maturity of the loan consistent with the safety and soundness of
35 such regulated institution, or at the time the loan is satisfied through
36 a refinance or sale of the property. Any late fees accumulated as a
37 result of the forbearance shall be waived.
38 (d) The exercising of options provided for in paragraph (a), (b) or
39 (c) of this subdivision by a qualified mortgagor shall not be reported
40 negatively to any credit bureau by any regulated institution.
41 4. Notwithstanding any other provision of law, adherence with this
42 section shall be a condition precedent to commencing a foreclosure
43 action stemming from missed payments which would have otherwise been
44 subject to this section. A defendant may raise the violation of this
45 section as a defense to a foreclosure action commenced on the defend-
46 ant's property when such action is based on missed payments that would
47 have otherwise been subject to this section.
48 5. Notwithstanding anything to the contrary in this section, this
49 section shall not apply to, and does not affect any mortgage loans made,
50 insured, or securitized by any agency or instrumentality of the United
51 States, any government sponsored enterprise, or a federal home loan
52 bank, or the rights and obligations of any lender, issuer, servicer or
53 trustee of such obligations, including servicers for the Government
54 National Mortgage Association.
55 § 2. This act shall take effect immediately.
