Relates to authorizing commercial mortgage forbearance during the COVID-19 pandemic; requires New York regulated institutions to make applications for forbearance available to qualified commercial mortgagors and to grant such forbearance for a period of ninety days, subject to the safety and soundness requirements of the regulated institution.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A10876
SPONSOR: Rules (Jean-Pierre)
TITLE OF BILL:
An act to amend the banking law, in relation to authorizing commercial
mortgage forbearance during the COVID-19 pandemic
PURPOSE OF BILL:
This bill would add a new section 9-x to the banking law to require New
York regulated institutions to grant 90 days of forbearance to qualified
commercial mortgagors who can demonstrate financial hardship during the
NY on PAUSE order caused by the COVID-19 pandemic. This bill would
allow any mortgagor granted forbearance to defer their payments to a
non-interest-bearing balloon payment due twelve months after the end of
the forbearance period. The bill would also give commercial tenants in
buildings receiving forbearance the ability to receive a rental defer-
ment proportional to the tenant's share of the rental income generated
by the mortgaged property.
SUMMARY OF SPECIFIC PROVISIONS:
Section 1 of the bill adds a new section 9-x to the banking law.
Subsection 1 of section 9-x of the banking law sets definitions.
Subsection 2 of section 9-x of the banking law would require New York
regulated institutions to grant 120 days of forbearance to any qualified
commercial mortgagor who can demonstrate financial hardship during the
NY on PAUSE order for the county in which the encumbered property is
located. Mortgagors must submit an application for forbearance which
must be made widely available by the lending institution. Such forbear-
ance is available to those already in arrears or on a trial period plan,
and may be backdated to March 7, 2020.
Subsection 3 of section 9-x of the banking law would give mortgagors the
ability to defer the accumulated arrears as an interest-free balloon
payment due twelve months after the forbearance period ends. This
section also provides commercial tenants with a rental deferment propor-
tional to their share of the total rental income generated by the mort-
gaged property. Mortgagors who receive this forbearance cannot evict
tenants for unpaid rent during the forbearance period.
Subsection 4 of section 9-x of the banking law requires adherence to
this section as a condition precedent in all foreclosure proceedings,
and allows defendants in such proceedings to raise any violations as a
defense when the action is based on missed payments otherwise subject to
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 obli-
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 York busi-
nesses will not be able to keep up with mortgage payments during this
time. With the Governor's issuance of Executive Order 202.9, some resi-
dential mortgagors have been granted forbearance, but this order has
left commercial mortgagors scrambling. A moratorium on foreclosure
proceedings is simply not enough to quell the fears of this economic
crisis among our small businesses. Without this legislation, businesses
would be at risk of mass foreclosures once the moratorium is lifted.
Commercial mortgagors who qualify for this program, including those with
mortgages on agricultural properties, mixed-use properties, and multi-
family mortgagors with five or more units will be able to defer their
missed payments into a non-interest-bearing balloon payment due one year
after the forbearance period ends. This offers a chance for our busi-
nesses to survive this crisis and get back on their feet. Commercial
tenants will also be able to receive a rental deferment proportional to
their share of the total rent generated by the property for which mort-
gage forbearance is received. Therefore, if a commercial tenant makes up
10% of the building's total rent roll, they can defer 10% of the total
forbearance received from their rental obligation for 12 months after
the forbearance period ends. Tenants in properties who receive this
forbearance will also be protected from eviction for nonpayment of rents
during the forbearance period.
By passing this legislation, we can provide essential security to small
businesses across New York, ensuring that no one will be subject to
foreclosure, or lose their place of business due the COVID-19 pandemic.
This is a new bill.
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:
To be determined.
This act shall take effect immediately.
STATE OF NEW YORK
July 24, 2020
Introduced by COMMITTEE ON RULES -- (at request of M. of A. Jean-Pierre)
-- read once and referred to the Committee on Banks
AN ACT to amend the banking law, in relation to authorizing commercial
mortgage forbearance during the COVID-19 pandemic
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-y to
2 read as follows:
3 § 9-y. Mortgage forbearance. 1. As used in this section, the following
4 terms shall have the following meanings:
5 (a) "covered period" means March seventh, two thousand twenty until
6 the date on which none of the provisions that closed or otherwise
7 restricted public or private businesses or places of public accommo-
8 dation, or required postponement or cancellation of all non-essential
9 gatherings of individuals of any size for any reason in executive order
10 numbers 202.3, 202.4, 202.5, 202.6, 202.7, 202.8, 202.10, 202.11, 202.13
11 or 202.14 of two thousand twenty, as extended by executive order numbers
12 202.28 and 202.31 and as further extended by any future executive order,
13 issued in response to the COVID-19 pandemic continue to apply in the
14 county in which the property encumbered by the mortgage in question is
15 located; and
16 (b) "regulated institution" means any New York regulated banking
17 organization as defined under this chapter and any New York regulated
18 mortgage servicer entity subject to the authority of the department.
19 2. Notwithstanding any other provision of law, New York regulated
20 institutions shall:
21 (a) make applications for forbearance of any payment due on a commer-
22 cial mortgage of a property located in New York widely available to any
23 qualified commercial mortgagor including those who are already in
24 arrears or on a trial period plan or who have applied for loss miti-
25 gation and who demonstrate financial hardship during the covered period;
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
 is old law to be omitted.
A. 10876 2
1 (b) grant such forbearance for a period of one hundred twenty days to
2 any such qualified commercial mortgagor, subject to the safety and
3 soundness requirements of the regulated institution.
4 (c) such forbearance may be backdated to March seventh, two thousand
6 3. Notwithstanding any other provision of law, any mortgage forbear-
7 ance granted by a regulated institution pursuant to this section, or any
8 other law, rule or regulation, to the qualified commercial mortgagor as
9 a result of financial hardship during the covered period shall be
10 subject to the following provisions:
11 (a) the regulated institution shall defer arrears accumulated during
12 the forbearance period as a non-interest bearing balloon payment payable
13 twelve months after the end of the forbearance period and shall waive
14 any late fees accumulated as a result of the forbearance; and
15 (b) the total value of the deferred mortgage payment shall be appor-
16 tioned each month to each tenant according to the percentage of the
17 total rents due that their rental obligation represents on the mortgaged
18 property in receipt of the forbearance. Each commercial tenant shall
19 have their pro rata share of the forborne mortgage payment be deferred
20 each month for the duration of the forbearance period. Such deferred
21 rent shall be due within twelve months after the end of the forbearance
22 period, and shall not accumulate interest or be subject to late fees;
24 (c) no eviction proceedings may be commenced or continued against any
25 residential or commercial tenant for nonpayment of rents that came due
26 during the forbearance period.
27 4. Notwithstanding any other provision of law, adherence with this
28 section shall be a condition precedent to commencing a foreclosure
29 action stemming from missed payments which would have otherwise been
30 subject to this section. A defendant may raise the violation of this
31 section as a defense to a foreclosure action commenced on the defend-
32 ant's property when such action is based on missed payments that would
33 have otherwise been subject to this section.
34 5. Notwithstanding anything to the contrary in this section, this
35 section shall not apply to, and does not affect any mortgage loans made,
36 insured, or securitized by any agency or instrumentality of the United
37 States, any government sponsored enterprise, or a federal home loan
38 bank, or the rights and obligations of any lender, issuer, servicer or
39 trustee of such obligations, including servicers for the Government
40 National Mortgage Association.
41 § 2. This act shall take effect immediately.