By: Jason P. Hipp
As just one of the many aspects of New York State’s response to the coronavirus outbreak, last month, on March 21, 2020, New York Governor Andrew Cuomo issued Executive Order 202.9 (the Order), which directed institutions regulated by the New York Department of Financial Services (DFS) to provide financial relief to any person or business who has a financial hardship as a result of the COVID-19 pandemic for a period of ninety days.
To carry out that general mandate, the Order directed DFS to ensure that “licensed or regulated entities”—which includes banks and savings banks, credit unions, investment companies and mortgage loan servicers, among others—provide to consumers in New York State an opportunity to make an application for a forbearance of mortgage payments (including principal and interest) to “any person or entity facing a financial hardship” resulting from the COVID-19 pandemic and grant such applications in “all reasonable and prudent circumstances.” While the Order does not specify the precise meaning of the “forbearance,” when read in context of the Order as a whole, it appears to refer solely to a forbearance of mortgage payments for a consumer in New York State. The Order also empowers DFS to issue regulations directing the restriction or modification of ATM fees, overdraft fees and credit card late fees.
The Order took effect on March 21, 2020, and, under a subsequent executive order issued on April 7, 2020, will remain in effect through May 7, 2020.
Days after the Order, on March 24, 2020, DFS issued emergency regulations implementing the Order. Under the emergency regulations—which remain in effect for the same period of time as the Order— “New York regulated institutions” (which include both banking organizations and mortgage servicers) are required to grant forbearances of payments due on a residential mortgage for property in New York for ninety days for individuals who reside in New York and demonstrate COVID-19-related financial hardship. 3 NYCRR § 119.3(a). Denial of such forbearance will subject an institution to a review by DFS of whether that activity constituted an unsafe or unsound practice (relying on several factors enumerated by DFS). 3 NYCRR § 119.3(f). All DFS-regulated institutions are subject to such a review, notwithstanding language in the Order limiting the review to the practices of any “bank.”