New York orders extraordinary measures requiring financial institutions to meet financial needs of and ameliorate the challenges being faced by customers affected by COVID-19.
With the spread of the novel coronavirus (COVID-19) throughout the country, as described in earlier client communications, federal and state officials at every level are issuing guidance and directives advising financial institutions on how to handle situations in which the pandemic prevents individuals from repaying loans. New York Governor Andrew Cuomo issued Executive Order No. 202.9 (EO 202.9), dated March 21, 2020, containing a broad requirement for forbearance and relief from banking fees for those experiencing financial hardship as a result of COVID-19. EO 202.9 is operative until April 20, 2020. EO 202.9 has been implemented in an Emergency Regulation issued by NYSDFS on March 24, 2020, Emergency Relief for New Yorkers Who Can Demonstrate Financial Hardship as a Result of COVID-19, 119 NYCRR 3 (the DFS Regulation). The DFS Regulation applies to “Regulated Institutions,” defined as “any New York regulated banking organization under New York Banking Law and any New York regulated mortgage servicer entity subject to the authority of the Department.”
The DFS Regulation requires that Regulated Institutions, subject to safety and soundness requirements, grant applications for forbearance of any payment due on a residential mortgage of a property in New York to any individual residing in New York and who demonstrates financial hardship as a result of the COVID-19 pandemic. Only residential mortgages for New York residents are covered by this forbearance requirement. The DFS regulation does not apply to commercial mortgages, any other types of loans or out-of-state residents. The forbearance requirement also does not extend to financial institutions that are not regulated by NYSDFS but are regulated by federal financial regulators or mortgages made, insured, or securitized by any agency or instrumentality of the United States.1 As described in an earlier client alert, the federal financial regulatory agencies have encouraged financial institutions to work constructively with borrowers affected by COVID-19 with respect to forbearance and loan modifications, but the mandatory forbearance requirement under the DFS Regulation is limited to New York residents’ residential mortgages.
In addition to mortgage relief, the DFS Regulation requires Regulated Institutions to provide relief from bank fees that consumers may incur as a result of the COVID-19 pandemic. Under the DFS Regulation, a Regulated Institution must eliminate for individual customers that demonstrate financial hardship from COVID-19: ATM fees in connection with ATMs that are owned or operated by the Regulated Institution, overdraft fees and credit card late fees. Regulated Institutions are not limited to the relief mandated by the DFS Regulation but are encouraged to take “additional reasonable and prudent actions to assist individuals demonstrating financial hardship as a result of the COVID-19 pandemic in any manner they deem appropriate.” Accordingly, the regulation does not mandate, but does encourage, other efforts to limit the financial impact of the COVID-19 pandemic on consumers recommended in earlier guidance documents, including for example, forbearance, payment accommodations or modification of loans other than mortgages, limiting early withdrawal penalties or extensions of new credit or increased credit limits for credit worthy customers.
Required COVID-19 Relief Process and Procedures
By April 3, 2020, all Regulated Institutions are required to publish on their websites, send emails to or otherwise communicate to consumers a mechanism and contact information to apply for COVID-19 hardship relief. Regulated Institutions are directed to develop their own criteria to evaluate and make determinations on applications received, so long as those criteria are consistent with the goals of Executive Order 202.9 and the DFS Regulation. Applications for forbearance must be processed and decided by Regulated Institutions as quickly as possible and in all cases within 10-days of receipt. Regulated Institutions must communicate to all applicants in writing whether a submitted application has been granted and must specify the steps the applicant must take to secure the relief. If the application has been denied, the applicant must be told the reason it was denied and must be informed that the applicant may file a complaint with the NYSDFS regarding the denial, and the Regulated institution must list the NYSDFS phone number and website for the complaint to be submitted.
The DFS Regulation requirements broadly extend to all banking institutions and encourage Regulated Institutions to seek guidance from NYSDFS in the face of the evolving regulator direction to address the COVID-19 crisis2. As financial regulators globally address the COVID-19 crisis, rules and guidance for financial institutions are changing rapidly. It is important to stay current on developments, most of which are effective without significant implementation time. Generally, the regulatory direction is for financial institutions to take all reasonable measures to meet financial needs of and ameliorate the challenges being faced by customers affected by the novel coronavirus.
Pillsbury’s experienced crisis management professionals are closely monitoring the global threat of COVID-19, drawing on the firm's capabilities in supply chain management, insurance law, cybersecurity, employment law, corporate law and other areas to provide critical guidance to clients in an urgent and quickly evolving situation. For more thought leadership on this rapidly developing topic, please visit our COVID-19 (Coronavirus) Resource Center.
1 The DFS Regulation also exempts mortgage loans made, insured, or securitized by any agency or instrumentality of the United States. This exclusion applies to any Government-Sponsored Enterprise, or a Federal Home Loan Bank, or the rights and obligations of any lender, issuer, servicer or trustee of such obligations, including servicers for the Government National Mortgage Association.
2 NYSDFS maintains a portal on its website to provide assistance to find out if a particular institution is regulated by DFS. The portal notes: “Certain banks, credit unions and other financial institutions may not be New York State-chartered or licensed, so we may not supervise them.”