May 23, 2022

Volume XII, Number 143

Advertisement
Advertisement

May 23, 2022

Subscribe to Latest Legal News and Analysis

Servicers That Fail to Prepare, Prepare to Fail, Warns NY AG

n a December 13, 2021 letter to servicers, New York Attorney General Letitia James reminded servicers of their continuing obligations to assist New Yorkers amidst the pandemic and warned of enforcement actions against servicers that fail to do so. According to Attorney General James, “lack of preparedness is no excuse.” Instead, the Office of the Attorney General will take “that lack of diligence” into account in making enforcement decisions. The letter follows the October 28, 2021, statement on the Homeowner Assistance Fund (HAF) program from New York’s Department of Financial Services (Industry Letter) and, together, the statements present an aggressive tone from the Empire State.

Expiration of Mortgage Forbearance Plans

As the expiration of many mortgage forbearance plans looms ahead, Attorney General James advised servicers to prepare for a sharp increase in customer requests. Specifically, servicers should maintain sufficient staffing and improve their communications with customers by addressing dropped calls, long hold times, and any other issues that may deter homeowners from reaching out for assistance. Servicers should also maintain sufficient resources for New York homeowners with limited English proficiency and monitor policies and call time metrics that could indicate discrimination against the same.

Banking Law § 9-x

In addition to the various streamlined modification programs offered by federal agencies in response to COVID-19, in June 2020, New York enacted Banking Law § 9-x, which requires New York regulated mortgage servicers of privately owned mortgages to provide distressed homeowners certain forbearance relief and affordable post-forbearance modifications that closely mimic the programs for federally backed mortgages. As a result of homeowners’ complaints, the Office of the Attorney General is investigating servicers’ compliance with Banking Law § 9-x and “will continue to monitor compliance and initiate enforcement actions against individual mortgage servicers as needed to protect New York homeowners.”

New York’s Homeowner Assistance Fund

Attorney General James’ letter also addressed servicers’ role in the upcoming distribution of New York’s HAF program. The federally funded program, which will begin accepting applications on January 3, 2022, will provide grants to homeowners facing default, foreclosure, or displacement due to COVID-19. Although New York plans to distribute around $450 million in HAF relief, “it may not be enough to assist every homeowner negatively impacted by COVID-19.” Thus, HAF serves as a last resort, meaning servicers must offer all affordable home preservation options available before informing borrowers of the availability of HAF grants. To ensure servicers’ compliance, the Office of the Attorney General’s Mortgage Enforcement Unit will review HAF applications for the “systematic misapplication of federal or state law, regulations or guidance.” We note that New York appears to be the only state where the Office of the Attorney General plans to be involved in the HAF program from inception.

Takeaways

Considering New York’s aggressive enforcement tactics, servicers should take several steps to ensure compliance with federal and New York law. First, servicers must work in good faith with homeowners and offer all affordable home preservation options available. Second, servicers should review the borrower for all available loss mitigation options before considering HAF funds in the loss mitigation review. And third, servicers should ensure effective and accurate communication by maintaining sufficient staffing; providing resources for New Yorkers with limited English proficiency; and addressing dropped calls, long hold times, and any other issues that may deter homeowners from reaching out for assistance.

Caroline Waters contributed to this article.

© 2022 Bradley Arant Boult Cummings LLPNational Law Review, Volume XI, Number 354
Advertisement
Advertisement
Advertisement
Advertisement
Advertisement
Advertisement

About this Author

Christy Hancock Financial Services Lawyer Bradley
Partner

Christy Hancock’s practice is dedicated to financial services regulatory compliance and litigation. Her work with mortgage servicing and financial institution clients has given her a broad base of knowledge regarding laws affecting the mortgage servicing business, including bankruptcy and foreclosure best practices, payment application, correspondence requirements, allowable fees, loan modifications, escrow requirements, and property preservation. In recent years, the majority of her practice has focused on advising large financial institutions on bankruptcy-related...

704.338.6005
Austin Holland Attorney Regulatory Compliance Bradley Nashville
Associate

Austin Holland’s practice focuses on regulatory compliance matters, government enforcement actions, and financial services litigation. He has represented clients in a variety of matters, but his practice is particularly focused on issues with an emphasis on matters related to housing.

Prior to joining Bradley, Austin worked for the U.S. Department of Housing and Urban Development in the Office of Litigation, where he handled matters related to affordable housing, reverse mortgages, fair housing, bankruptcy, foreclosures, grant recaptures,...

615-252-2329
Advertisement
Advertisement
Advertisement