June 12, 2020
Industry Letter: Compliance with 3 NYCRR Part 419, Servicing Mortgage Loans: Business Conduct Rules
To: Mortgage Loan Servicers
RE: 3 NYCRR Part 419: Mortgage Loan Servicers Business Conduct Rules
The New York State Department of Financial Services (the “Department”) recently promulgated a version of 3 NYCRR Part 419 (“Final Part 419”), which sets business conduct rules for mortgage loan servicers operating in New York. The Final Part 419 restates many of the requirements contained in the regulation originally proposed on an emergency basis and codifies certain requirements imposed by Regulations X and Z and best practices that have become commonplace since Part 419 was first adopted ten years ago.
The Department has received a number of inquiries about the requirements and implementation of the Final Part 419. To assist everyone with the transition to the Final Part 419, the Department has prepared and posted responses to the most frequently asked questions on its website.
In addition, the Department wants to highlight two particular issues, involving the application of the Final Part 419 to open-end credit plans or Home Equity Lines of Credit (“HELOCs”), that have been an apparent source of confusion. The first is whether servicers need to provide HELOC borrowers with a periodic statement pursuant to 3 NYCRR § 419.4(c). It is the Department’s position that a servicer that furnishes a periodic statement to a borrower, in connection with an open-end credit plan or HELOC, in satisfaction of 12 CFR § 1026.7, is not required to furnish to such borrower a periodic statement, pursuant to 3 NYCRR § 419.4(c).
The second issue concerns the application of the loss mitigation requirements contained in Final Part 419 to open-end credit plans or HELOCs. Currently, the requirements of 3 NYCRR §419.7 in connection with delinquencies and loss mitigation efforts, only apply to open-end credit plans or HELOCs that are in first lien positions. The Department sees no need for these provisions to apply to open-end credit plans or HELOCs not in a first lien position.
Please note that the Department will continue to monitor the application of these two interpretations and their impact on consumers and may revisit them at a later date.
Should you have any questions regarding this letter, please contact Rholda Ricketts at (212) 709-1640.
Very truly yours,
Deputy Superintendent for Mortgage Banking