October 28, 2021
To: New York Regulated Mortgage Loan Servicers
RE: Loss Mitigation for Borrowers Impacted by COVID-19
With many borrowers set to exit pandemic-related mortgage forbearances, the New York State Department of Financial Services (the “Department”) is issuing this supervisory letter to remind all regulated institutions that service mortgage loans secured by residential 1-4 family properties located in New York (“Servicers”), of the need to communicate timely and accurate information to borrowers, particularly as it relates to available loss mitigation options, evaluate borrowers for all loss mitigation options and ensure that borrowers are only being offered sustainable loan modifications.
To ensure that accurate and up-to-date information regarding available loss mitigation options is being communicated to borrowers, as well as information that complies with the requirements of federal and state laws, regulations, government agency and government sponsored enterprises’ (“GSEs”) guidelines, Servicers are expected to provide proper guidance and training to their customer service representatives, and loss mitigation and collection staff. The Department expects Servicers to assess the adequacy of existing staff levels and take appropriate action to ensure that their loss mitigation operations are sufficiently staffed to facilitate timely response and evaluation of a borrower’s request for a loan modification or other alternative to foreclosure.
Furthermore, considering the projected number of borrowers expected to exit forbearances in the coming months, the Department expects Servicers to ensure that all staff members engaged in loss mitigation activities or functioning as a designated Single Point of Contact (“SPOC”) are also aware of government and non-profit organization programs designed to help borrowers avoid delinquency and foreclosure.
Additionally, the Department encourages Servicers to work with New York State Homes and Community Renewal in its implementation of New York State’s Homeowner Assistance Fund (“HAF”), which is designed to assist homeowners financially impacted by COVID-19. The Department also encourages Servicers to sign on to the HAF participation agreements and to utilize the common data file that have been agreed to by participating HAF states. Servicers are expected to notify borrowers about HAF and provide information relating to the website and address that borrowers can apply or request an application. Servicers should not refer borrowers to HAF in place of offering all available loss mitigation options as directed by state and federal law. The HAF program is intended to supplement loss mitigation in cases where a loan modification is otherwise not achievable.
Servicers are expected to work with borrowers who apply for HAF by factoring those resources into their loss mitigation analysis prior to the issuance of any denial notices to such borrowers. Also, Servicers are expected to incorporate the deferral of principal as one of several steps in calculating a sustainable loan modification.
The Department expects Servicers of private label and portfolio loans to offer streamlined and flex modification programs similar to GSEs and government agencies COVID-19 related loss mitigation initiatives. Additionally, Servicers are expected to fully document all investor requirements and restrictions which preclude such Servicers from offering modifications on terms similar to those offered by government agencies and GSEs or prohibit the inclusion of deferred principal as a step in calculating loan modifications.
Servicers are reminded that the covered period under section 9-X of the New York Banking Law (NYBL) was extended to December 31, 2021. Therefore, eligible borrowers who request a forbearance up to and including December 31, 2021 must be granted an initial forbearance of at least six months in accordance with the requirements of section 9-X of the NYBL.
Should you have any questions regarding this letter, please contact [email protected]