AG announces mortgage enforcement unit will review applications for NYS homeowners
√ Assistance funds to ensure New Yorkers receive required relief from mortgage industry
New York Attorney General Letitia James has taken action to provide support to New Yorkers still recovering from the financial effects of the coronavirus disease 2019 (COVID-19) pandemic. In a letter to mortgage servicers operating in New York and mortgage industry trade associations, James reiterates her expectation that they participate in New York’s recovery from the COVID-19 pandemic by providing long-term relief to homeowners in accordance with New York state law, as well as with federal regulations and guidelines. James also lays out, in her letter, that the Office of the Attorney General’s (OAG) mortgage enforcement unit (MEU) will be helping to oversee the distribution of New York state’s Homeowner Assistance Fund (HAF) announced last week by Gov. Kathy Hochul.
“While the support provided by the Homeowner Assistance Fund is substantial, the number of homeowners facing COVID-related distress is far greater,” James said. “To help the greatest number of homeowners and ensure that the family home stays in the family, HAF funds must supplement rather than replace the mortgage industry’s own efforts. My office will continue to ensure that mortgage servicers comply with their legal obligations as we work to protect New York families and their homes. If we plan to rebuild our economy, we must ensure that homeowners are granted the relief they need.”
The letter follows James’ warning at the onset of the pandemic, in April 2020, when she called on mortgage servicers to quickly provide forbearances to COVID-19-impacted homeowners, and to prepare for the day when those forbearances would expire by establishing seamless transitions into affordable and sustainable modifications. Since then, the OAG has monitored compliance with COVID-19-related relief requirements imposed by state and federal laws and regulations, including investigating whether servicers have offered homeowners the forbearance relief and post-forbearance modifications required by New York Banking Law § 9-x.
Additionally, James’ letter outlines expectations for mortgage servicers as forbearance plans expire, including that servicers comply with streamlined modification programs now required by various federal agencies and government-sponsored enterprises (Fannie Mae and Freddie Mac), and provide comparable relief (pursuant to New York state Banking Law § 9-x and New York’s mortgage servicing regulations) to homeowners whose mortgages are owned by private investors through private label securities or by banks in their own portfolios. James emphasizes that servicers must invest in adequate staffing and improve their customer communications, so that they can handle any surge in requests for assistance. Servicers’ failure to prepare for this moment will be taken into account by the OAG.
James also announced the OAG’s MEU will be helping to oversee the distribution of New York state’s HAF, by ensuring that mortgage servicers play their part by offering homeowners all available loss mitigation options before that homeowner seeks an outside HAF grant, in order to help the program save as many homes as possible.
As detailed in James’ letter, the MEU will review HAF applications to determine if a servicer’s loss mitigation programs – such as a deferral of missed payments or a streamlined loan modification – would result in an affordable and sustainable monthly payment. When a legally mandated modification is not offered to a potentially eligible homeowner, the MEU will contact mortgage servicers for an explanation. The MEU will also monitor mortgage servicers’ compliance with federal or state laws, regulations or guidance. This is in keeping with the U.S. Department of Treasury’s instruction that HAF be used to supplement, and not replace, loss mitigation.
In the weeks to come, the MEU will be reaching out to the mortgage industry, as well as the legal services and housing counseling agencies that assist New York homeowners, to further explain its role in the HAF application process and how to coordinate with MEU.