On March 21, 2020, New York Governor Andrew Cuomo issued New York Executive Order 202.9, “Continuing Temporary Suspension and Amending Disaster Emergency Laws” (the “Executive Order.”) Executive is focusing on forbearance from loans by banking institutions for individuals and businesses in financial difficulty due to the COVID-19 pandemic.
New York Executive Order 202.9
The Executive Order amended the New York Banking Act § 39 (2) to consider it a “dangerous and unhealthy business practice” for any bank subject to the jurisdiction of the New York Department of Financial Services ( “DFS”) not to grant loan forgiveness to “any person or business that has suffered financial hardship as a result of the COVID-19 pandemic” for a period of 90 days. It is not clear to what extent the term “bank” will be interpreted. The narrowest interpretation of the term “banks” that are subject to the jurisdiction of DFS would include only New York State chartered banks; However, some question whether such a narrow interpretation was the governor’s real intention given that, as a general proposal, the executive decrees issued to date in connection with the pandemic have demonstrated an intention to be as broad as possible.
A broader interpretation of banks subject to DFS jurisdiction may include, but are not limited to, all New York State chartered banks, out-of-state chartered banks that have one or more branches in New York State and foreign banking companies authorized by the DFS to do business in New York State. National banking associations and other federally chartered banking institutions would likely not be covered, even in a broader interpretation of the term. Under New York Banking Law §39 (2), DFS can order any banking institution subject to its jurisdiction to end any dangerous and misguided business practices. Under Section 309 (a) of the New York Financial Services Act, DFS can also sue for an injunction against banks for violating the provisions of the banking law. The decree will remain in force at least until April 20, 2020.
The executive order also ordered the DFS to enact emergency regulations developing a consumer relief program to help those in financial difficulty due to COVID-19 apply for forbearance from residential loans. DFS has further been asked to promulgate regulations restricting and / or modifying ATM fees, overdraft fees and credit card late fees charged by banking institutions licensed or regulated by DFS.
3 NYCRR § 119
In response to the Executive Order’s direction, the DFS enacted a new Part 119 of Title 3 of the New York Code, Rules and Regulations (“3 NYCRR § 119”) on March 24, 2020, detailing the COVID relief program -19 for individuals with regard to home loans. 3 NYCRR § 119.3 (a) requires banking institutions under the jurisdiction of the DFS to develop and make widely available requests for forbearance from any payment owed on a residential mortgage loan located in New York State to persons who may demonstrate financial hardship resulting from the COVID-19 pandemic and, after determining that the individual application qualifies for COVID-19 relief, grant forbearance for a period of 90 days. 3 NYCRR § 119.3 (b) states that all banking institutions under the jurisdiction of the DFS will offer the following relief to anyone eligible for COVID-19 relief: elimination (1) of ATM fees on owned machines or operated by the banking institution; (2) overdraft fees; and (3) charges for late payment by credit card. While these forms of COVID-19 relief are required by regulation, banking institutions are not limited to these forms of relief and are in fact encouraged to offer additional forms of relief where possible.
3 NYCRR § 119.3 (c) requires banking institutions to send emails, post on their website, send mass mailings, or generally communicate to individuals how to request COVID-19 relief and provide the contact details of the head of the banking institution. Such broad communication should take place as soon as reasonably possible, but no later than 10 business days after the promulgation of 3 NYCRR § 119.
While the regulations set out in 3 NYCRR § 119 allow banking institutions to develop the criteria to qualify for the COVID-19 relief program, 3 NYCRR § 119.3 (d) requires that the criteria be clear and easy to understand, as well. that is reasonably relevant to what the banking institution will need to know in order to determine whether it will provide COVID-19 relief to an individual applicant. In addition, banking institutions are required to respond promptly to any individual requester who omits information necessary to process the request and to explain to the individual requester how this information can be obtained and transmitted to the banking institution.
Requests for COVID-19 relief must be processed and processed no later than 10 business days after receipt of all information necessary to process the request. Banking institutions should also develop a fast-track procedure for applicants who demonstrate an emergency and request expedited processing due to these urgent circumstances. All decisions made by banking institutions should be communicated in writing to claimants, either detailing the additional steps to be taken to obtain redress, granting the requested redress, or detailing the reason the claim was denied (and providing a statement that an appeal can be filed with DFS, as well as contact details for DFS, if the appeal was rejected).
Banking institutions are encouraged to seek advice from DFS with respect to notices, communications, requests and other matters arising from 3 NYCRR § 119. Finally, 3 NYCRR § 119.3 (k) states that DFS regulations do not apply to loans other than residential mortgages, thereby expressly excluding commercial mortgages.
Federal orientation
On March 22, 2020, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency, the Consumer Financial Protection Bureau, and the state banking regulators (collectively referred to as “Federal Financial Agencies”) have collectively issued guidelines relating to financial institutions that work with borrowers affected by financial hardship resulting from COVID-19. In that guide, federal financial agencies have stated that loan modification programs are positive actions that can help limit financial hardship resulting from the COVID-19 pandemic. Federal financial agencies have made it known that they will not criticize financial institutions for such loan modifications and have called on institutions monitoring these financial institutions not to automatically classify COVID-19 loan modifications as “debt restructurings. in difficulty ”or (“ TDR ”). .
In collaboration with the Financial Accounting Standards Board, federal financial agencies have determined that short-term (up to six (6) months) changes made due to difficulties related to COVID-19, such as payment deferrals, waivers of fees, extensions of repayment terms, or other late payments will not be considered a TOR under United States Generally Accepted Accounting Principles (GAAP). In addition, loan modifications and other forbearance measures on one-to-four family residential mortgages, where the loans are “prudently worried” and “not past due or carried to non-accrued status” will not result in these loans are considered to be restructured or modified. for the purposes of risk-based capital rules.
As applies to the default reporting rules, provided that a loan is not required to be declared past due for any other reason, the fact that a loan has been canceled due to difficulties related to COVID -19 will not trigger the obligation to report the loan past due during the COVID-19 forbearance period. During the COVID-19 forbearance period, loans should also not be reported as unaccounted for, unless otherwise specified in applicable regulatory reporting instructions.
