NY Banking Department Issues Industry Letter Clarifying Section 590(2)(b-1) of Banking Law

On October 20, the New York State Banking Department (Department) issued a mortgage banking industry letter confirming that an exempt organization, such as a bank, savings bank or credit union, is considered a mortgage loan servicer when it collects principal and interest payments on loans it holds in portfolio, as well as when it services loans for third parties. Consequently, those organizations are required to notify the Banking Department of that fact and to comply with the Conduct of Business Rules for Mortgage Loan Servicers. The letter clarified the requirements of Section 590(2)(b-1) of the Banking Law, which provides that an exempt organization that makes and services mortgage loans is not required to register as a "mortgage loan servicer," though it must (i) notify the Superintendent that it is acting as a "mortgage loan servicer," and (ii) comply with any regulation applicable to mortgage loan servicers promulgated by the Banking Board or prescribed by the Superintendent with respect to mortgage loan servicer.