NYDFS clarifies Final Part 419 mortgage servicer compliance

State Issues NYDFS Mortgages Mortgage Servicing HELOC

On June 12, NYDFS issued an industry letter and a set of Frequently Asked Questions (FAQs) to mortgage servicers in response to inquiries regarding the requirements and implementation of 3 NYCRR Part 419 (Final Part 419), which governs the conduct and business practices for mortgage loan servicers operating in New York. Final Part 419 “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 FAQs answer common questions related to topics such as the definition of a servicer, applicability to reverse mortgages, small servicer exemptions, and escrow account analysis requirements for borrowers with loans in forbearance as a result of the Covid-19 pandemic. The industry letter and FAQs also highlight two specific issues concerning the application of Final Part 419 on open-end credit plans or Home Equity Lines of Credit (HELOCs):

• While Final Part 419 applies to HELOCs, NYDFS clarifies that, until further notice, a servicer that furnishes a periodic statement to a borrower in connection with an open-end credit plan or HELOC that “complies with the requirements of 12 CFR § 1026.7(a) is not required to furnish a periodic statement to such borrower pursuant to Part 419.4(c).”
• Because the requirements of 3 NYCRR §419.7 governing delinquencies and loss mitigation efforts currently only apply to open-end credit plans or HELOCs that are in first lien positions, NYDFS states it will not apply these provisions to open-end credit plans or HELOCs that are not in a first lien position.

NYDFS states that it “will continue to monitor the application of these two interpretations and their impact on consumers and may revisit them at a later date.” Final Part 419, as extended, is effective June 15.