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Financial Services Law Insights and Observations

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  • New York regulator issues guidance to regulated mortgage lenders and servicers regarding fees

    State Issues

    On September 1, the New York Department of Financial Services issued industry guidance instructing regulated mortgage lenders and servicers not to charge (or pass through to) consumers for mortgage default registration fees. The press release announcing the guidance notes that certain counties, cities, and municipalities in New York require mortgagees to pay a fee to register mortgages declared to be in default. Noting that consumers are facing financial hardship arising from the Covid-19 pandemic, the DFS guidance provides that these fees may not be passed on to consumers. Moreover, lenders and servicers who have charged consumers such fees must provide refunds, and must create a log of all borrowers who were charged such fees.

    State Issues Covid-19 New York Mortgages Mortgage Lenders Servicer Mortgage Servicing NYDFS Consumer Finance

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  • New York extends commercial foreclosure restrictions

    State Issues

    On August 20, the New York governor issued Executive Order 202.57, which extends various earlier executive orders. Among others, the executive order extends through September 19, 2020, the directive in Executive Order 202.48 relating to the initiation of a proceeding or enforcement of an eviction of any commercial tenant for nonpayment of rent or a foreclosure of any commercial mortgage for nonpayment of such mortgage.  

    State Issues Covid-19 New York Foreclosure

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  • NYDFS extends suspension of license expiration for individual insurance producers

    State Issues

    On August 6, the New York Department of Financial Services (DFS) issued a third supplement to Insurance Circular Letter No. 9, previously covered here and here.  The letter, which suspended the expiration of licenses for individual insurance producers, has been extended for an additional 30 days through September 6, 2020. All licenses that would have expired between March 25, 2020, and September 6, 2020, but for Insurance Circular Letter No. 9 (2020) and the supplements thereto will automatically expire on September 7, 2020, unless the producer completes all necessary continuing education credits, and submits a license renewal application, before September 7, 2020. The supplement notes that the extension is a “final accommodation.”

    State Issues Covid-19 New York NYDFS Licensing Insurance

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  • New York extends expiration date of licenses issued by the Division of Licensing Services

    State Issues

    Pursuant to Executive Order 202.11 (previously discussed here), the Department of State, Division of Licensing Services, announced that any license issued by the division that expires after March 27, 2020, will remain in effect until September 5, 2020. Further, the announcement notes that the Appraisal Subcommittee of the Federal Financial Institutions Examination Council has advised that appraisers within New York have been granted a 90-day deferment for meeting continuing education requirements. A license holder that is eligible to renew and does not need the extension is encouraged to renew the license. Other license holders may rely on the above extensions. 

    State Issues Covid-19 New York Licensing Appraisal Financial Institutions Examination

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  • State AGs challenge OCC’s “valid-when-made” rule

    Courts

    On July 29, the California, Illinois, and New York attorneys general filed an action in the U.S. District Court for the Northern District of California challenging the OCC’s valid-when-made rule, arguing the rule “impermissibly preempts state law.” As previously covered by a Buckley Special Alert, on June 2 the OCC issued a final rule designed to effectively reverse the Second Circuit’s 2015 Madden v. Midland Funding decision. The “true lender” rule provides that “[i]nterest on a loan that is permissible under [12 U.S.C. 85 for national bank or 12 U.S.C 1463(g)(1) for federal thrifts] shall not be affected by the sale, assignment, or other transfer of the loan.”

    The attorneys general argue in their complaint that the rule is “contrary to the plain language” of section 85 (and section 1463(g)(1)) and “contravenes the judgment of Congress,” which declined to extend preemption to non-banks. Moreover, the complaint asserts that the OCC disregarded congressional procedures for preemption by failing to perform a case-by-case review of state laws and not consulting with the CFPB before “preempting such a state consumer-protection law.” The attorneys general further contend that the OCC “failed to give meaningful consideration” to the commentary received regarding the rule essentially enabling “‘rent-a-bank’ schemes.” The result of the OCC’s actions, according to the attorneys general, is a rule that would allow “predatory lenders to evade state law by partnering with a federally chartered bank to originate loans exempt from state interest-rate caps.” These structures “have long troubled state law-enforcement efforts,” according to the complaint, and the rule will exacerbate these issues by “decreas[ing] licensing fees received by the States and increase[ing] the cost and burden of future supervisory, investigative, and law-enforcement efforts by the States.”

    The complaint requests the court declare that the OCC violated the Administrative Procedures Act in issuing the rule and hold the rule unlawful.

    Courts State Issues State Attorney General OCC Madden Fintech Interest Rate New York California Illinois

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  • District court denies interlocutory appeal request in escrow interest action

    Courts

    On July 9, the U.S. District Court for the District of Maryland denied a national bank’s request for interlocutory appeal of the court’s February decision denying the bank’s motion to dismiss an action, which alleged that the bank violated Maryland law by not paying interest on escrow sums for residential mortgages. As previously covered by InfoBytes, after the bank allegedly failed to pay interest on a consumer’s mortgage escrow account, the consumer filed suit against the bank alleging, among other things, a violation of Section 12-109 of the Maryland Consumer Protection Act (MCPA), which “requires lenders to pay interest on funds maintained in escrow on behalf of borrowers.” The court rejected the bank’s assertion that the state law is preempted by the National Bank Act (NBA) and by the OCC’s 2004 preemption regulations. The court concluded that under the Dodd-Frank Act, national banks are required to pay interest on escrow accounts when mandated by applicable state or federal law.

    The bank subsequently moved for an interlocutory appeal. In denying the bank’s request, the court explained that there was not a difference of opinion among courts as to whether the NBA preempts Maryland’s interest on escrow law. Specifically, the court noted that its “conclusion aligns with the only other two courts that have examined [the] particular question,” citing to the U.S. Court of Appeals for the Ninth Circuit’s decision in Lusnak v Bank of America and the Eastern District of New York’s decision in Hymes v. Bank of America (covered by InfoBytes here and here, respectively). After finding there is no “difference of opinion as to any ‘controlling legal issue,’” the court concluded the motion failed to satisfy the requisite elements for an interlocutory appeal.

    Courts State Issues Maryland National Bank Act Escrow Preemption Ninth Circuit Appellate New York Mortgages Dodd-Frank

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  • New York governor announces new Covid-19 rental assistance program

    State Issues

    On July 14, the New York governor announced an emergency rental assistance program that will provide direct aid to tenants who have lost income due to the Covid-19 pandemic. The program is funded through the CARES Act’s Coronavirus Relief Fund and will be administered by the New York State Homes and Community Renewal, which will begin accepting applications for assistance on July 16. To qualify for the program, applicants must meet certain eligibility requirements, including loss of income and residency requirements.

    State Issues Covid-19 New York Mortgages CARES Act

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  • New York Division of Licensing Services issues updates regarding exams

    State Issues

    The New York Department of State, Division of Licensing Services, has issued updates regarding licensing exams. The division will begin offering written exams at exam sites located in regions that are in Phase 3 of reopening beginning July 6 for candidates whose previously scheduled exams were cancelled. Exam candidates must schedule their exam date prior to appearing for an exam. Walk-in exams will resume on July 13.

    State Issues Covid-19 New York Licensing Examination

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  • NYDFS extends suspension of license expiration for individual insurance producers

    State Issues

    On July 2, the New York Department of Financial Services issued a supplement that extends the relief provided by Insurance Circular Letter No. 9, previously covered here. The letter, which, among other things, suspended the expiration of licenses for individual insurance producers, has been extended for an additional 30 days through August 7, 2020. Licenses that would have expired but for the extension will automatically expire on August 7, 2020, unless the producer has submitted a license renewal application and completed all necessary continuing education credits before that date.

    State Issues Covid-19 NYDFS New York Licensing Insurance Insurance Licensing

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  • New York Department of Financial Services adopts emergency measure to provide relief to insureds

    State Issues

    On June 28, the New York Department of Financial Services adopted an emergency measure that amends the insurance regulations to provide relief to policyholders, contract holders, and insureds who can demonstrate financial hardship relating to the Covid-19 pandemic. Among other things, the emergency measure: (i) provides that premiums remitted by a creditor will be assumed to provide coverage under a credit life or credit unemployment insurance policy for insured debtors whose payments are not more than three months overdue; (ii) provides certain protections for insureds who do not make timely premium payments to certain insurance entities; and (iii) prohibits a premium finance agency from cancelling an insurance policy due to an insured’s failure to make a timely installment payment for a period of at least 90 days, if the insured can demonstrate financial hardship due to Covid-19, and subject to the safety and soundness of the premium finance agency. 

    State Issues Covid-19 New York NYDFS Insurance Consumer Credit

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