New York changes contact requirements for some delinquent borrowers | Alston and bird
A&B SUMMARY: On February 24, Governor Kathy Hochul signed into law Assembly Bill 8771 (2022 NY Laws 48), changing single point of contact requirements for certain delinquent borrowers. What changes does measurement require for service protocols?
New York SPOC Requirements: As created effective January 2, 2022, Section 6-o of the New York Banking Law required a lender to provide a single point of contact (“SPOC”) to a borrower who: (a) is in 60 days or more in arrears on a “home loan”; and (b) elects to pursue a loan modification or other foreclosure prevention alternative. The obligation arose in response to a written or electronic request from the borrower and obligated the lender (or a servicing agent acting on behalf of the lender) to provide the SPOC within 10 business days of such request.
As amended by AB 8771 retroactive to its creation, the section: (a) applies the SPOC requirement to any borrower who is 30 days or more in arrears; and (b) no longer makes the obligation conditional upon an affirmative request by the borrower. The amended section also authorizes the Superintendent of Financial Services to make rules and regulations relating to the SPOC requirement.
Impact of the amendment: The amendment brings Section 6-o of the Banking Act closer to the wording of the New York Mortgage Servicers Conduct of Business Regulation (“Part 419” of the Superintendent of Financial Services Regulation). Since being adopted in final form in December 2019, Rule 419.7 requires a servicer to “assign a single point of contact for any borrower who is at least 30 days past due or has requested a loss mitigation request ( or sooner at the choice of a repairer). (Emphasis ours.) As mentioned, both requirements conflict with the CFPB’s Mortgage Servicing Rules, which require the assignment of a SPOC to borrowers who are 45 years past due. days. However, there are a few notable distinctions.
First, Article 6-o does not define a “single point of contact”, leaving open the question of whether a single person can play this role with respect to a particular borrower. Part 419 provides that the SPOC may be “a designated individual or group of maintenance personnel each of whom has the capacity and authority to perform the responsibilities” of the SPOC as stated in Rule 419.7(b). Part 419, however, specifies that if an administrator appoints a group of personnel to carry out the responsibilities of the SPOC, “the administrator must ensure that each member of the group is informed of the situation of the borrower and of the state current loss mitigation process, including the content and outcome of any communication with the borrower.
Second, Part 419 specifies the obligations of an administrator and an appointed SPOC for a defaulting borrower. Specifically, Part 419:
- requires the SPOC to “attempt to contact the borrower as soon as possible after the assignment of the single point of contact to the borrower;”
- clarifies the SPOC’s responsibilities with respect to the borrower’s participation in loan modification or loss mitigation activities;
- requires coordination with other service personnel (in particular, to ensure that foreclosure proceedings are halted when required by Part 419); and
- requires that the SPOC remain assigned and available to the borrower until the borrower’s account becomes current or the servicing agent determines that the borrower has exhausted all loss mitigation options available from or through the managing agent.
Section 6-o, on the other hand, does not contain such specifications. However, by granting the Superintendent the power to make regulations, the amended section leaves open the possibility that such requirements could be established by regulation.
Finally, the requirement of Rule 419.7 provides broad coverage, extending to any Mortgage Serviced by a Servicer within the scope of Part 419 (i.e. all Term Mortgages and Senior and Subordinated Reverse Bonds) where the Borrower (a) is 30 days or more past due, or (b) has requested a Loss Mitigation Claim. In contrast, the Section 6-o requirement applies to a more limited subset of residential mortgages. The obligation extends only to a “home loan”, defined in Article 6-l of the Banking Law as being limited to term mortgages secured by a residential property of one to four families which, at the origin, do not exceed the Fannie Mae conforming loan limit (among other conditions). Further, the obligation under Section 6-o requires both that the borrower meets the delinquency threshold (30 days or more) and has elected to pursue a loan modification or other delinquency prevention alternative. foreclosure.
Take away food: In view of the distinctions between the obligations to which a lender is subject under section 6-o (and which it may delegate to a managing agent) and those to which a managing agent is subject under part 419, we recommend careful review and coordination of loss mitigation procedures to ensure proper SPOC compliance for defaulting borrowers in New York. Moreover, given the retroactive effective date of the measure, the need for such a review is urgent.