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NEW EMERGENCY BANK REGULATIONS TO ADDRESS COVID-19 IMPACTS

COVID-19On March 24, pursuant to Governor Cuomo’s Executive Order 202.9, the New York State Department of Financial Services (“DFS”) promulgated emergency regulations to provide financial relief to New Yorkers who can demonstrate financial hardship due to the novel coronavirus (“COVID-19”). The emergency regulations add part 119 to 3 NYCRR. These regulations are not applicable to and do not affect any mortgage loans made, insured, or securitized by any agency of the United States, any Government Sponsored Enterprise, or a Federal Home Loan Bank. These regulations also do not apply to commercial loans. A “regulated institution” is defined under the new regulations as any “New York regulated banking organization as defined under New York Banking Law and any New York regulated mortgage servicer entity subject to the authority of the NYS Department of Financial Services.” You can find out who DFS supervises by following this link: https://www.dfs.ny.gov/who_we_supervise.

The following relief must be granted if an individual can demonstrate financial hardship due to COVID-19:

  1. Elimination of ATM fees for ATMs that are owned or operated by a regulated institution;
  2. Elimination of any overdraft fees;
  3. Elimination of any credit card late payment fees; and

Further, regulated institutions are required to make applications for forbearance of any payment due on a residential mortgage of a property located in New York widely available to any individual residing in New York and who demonstrates financial hardship as a result of COVID-19. If such individual can demonstrate financial hardship as a result of COVID-19, regulated institutions are required to grant forbearance for a period of 90 days, subject to the safety and soundness requirements of the regulated institution.

Regulated institutions must do the following:

  1. Create an application for relief based on financial hardship as a result of COVID-19. The criteria of such application must be clear, easy to understand, and reasonably tailored to the requirements of the regulated institution to assess whether it will provide relief.
  2. Within 10 business days of the promulgation of the regulation (so by April 7, 2020), all regulated institutions must communicate to their customers how to apply for COVID-19 relief. This communication must be made by email, publication on the regulated institution’s website, mass mail, or other similarly broad communication.
  3. If an application is received that omits information the regulated institution reasonably needs to process the application, the regulated institution must promptly communicate to the applicant what information is missing and how it can be provided.
  4. A regulated institution must process requests for COVID-19 relief within 10 business days after receiving all the information it reasonably requires to process the application.
  5. A regulated institution must develop and implement procedures for expedited processing of applications (presumably less than 10 business days) for applicants who can reasonably establish an exigent circumstance and request expedited processing. The regulations do not define an exigent circumstance.
  6. All determinations must be communicated to the applicant in writing, where reasonably feasible and warranted.
  • If the application is granted, the communication must state what, if anything, the applicant needs to do to secure the requested relief.
  • If the application is denied, the communication must state the reason for denial and a statement that the applicant may file a complaint with the NYS DFS at 1-800-342-3736 or http://www.dfs.ny.gov if the applicant believes the application was wrongly denied.

Finally, in assessing whether a regulated institution has engaged in an unsafe and unsound practice by denying an application, DFS will consider the following:

  1. Adequacy of the process established to process such forbearance applications;
  2. Thoroughness of the review afforded to the application;
  3. The application of any state and federal law or regulations that would prohibit the grant of the forbearance;
  4. The safety and soundness requirements of the regulated institution; and
  5. The borrower’s:
  • Payment history;
  • Creditworthiness; and
  • Financial resources

Attorneys in our Business, Corporate & Banking Department at Lacy Katzen LLP are continuing to monitor the Governor’s executive orders, emergency regulations, and guidance from the DFS related to COVID-19 in order to provide our business and banking clients with the most up-to-date information. Please give us a call if you have any questions.

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