DFS Releases Mortgage Servicing Guidance Of Which Both Federal and State CUs Should Be Aware  

June 15, 2020 at 11:13 am 1 comment

Good morning folks.  Whether you are a state or federal credit union, if you provide mortgage loans in New York State either on behalf of your credit union or as a third party servicer, then you should take the time to read the Final Part 419 Regulation and guidance issued on Friday by New York State’s Department of Financial Services.  It will impact your mortgage operations.

3 NYCRR § 419 is a state level mortgage servicing regulation that has been in effect for more than ten years.  It has always applied to state regulated institutions and exempt organizations, but given its similarity to existing Federal requirements, it had little effect on credit union operations.

Several months ago the state proposed imposing loss mitigation and disclosure requirements, some of which go beyond those mandated by federal law.  For example, the amended regulations imposed disclosure requirements on reverse mortgages and HELOCs even though federal servicing regulations do not apply to these types of products.

Final regulations take effect today, June 15th, but on Friday DFS issued guidance in the form of FAQs further interpreting the changes.  Among the most important clarifications made by DFS is its unequivocal explanation that these regulations not only apply to exempt organizations but to any organization providing mortgages in New York, which would of course include federally chartered credit unions.  DFS explains:

“… the term “Servicer” includes any entity engaging in the servicing of a mortgage loan in the State of New York, regardless of whether such entity is required to be registered pursuant to Section 590(2)(b-1) of the New York Banking Law.

Furthermore, an entity doesn’t have to be working as a third party to be considered a servicer.

A major source of concern has been the applicability of 419 to Home Equity Lines of Credit (“HELOCs”).  The Departments clarified in its guidance that servicers who comply with 12 CFR § 1026.7, is not required to furnish to such borrower a periodic statement, pursuant to 3 NYCRR § 419.4(c).   Furthermore, with regard to the loss mitigation requirements of the state regulations, the guidance explains that they will not apply to Home Equity Lines Of Credit in second lien positions.

This is just one example of several ways that the New York state regulations are different in subtle but important ways from their federal counterparts.  Your compliance person should provide a comparison of the state and federal mandates.

The regulation takes effect today, but you have until August 14th to comply with its provisions provided that you post a notice on your website advising consumers that they will be entitled to receive the state mandated periodic statements on or shortly after that date.

Entry filed under: Compliance, Mortgage Lending, New York State, Regulatory. Tags: , , .

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1 Comment Add your own

  • 1. Linda Hoff  |  June 15, 2020 at 11:54 am

    Good Morning:

    Does the NYSCUL have any plan on putting out a comparison chart on Part 419 (state vs federal)?

    Thank you.

    Linda Hoff, NCCO, CAMS
    Compliance Officer
    Phone: 315-356-3409
    Fax: 315-336-4546

    Reply

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Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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