New York State Issues Delinquent Mortgage Fee Guidance  

September 4, 2020 at 9:31 am 1 comment

Good morning folks.  Your faithful blogger is glum this morning and a little bit tired.  I wasn’t able to get to sleep after watching my New York Islanders lose to the Philadelphia Flyers in double overtime, squandering their second opportunity to make it to the semi-finals of the Bubble Stanley Cup Playoffs.  This is a big deal in the Meier household since my brother and I were in the Nassau Coliseum the last time the Islanders were in the semi-finals, a mere 27 years ago.  But I digress…

Earlier this week New York State’s Department of Financial Services (DFS) issued an industry guidance forbidding servicers from passing on to the mortgagor fees charged by localities to register delinquent homes.  DFS is requiring any servicers who may have done so, to reimburse homeowners.

Section 3 NYCRR 419 of New York’s banking regulations has been around for years but new amendments took effect in June which enhanced its scope and increased the requirements it placed on servicers.  Under section 419.5 only the following fees can be charged:

Authorized fees: A servicer may only collect a fee if it is for a service that is actually rendered to the borrower, reasonably related to the cost of rendering that service, and it meets one of the following conditions: 1. the fee is expressly authorized and clearly and conspicuously disclosed by the loan instruments and not prohibited by law; 2. the fee is expressly permitted by law and not prohibited by the loan instruments; or 3. the fee is not prohibited by law or the loan instruments and is for a specific service requested by the borrower that is assessed only after disclosure of the fee is provided to the borrower and the borrower expressly consents to pay the fee in exchange for the service.

According to DFS, some localities now charge and require the registration of mortgages that are in default.  DFS has received reports that lenders are passing on these fees to borrowers.  According to DFS this is illegal since it is not the type of fee permitted to be charged pursuant to 419.5.

As always with 419 the question I get is “Does this apply to my federal credit union?”  Well, it clearly applies to your mortgage CUSO and New York State takes the position that 419 applies to any entity servicing of a mortgage loan in New York State.

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

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1 Comment Add your own

  • 1. Ihor Makarenko  |  September 4, 2020 at 2:20 pm

    Game 7 should be a classic – Let’s go FLYERS (born in Philly)


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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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