NY's 90-Day Mortgage Waiver Has Big Limitations

"Amid the coronavirus crisis, Governor Andrew Cuomo signed an executive order to compel state-regulated financial institutions to waive mortgage payments for 90 days but the executive order does not apply to all mortgage loans.

The two-part order, known as Executive Order 202.9 and issued on March 21, gave the state Department of Financial Services (DFS) power to require state-regulated financial entities to provide forbearance of payments towards a mortgage for any person or entity facing financial difficulties due to the COVID-19 pandemic. The mortgage relief is directed toward homeowners and does not apply to commercial loans secured by a property. The second part gave DFS the authority to restrict or modify automated teller machines (ATMs), overdraft fees and credit card late fees in light of the crisis.

On March 24, DFS released some guidance on the order and a press release that read, “the emergency regulation is not applicable to and does not affect any mortgage loans made, insured, or securitized by any agency or instrumentality of the United States, any Government Sponsored Enterprise, or a Federal Home Loan Bank, or the rights and obligations of any lender, issuer, servicer or trustee of such obligations, including servicers for the Government National Mortgage Association.”

According to DFS, many financial institutions are state-chartered and the agency has some regulatory authority over financial institutions that are not state-chartered or licensed. Institutions beyond the purview of DFS regulations are overseen by the federal government.

A little over a week ago, the White House announced foreclosures would be suspended for mortgages backed by Fannie Mae and/or Freddie Mac or Federal Housing Administration (FHA) mortgages on single-family homes. On March 18,  federal regulators announced those government-sponsored financial institutions would allow deferral of mortgage payments for up to a one year for those households that can demonstrate hardship due to the coronavirus epidemic.

As the crisis evolves, however, it’s not clear that federal players will be as aggressive in restraining the creation of delinquent mortgages as New York’s economic situation warrants.

State banks, federal banks and servicers

Nonprofit groups such as Legal Services NYC are concerned there will not be enough support for the inevitable impact on homeowners who have mortgages and face financial strain during the COVID-19 pandemic..."

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