New York Amends Contact Requirements For Certain Delinquent Borrowers – Finance and Banking

A&B ABstract: On February 24, Governor
Kathy Hochul signed into law Assembly Bill 8771 (2022 N.Y. Laws 48),
amending single point of contact requirements for certain
delinquent borrowers. What changes does the measure require for
servicer 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 60 or more
days delinquent on a “home loan”; and (b) chooses 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 required the lender (or a
servicer acting on the lender’s behalf) to provide the SPOC
within 10 business days of such request.

As amended by AB 8771 retroactive effect to its creation, the
section: (a) applies the SPOC obligation to any borrower who is 30
or more days delinquent; and (b) no longer conditions the
obligation on an affirmative request from the borrower. The amended
section also authorizes the Superintendent of Financial Services to
establish rules and regulations relating to the SPOC
requirement.

Impact of the Amendment: The amendment brings
Section 6-o of the Banking Law closer to the language of New
York’s Mortgage Loan Servicer Business Conduct
Regulations (“Part 419” of the Superintendent of
Financial Services Regulations). Since its adoption in final form
in December 2019, Rule 419.7 has required a servicer to
“assign a single point of contact to any borrower who is at
least 30 days delinquent or has requested a loss mitigation
application (or earlier at a servicer’s option).”
(Emphasis added.) As we have discussed, both requirements are in
contrast to the CFPB’s Mortgage Servicing Rules, which requires
assignment of a SPOC to borrowers who are 45 days delinquent.
However, there are a few notable distinctions.

First, Section 6-o does not define a “single point of
contact,” leaving open whether only one individual may serve
that role with respect to any particular borrower. Part 419
provides the SPOC may be either “an individual or designated
group of servicer personnel each of whom has the ability and
authority to perform the responsibilities” of the SPOC as set
forth in Rule 419.7(b). Part 419 further clarifies, however, that
if a servicer designates a group of personnel to fulfill the SPOC
responsibilities, “the servicer shall ensure that each member
of the group is knowledgeable about the borrower’s situation
and current status in the loss mitigation process, including the
content and outcome of any communication with the
borrower.”

Second, Part 419 specifies the obligations of a servicer and a
designated SPOC for a delinquent borrower. Specifically, Part
419:

• requires the SPOC to “attempt to initiate contact with the
  borrower promptly following the assignment of the single point of
  contact to the borrower;”




• specifies the responsibilities of the SPOC with respect to the
  borrower’s participation in loan modification or loss
  mitigation activities;




• requires coordination with other servicer personnel (in
  particular, to ensure that foreclosure proceedings are halted when
  required by Part 419); and




• requires the SPOC to remain assigned and available to the
  borrower until either the borrower’s account becomes current or
  the servicer determines that the borrower has exhausted all loss
  mitigation options available from or through the servicer.

Section 6-o, by contrast, does not include such specifications.
However, by granting the Superintendent rulemaking authority, the
amended section leaves open the possibility that such requirements
may be established by rule.

Finally, the requirement under Rule 419.7 provides broad
coverage, extending to any mortgage loan serviced by a servicer
within the scope of Part 419 (i.e., all first- and subordinate-lien
forward and reverse mortgage loans) where the borrower (a) is 30
days or more delinquent, or (b) has requested a loss mitigation
application. By contrast, the requirement under Section 6-o applies
to a narrower subset of residential mortgage loans. The obligation
extends only to a “home loan,” defined under Section 6-l
of the Banking law to be limited to forward mortgages secured by
one- to four-family residential property that, at origination, do
not exceed the Fannie Mae conforming loan limit (among other
conditions). Further, the obligation under Section 6-o requires
both that the borrower meet the delinquency threshold (30 or more
days) and have chosen to pursue a loan modification or other
foreclosure prevention alternative.

Takeaways: Given the distinctions between the
obligations to which a lender is subject under Section 6-o (and
which it may delegate to a servicer), and those to which a servicer
is subject under Part 419, we recommend careful review and
coordination of loss mitigation procedures to ensure the proper
fulfillment of SPOC obligations for delinquent borrowers in New
York. Further given the retroactive effective date of the measure,
the need for such review is urgent.

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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.