N.Y. Comp. Codes R. & Regs. tit. 3 § 419.7

Current through Register Vol. 46, No. 45, November 2, 2024

Section 419.7 - Residential mortgage loan delinquencies and loss mitigation efforts

(a)In general.

A servicer shall make reasonable and good faith efforts, in accordance with the requirements set forth in Civil Practice Laws and Rules section 3408, to provide appropriate loss mitigation options to help borrowers avoid foreclosure consistent with usual and customary industry standards, the lawful terms of the note, mortgage or contract for the servicing of a mortgage loan, and subdivision (c) of this section.

(b)Single point of contact.

(1) Servicers shall 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).

(2) The single point of contact shall attempt to initiate contact with the borrower promptly following the assignment of the single point of contact to the borrower.

(3) The single point of contact shall have access to all records containing current information about the borrower's account, including, but not limited to, records relating to loss mitigation applications, pending foreclosure actions, documentation requests, and details of missing or incomplete documentation.

(4) The single point of contact shall have primary responsibility for coordinating the servicer's actions to resolve the borrower's delinquency or imminent risk of delinquency until all available home retention and non-foreclosure liquidation options have been exhausted and for communicating those actions to the borrower. The single point of contact's responsibilities shall include:

(i) communicating the loss mitigation options available to the borrower, the actions the borrower must take to be considered for loss mitigation, detailed information on the eligibility criteria for any given loss mitigation option, and the status of the servicer's evaluation of the borrower for loss mitigation options;

(ii) coordinating tracking and maintenance of all documents associated with loan modification or loss mitigation activities so that the borrower will not be unreasonably required to resubmit the same documented information, and that the borrower is notified promptly of the need for additional information;

(iii) being knowledgeable about the borrower's situation throughout the entire delinquency or imminent risk of delinquency resolution process; and

(iv) coordinating with other personnel (in-house or third-party provider) responsible for ensuring that a borrower is considered for all available loss mitigation options, including proprietary loss mitigation options.

(5) The single point of contact shall have direct and immediate access to personnel with the authority to stop foreclosure proceedings to comply with section 419.10(a)(4) and (5) of this Part, and an obligation to communicate immediately to such personnel any information received by the single point of contact indicating that it may be necessary or appropriate to stop a foreclosure proceeding as required by section 419.10(a)(4) and (5) of this Part.

(6) The single point of contact shall transfer a borrower to an appropriate supervisor upon the request of the borrower. Such transfer shall comply with section 419.6(e)(5) of this Part.

(7) The single point of contact shall remain assigned and available to the borrower until the borrower's account becomes current or the servicer determines that all loss mitigation options offered by, or through, the servicer have been exhausted.

(8) A servicer may assign a group of people to be a borrower's single point of contact provided that 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.

(c)Notices.

(1) A servicer shall send a late payment notice to a borrower at the borrower's last known address no later than 17 days after the payment becomes due and remains unpaid, provided that a servicer is not required to send another late payment notice until after the borrower becomes current on all payment obligations and then does not make another scheduled payment for 17 calendar days after it becomes due.

(2) No later than the 45th day of a borrower's delinquency, a servicer shall provide the borrower with a written notice that informs the borrower of:

(i) the nature and extent of the delinquency;

(ii) the servicer's loss mitigation protocols;

(iii) information on the availability of housing counseling services and that such information can be obtained by contacting the New York State Department of Financial Services Consumer Assistance Unit at 1-800-342-3736 or by visiting the department's website at www.dfs.ny.gov;

(iv) the loss mitigation options and services offered by the servicer;

(v) all a list of documents and information that a borrower must submit to be considered for any given loss mitigation option;

(vi) a toll-free telephone number and at least one other method by which the borrower may directly contact the single point of contact; and

(vii) the preferred means by which documents should be delivered to the servicer.

(3) While any borrower on a mortgage loan is a debtor in bankruptcy under title 11 of the United States Code, a servicer is exempt from the requirements of this subsection with regard to that mortgage loan.

(d)Receipt of loss mitigation application.

(1) A servicer shall exercise reasonable diligence in obtaining documents and information to complete a loss mitigation application, including but not limited to promptly following up with the borrower to obtain any information the borrower has not submitted that is necessary to make the application complete and to ensure that the servicer timely receives any necessary third-party information or approvals.

(2) If a servicer receives a loss mitigation application 45 days or more before a foreclosure sale, the servicer shall:

(i) promptly review the loss mitigation application to determine if the loss mitigation application is complete; and

(ii) notify the borrower within five business days after receiving the loss mitigation application that the servicer has received the loss mitigation application. Such notice shall:

(a) state whether the loss mitigation application is complete or incomplete; and

(b) explain the key elements of the loss mitigation process, including, as appropriate, the following:

(1) third-party approvals that may be required for the servicer to evaluate and offer a loss mitigation option;

(2) the average length of time for a decision to be made regarding the borrower's loss mitigation application; and

(3) a notification of the actions the servicer, lender or mortgagee of the mortgage may take during the loss mitigation process, such as whether the borrower may continue to receive collection letters or foreclosure notices, whether the foreclosure process will continue or whether, and to what extent collection and foreclosure will be stayed;

(c) if a servicer determines that the loss mitigation application is incomplete, the notice required by this subparagraph shall also:

(1) identify with specificity any additional documents or information that the borrower must submit to make the loss mitigation application complete and a reasonable date by which the borrower should submit the documents and information necessary to make the loss mitigation application complete;

(2) state the effect of the borrower's failure to submit all required documentation, including potential denial of the loss mitigation application, commencement of a foreclosure action, or continuation of pending foreclosure action; and

(3) state the action that the servicer will take if the borrower does not submit the documents or information necessary to make the loss mitigation application complete within the time period specified in the letter.

(e)Evaluation of loss mitigation applications.

(1) Complete loss mitigation application. If a servicer receives a complete loss mitigation application more than 37 days before a foreclosure sale, then, within 30 days of receiving the complete loss mitigation application, a servicer shall:

(i) evaluate the borrower for all loss mitigation options available to the borrower;

(ii) review any initial determination to deny a loss mitigation option. Such a review shall be performed by supervisory personnel who were not involved in making the initial determination; and

(iii) if the servicer denies the borrower's loss mitigation application, the servicer shall, upon the borrower's request, provide to the borrower the result of any evaluation of the net present value of a loss mitigation option if the servicer performed such an evaluation.

(2) Incomplete loss mitigation application.

(i) In general. A servicer shall not evade the requirement to evaluate a complete loss mitigation application for all loss mitigation options available to the borrower by offering a loss mitigation option based upon an evaluation of information provided by a borrower in connection with an incomplete loss mitigation application.

(ii) Reasonable time. A servicer may evaluate an incomplete loss mitigation application only if, despite the servicer's reasonable diligence to obtain necessary documents and information, the loss mitigation application remains incomplete for 30 days without the borrower making reasonable progress to complete the application. Any such evaluation and offer is not subject to the requirements of this section and shall not constitute an evaluation of a complete loss mitigation application for purposes of paragraph (1) of this subdivision.

(iii) Facially complete application. A loss mitigation application shall be deemed to be facially complete at the time that the borrower submits all the documents and information identified by the servicer pursuant to subparagraph (c)(2)(v) of this section or all of the documents and information specified in the notice required pursuant to subparagraph (d)(2)(ii) of this section. If the servicer reasonably determines that additional information or corrections to a previously submitted document are required to complete the application, the application shall be treated as complete for the purposes of section 419.10(a)(4) and (5) of this Part until the borrower has been given a reasonable opportunity to complete the application. If the borrower completes the application within this period, the application shall be considered complete as of the date it was facially complete for the purposes of section 419.10(a)(4) and (5) of this Part and subdivisions (f) and (g) of this section, and as of the date the application was actually a complete loss mitigation application for purposes of paragraph (1) of this subdivision. A servicer that complies with this paragraph will be deemed to have fulfilled its obligation to provide an accurate notice under subparagraph (d)(2)(ii) of this section.

(iv) Payment forbearance. Notwithstanding subparagraph (i) of this paragraph, a servicer may offer a short-term payment forbearance program to a borrower based upon an evaluation of an incomplete loss mitigation application. A servicer shall not commence a foreclosure action, and shall not move for foreclosure judgment or order of sale, or conduct a foreclosure sale, if a borrower is performing pursuant to the terms of a payment forbearance program.

(f)Notice of loss mitigation application determination.

(1) Grant of a loss mitigation application. If a servicer grants a loss mitigation application, it shall provide the borrower with a notice, in writing, that clearly and conspicuously discloses:

(i) the nature of the loss mitigation option being offered to the borrower;

(ii) consistent with subdivision (g) of this section, the amount of time the borrower has to accept or reject the offered loss mitigation option;

(iii) the material terms, costs and risks of the loss mitigation option offered and any material changes the loss mitigation option would make to the borrower's mortgage loan, including but not limited to:

(a) changes to the terms of the mortgage loan, to the extent such changes are known to the servicer, after due diligence by the servicer, at the time the notice is provided;

(b) a breakdown of the loan balance and an itemization of any fees or charges assessed; and

(c) any amounts capitalized and applied to the balance of the mortgage loan.

(2) Denial of a loss mitigation application. If a servicer denies a loss mitigation application, it shall provide the borrower with a notice, in writing, that clearly and conspicuously discloses:

(i) consistent with subdivision (h) of this section, that the borrower has the right to appeal the denial of any loan modification option, what the borrower has to do to appeal the denial, and the amount of time the borrower has to file an appeal;

(ii) the specific reasons for the servicer's determination for each such loss mitigation option, instructions on how the borrower can appeal the denial, any other loss mitigation options for which the borrower may be considered, and the following statement, in boldface type and in print no smaller than the largest print used elsewhere in the main body of the denial: If you believe your loss mitigation request has been wrongly denied, you may file a complaint with the New York State Department of Financial Services at 1-800-342-3736 or http://www.dfs.ny.gov; and

(iii) the borrower's right to obtain, upon the borrower's request, the result of any evaluation of the net present value of a loan modification performed by the servicer.

(g)Borrower response to a servicer's offer of a loss mitigation option.

(1) In general. Subject to subparagraphs (3)(ii) and (iii) of this subdivision, if a servicer receives a complete loss mitigation application 90 days or more before a foreclosure sale, the servicer may require that a borrower accept or reject an offer of a trial or permanent loss mitigation option no earlier than 30 days after the loss mitigation option is offered to the borrower. If a complete loss mitigation application is received less than 90 days before a foreclosure sale, but more than 37 days before a foreclosure sale, a servicer may require that a borrower accept or reject an offer of a loss mitigation option no earlier than 7 days after the loss mitigation option is offered to the borrower.

(2) A servicer shall respond to a request for further information concerning a loss mitigation option the servicer offered to a borrower within five business days of receiving such a request.

(3) Rejection.

(i) In general. Except as set forth in subparagraphs (ii) and (iii) of this paragraph, a servicer may deem a borrower that has not accepted an offer of a loss mitigation option within the deadline established pursuant to paragraph (1) of this subdivision to have rejected the offer.

(ii) Trial loan modification plan. A borrower who does not satisfy the servicer's requirements for accepting a trial loan modification plan, but submits the payments that would be owed pursuant to any such plan within the deadline established pursuant to paragraph (1) of this subdivision, shall be provided a reasonable period of time to fulfill any remaining requirements for acceptance of the trial loan modification plan beyond the deadline established pursuant to paragraph (1) of this subdivision. The servicer shall notify the borrower of any such remaining requirements within five business days of receiving such a payment.

(iii) Interaction with appeal process. If a borrower appeals a servicer's determination to deny the borrower's loss mitigation application for any loss mitigation option pursuant to subdivision (h) of this section, the borrower's deadline for accepting a loss mitigation option offered pursuant to subparagraph (f)(1)(ii) of this section shall be extended until 14 days after the servicer provides the notice required pursuant to paragraph (h)(4) of this section.

(h)Appeal process.

(1) Appeal process required for loss mitigation denials. If a servicer receives a complete loss mitigation application 90 days or more before a foreclosure sale or before the servicer commences a foreclosure action against a borrower, a servicer shall process an appeal of the servicer's determination to deny a borrower's loss mitigation application for any loss mitigation option.

(2) Deadlines. A servicer shall permit a borrower to appeal a denial of a loss mitigation application within 14 days of the date on which the notice required by subparagraph (e)(1)(iii) of this section was postmarked.

(3) Independent evaluation. An appeal shall be reviewed by different personnel than those responsible for evaluating the borrower's complete loss mitigation application.

(4) Appeal determination. Within 30 days of receiving a timely appeal, the servicer shall provide a notice to the borrower stating the servicer's determination of whether the servicer will offer the borrower a loss mitigation option based upon the appeal and, if applicable, how long the borrower has to accept or reject such an offer or a prior offer of a loss mitigation option. A servicer may require that a borrower accept or reject an offer of a loss mitigation option after an appeal no earlier than 14 days after the servicer provides the notice to a borrower. A servicer's determination under this paragraph is not subject to any further appeal.

(i)Borrower programs and counseling.

A servicer shall take reasonable steps to ensure that its staff is aware of programs designed to help borrowers avoid foreclosure or resolve delinquency. A servicer shall make available to borrowers who are at least 60 days delinquent and borrowers who the servicer has reason to believe are experiencing a financial hardship and are in imminent risk of delinquency a list of government approved not-for-profit housing counselors in the homeowner's geographic area as listed on the Department of Financial Services website (www.dfs.ny.gov) or the Division of Homes and Community Renewal's website (www.hcr.ny.gov).

(j)Waiver of legal claims and defenses.

A servicer shall not require a homeowner to waive legal claims and defenses as a condition of a loan modification, reinstatement, forbearance or repayment plan.

(k)Servicer protocols.

A servicer shall maintain a system for servicing delinquent loans that includes at a minimum the following:

(1) an accounting system that promptly alerts the servicer that a mortgage is delinquent;

(2) procedures for identifying and working with borrowers who are at risk of foreclosure or delinquency in order to help such borrowers, including procedures for making borrowers aware of programs and counseling as set forth above;

(3) procedures and controls for sending delinquency notices, assessing late fees, handling partial payments, maintaining collection histories, and reporting delinquencies to credit bureaus;

(4) guidelines for analyzing delinquencies and applicable loss mitigation options in a consistent and systematic manner; and

(5) procedures for management review and evaluation of decisions regarding appropriate loss mitigation options or commencement of foreclosure actions.

N.Y. Comp. Codes R. & Regs. Tit. 3 § 419.7

Amended New York State Register December 18, 2019/Volume XLI, Issue 51, eff. 12/18/2019