Alston & Bird Consumer Finance Blog

Mortgage Servicing

Massachusetts Enacts Emergency COVID-19 Measure Addressing Residential Mortgage Foreclosure Moratoria, Forbearance, Evictions, Reverse Mortgage Counseling

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A&B Abstract:

On April 20, 2020, Massachusetts Governor, Charlie Baker, signed into law HB 4647 (2020 Mass. Acts 65), an emergency measure, effective immediately, providing for mortgage forbearances and a moratorium on evictions and foreclosures during the COVID-19 emergency. This measure also waives the in-person counseling requirement for reverse mortgage loans.  This law follows guidance issued by the Division of Banks on March 25, 2020, setting forth the Division’s expectations of mortgage servicers to provide relief to borrowers adversely impacted by the COVID-19 pandemic.

Forbearance

The emergency measure requires a creditor or mortgagee to grant a forbearance on a mortgage loan for residential property if the borrower submits a request to the servicer affirming that the borrower has experienced a COVID-19 hardship, subject to the following terms:

  • the forbearance shall not be for more than 180 days;
  • no fees, penalties or interest beyond the amounts scheduled and calculated as if the borrower made all contractual payments on time and in full under the mortgage contract shall accrue during the forbearance;
  • a payment subject to the forbearance shall be added to the end of the term of the loan, unless otherwise agreed to by the borrower and mortgagee;
  • a borrower and mortgagee are not prohibited from entering into an alternative payment agreement for the mortgage payments subject to forbearance;
  • the mortgagee must not furnish negative mortgage payment information to a consumer reporting agency related to forborne mortgage payments; and
  • a creditor or mortgagee is not required to grant this forbearance if the borrower’s request is made after the expiration of this provision of the emergency measure (the sooner of 120 days from its effective date or 45 days the Governor’s COVID-19 emergency declaration has been lifted).

For purposes of this section, “residential property” includes real property located in the commonwealth, on which there is a dwelling house with accommodations for 4 or fewer separate households that is the borrower’s principal residence; excluding investment property, property taken, in whole or in part, as collateral for a commercial loan, and property subject to condemnation or receivership.

This forbearance provision is similar to a federal Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) forbearance, with some notably differences.  First, this provision is not limited to federally backed mortgage loans.  Second, the forborne payments are to be tacked on to the end of the mortgage term unless otherwise agreed to by the parties.  Last, the terms differ in two respects.  First, unlike the CARES Act, Massachusetts does not require an additional 180 extension of the forbearance.  Second, the requirement for a servicer to offer a forbearance will remain in effect until the Governor’s COVID-19 emergency declaration is lifted, which at this point is unknown.

Foreclosure

For purposes of foreclosure of “residential property,” as that term is defined above, the emergency measure  imposes a foreclosure moratorium, meaning a mortgagee (or a person acting in the name of a mortgagee) is prohibited from:

  • causing a notice of foreclosure sale to be published;
  • exercising a power of sale;
  • initiating a judicial or nonjudicial foreclosure process; or
  • filing a complaint to determine the military status of the borrower under the federal Servicemembers Civil Relief Act.

Vacant or abandoned properties are expressly excluded from this foreclosure moratorium.  The foreclosure moratorium became effective immediately and expires after the sooner of 120 days or 45 days after the COVID-19 emergency declaration has been lifted.  This moratorium appears broader than the moratorium imposed under the CARES Act in that it likely will extend beyond the CARES Act’s moratorium of May 18, 2020 and that it is not limited to “federally backed” loans. Note, most residential mortgage foreclosures are nonjudicial in Massachusetts and begin by sending a delinquent borrower a notice of default and right to cure as required by Mass. General Laws chapter 244, Section 35A.  It is likely that such notice could be viewed as initiating a foreclosure, and thus not allowed during this foreclosure moratorium.

Evictions

 With respect to evictions, the emergency measure provides as follows:

  • notwithstanding any law, rule, regulation or order to the contrary, a landlord or owner of a property shall not, for purposes of a “non-essential eviction” for a residential dwelling unit, terminate a tenancy or send any notice requesting or demanding that a tenant vacate the premises;
  • a landlord shall not impose a late fee for non-payment of rent for a residential dwelling unit;
  • a landlord shall not furnish rental payment data to a consumer reporting agency related to the non-payment of rent if, not later than 30 days after the missed rent payment, the tenant provides notice and documentation to the landlord that the non-payment of rent was due to a COVID-19 financial impact;
  • subject to certain conditions, a lessor who received rent in advance for the last month of tenancy pursuant to Mass. Gen. Law chapter 186, § 15B, may access and utilize the funds received in advance for certain enumerated uses; and
  • nothing in the emergency measure shall be construed to relieve a tenant from the obligation to pay rent or restrict a landlord’s ability to recover rent.

Related to residential dwelling units, a “non-essential eviction” is an eviction: (i) for non-payment of rent, (ii) resulting from a foreclosure, (iii) for no fault or cause, or (iv) for cause that does not involve allegations of: (a) criminal activity that may impact the health and safety of other residents, health care workers, emergency personnel, persons lawfully on the property or general public, or (b) lease violations that may impact the health and safety of other residents, health care workers, emergency personal, persons lawfully on the subject property or the general public. The Massachusetts executive office of housing and economic development has authority to issue emergency regulations to implement this section and develop forms for notice and documentation to a landlord that the non-payment of rent was due to COVID.  Also note that the measure contains similar restrictions for landlords of small business premises and limits the ability of a court, sheriff or others to process or enforce non-essential evictions.

Temporary waiver of In-Person Counseling for Reverse Mortgage

Massachusetts is temporarily waiving the in-person counseling requirement set forth in Mass. Gen. Law chapter 167E, § 7A and chapter 171, § 65C1/2 for reverse mortgage loans during the state-declared COVID-19 emergency and until such emergency has been lifted.  In lieu of in-person counseling, the requirement is satisfied by a written certification from a counselor with a third-party organization indicating that a borrower has received counseling via a synchronous, real-time videoconferencing or telephone counseling, provided that the counselor is approved by the executive office of elder affairs for purposes of such counseling.  The measure does not specifically address the reverse mortgage counseling regulation set forth in 209 CMR 55.04. However, given that the regulation is provided under the statutory authority cited above, there is reason to believe that it should also be covered by this temporary waiver.

Takeaway

In addition to ensuring compliance with the federal CARES Act, mortgage servicers need to monitor newly enacted state measures responding to the COVID-19 pandemic and develop policies and procedures to ensure compliance.

Regulatory Agencies Issue Mortgage Servicing Guidance and FAQs for the CARES Act

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Our Financial Services & Products Group answers some questions mortgage servicers might have about how federal and state agencies will be flexible with enforcement under the CARES Act.

  • What is the “covered period” for purposes of Section 4022?
  • Can a servicer require a borrower to provide a written attestation?
  • Should servicers report the status of loans on forbearance?
  • What is being done to address mortgage servicer liquidity concerns?

Alston & Bird has formed a multidisciplinary task force to advise clients on the business and legal implications of the coronavirus (COVID-19).

Key Provisions of the CARES Act Affecting Mortgage Servicers

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A&B ABstract:

In response to COVID-19, on Friday March 28, 2020, President Trump signed into law the “Coronavirus Aid, Relief, and Economic Security Act” (the “CARES Act”).  This is a monumental $2 trillion stimulus package intended to provide financial relief to businesses, individuals and public institutions affected by the coronavirus.  The CARES Act addresses sweeping economic stabilization, small business lending and other direct financial support, tax provisions, healthcare, or other provisions. Below, we summarize the key provisions of the CARES Act affecting residential mortgage servicers.

Section 4021: Credit Protection During COVID-19

Section 4021 of the CARES Act amends the Fair Credit Reporting Act (15 U.S.C. 1681s-2(a)(1)) by adding a new section providing special instruction for reporting consumer credit information to credit reporting agencies during the COVID-19 pandemic.

Specifically, this section provides that if a creditor or other furnisher offers an “accommodation” to a consumer affected by the COVID-19 pandemic in connection with a credit obligation or account, and the consumer satisfies the conditions of such accommodation, the furnisher must report the credit obligation or account as “current.” An “accommodation” as defined in this section includes relief granted to impacted consumers such as an agreement to defer a payment, make a partial payment, grant forbearance, or modify a loan or contract.

In the event that the credit obligation or account was delinquent before the accommodation, the furnisher is required to maintain the delinquent status during the effective period of the accommodation, or, if the consumer brings the account current during such period, then to report the account as current. The reporting requirements set forth in Section 4021 do not apply to charged-off accounts.

This section applies from January 31, 2020 through the later of 120 days after: (i) enactment of this section, or (ii) termination of the national emergency declaration.[1]

A&B Takeaway: It is important to recognize that this provision applies to borrower’s payment history starting on January 31, 2020.  It also is important to recognize that state laws may also address the furnishing of credit information.  To the extent the state law is inconsistent, it is generally preempted pursuant to section 1681t(b)(1)(C) of FCRA, with specific carve outs for California and Massachusetts law that may require specific attention.

Section 4022:  Foreclosure Moratorium and Consumer Right to Request Forbearance

Section 4022 of the CARES Act grants forbearance rights and protection against foreclosure[2] to borrowers with a “federally backed mortgage loan”[3] including certain first or subordinate lien loans designed principally for the occupancy of from 1- to 4- families.  Loans secured by greater than 4 families are addressed separately in Section 4023 of the CARES Act.

During the covered period, a borrower with a federally backed mortgage loan who is experiencing a financial hardship that is due, directly or indirectly, to the COVID-19 emergency, may request forbearance on their loan, regardless of delinquency status, by submitting a request to their servicer and affirming that they are experiencing a financial hardship during the COVID-19 emergency.

Upon receiving a request for forbearance, a servicer must provide forbearance for up to 180 days, with no additional documentation required, other than the borrower’s attestation to a financial hardship caused by the COVID-19 emergency, and with no fees, penalties, or interest (beyond the amounts scheduled or calculated as if the borrower made all contractual payments on time and in full under the terms of the mortgage contract) charged to the borrower in connection therewith.  The forbearance period may be extended for up to an additional 180 days, at the request of the borrower, provided that the borrower’s request is made during the covered period.  The initial or extended period may also be shortened at the borrower’s request.

Additionally, except with respect to vacant or abandoned properties, a servicer of a federally backed mortgage loan may not initiate any judicial or non-judicial foreclosure process, move for a foreclosure judgment or order of sale, or execute a foreclosure-related eviction or foreclosure sale for at least 60 days from March 18, 2020.

A&B Takeaway: While the law provides much needed relief for borrowers impacted by the COVID-19 pandemic, it leaves a number of questions unanswered.  First, the law does not appear to cover mortgage loans that are not federally insured or guaranteed or otherwise purchased or securitized by Fannie Mae or Freddie Mac.  Thus, it is unclear whether a servicer of a non-federally backed mortgage loan would need to comply.  Second, the law is silent as to whether borrower requests must be in writing, suggesting that oral requests for forbearance must be considered.[4] Third, while Section 4022 does not expressly define the “covered period,” Subsection (b)(1)(B) does provide that the borrower must attest to a financial hardship during the “COVID-19 emergency,” suggesting that borrower requests received outside of the “COVID-19 emergency” would not require the granting of forbearance.  Subsection (a)(1) defines “COVID-19 emergency” as the national emergency declared by President Trump on March 13, 2020 by Executive Order pursuant to the National Emergencies Act (“NEA”). Under the NEA, unless the President requests an extension, an emergency declaration terminates if: (1) the President issues a proclamation rescinding it, (2) Congress, having met no later than six months after date of issuance to consider a joint resolution of termination, passes such joint resolution, or (3) automatically one year following date of issuance.[5] Note that the national emergency declared by President Trump was made retroactive to March 1, 2020.  Accordingly, there appears to be an implied covered period associated with this section, namely, March 1, 2020 until the earlier of February 28, 2021 or action by either the President or Congress to terminate the emergency declaration, unless the President requests an extension in accordance with the NEA.  Fourth, while Section 4022 provides that a servicer must grant forbearance for “up to 180 days,” it does not specify how a servicer is to determine the length of the forbearance period.  Thus, it is unclear whether a servicer must simply rely on a borrower’s attestation to determine the length of the initial forbearance (and any extensions thereto) or whether the servicer has some discretion to provide an initial (or extended) forbearance period of less than 180 days.  Finally, we note that the FHA, VA, USDA, Fannie Mae and Freddie Mac (collectively, the “Federal Agencies/GSEs”) all issued earlier guidance imposing a 60-day foreclosure moratoria in addition to guidance encouraging mortgage servicers to consider forbearance and other relief for borrowers affected by COVID-19.  While the CARES Act appears to provide similar foreclosure protections to those mandated by the Federal Agencies/GSEs, mortgage servicers should carefully review and compare the existing guidance to the protections under the CARES Act to determine their obligations with respect to impacted borrowers.

Section 4024: Temporary Moratorium on Eviction Filings

Section 4024 provides for a temporary moratorium on eviction filings for tenants of certain single- and multi-family properties.  Specifically, during the 120-day period following the enactment of the CARES Act (the “Moratorium Period”), the lessor of a “covered dwelling”[6] may not: (1) make, or cause to be made, any filing with the court of jurisdiction to initiate a legal action to recover possession of the covered dwelling from the tenant for nonpayment of rent or other fees or charges; or (2) charge fees, penalties, or other charges to the tenant related to such nonpayment of rent.

The lessor of a covered dwelling unit (1) may not require the tenant to vacate the covered dwelling unit until 30 days have passed from the date on which the lessor provides the tenant with a notice to vacate; and (2) may not issue a notice to vacate until after the expiration of the Moratorium Period.

A&B Takeaway:

Numerous states and localities also have issued temporary moratoriums on eviction files that provide greater protections to tenants.

[1] We note that this raises some unique questions regarding preemption of certain state consumer laws regarding consumer credit reporting.

[2] Note that, while outside the scope of this summary, Section 4023 of the CARES Act addresses foreclosure moratoria for certain multifamily loans.

[3] “Federally backed mortgage loan” means any loan which is secured by a first or subordinate lien on residential real property (including individual units of condominiums and cooperatives) designed principally for the occupancy of from 1- to 4- families that is (A) insured by the Federal Housing Administration under title II of the National Housing Act (12 U.S.C. 1707 et seq.); (B) insured under section 255 of the National Housing Act (12 U.S.C. 1715z-20); (C) guaranteed under section 184 or 184A of the Housing and Community Development Act of 1992 (12 U.S.C. 1715z-13, 1715z-13b); (D) guaranteed or insured by the Department of Veterans Affairs; (E) guaranteed or insured by the Department of Agriculture; (F) made by the Department of Agriculture; or (G) purchased or securitized by the Federal Home Loan Mortgage Corporation (i.e., Freddie Mac) or the Federal National Mortgage Association (i.e., Fannie Mae).

[4] Note that Section 4023 of the CARES Act provides that “a multifamily borrower…may submit an oral or written request for forbearance,” further suggesting that oral requests must be considered under Section 4022.

[5] See 50 U.S.C. §§ 1622(a)-(b), (d).

[6] The term “covered dwelling” means a dwelling that (A) is occupied by a tenant (i) pursuant to a residential lease; or (ii) without a lease or with a lease terminable under State law; and (B) is on or in a covered property.  The term “dwelling” (A) has the meaning given the term in 42 U.S.C. 3602; and (B) includes houses and dwellings described in 42 U.S.C. 3603(b).  The term “covered property” means any property that (A) participates in (i) a covered housing program (as defined in 34 U.S.C. 12491(a)); or (ii) the rural housing voucher program under 42 U.S.C. 1490r; or (B) has a (i) Federally backed mortgage loan; or (ii) Federally backed multifamily mortgage loan.

Federal and State Guidance Regarding the COVID-19 Pandemic

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A&B Abstract:

The Alston & Bird Consumer Finance team recognizes that this is a period of great uncertainty both for the nation and our clients. We have received numerous questions and concerns regarding what federal and state regulators are doing in light of the COVID-19 pandemic and how their response may affect day-to-day business. We have been monitoring both the federal and state guidance that has been released in response to the COVID-19 pandemic and have provided a summary of what has been released thus far.  We are continuing to monitor for new developments and will update this blog post accordingly.

Federal Guidance

Federal Administrative Agencies:

  • HUD/FHA: On March 18, 2020, HUD released Mortgage Letter 2020-4, which placed a foreclosure and eviction moratorium on all FHA-insured Single Family mortgages for a period of 60 days. The moratorium applies both to the initiation of foreclosures and to the completion of foreclosures in process.  Similarly, evictions of persons from properties secured by FHA-insured single-family mortgages are suspended for 60 days.  Deadlines of the first legal action and reasonable diligence timelines for Home Equity Conversion Mortgages are extended by 60 days.  In light of the broad language of the Mortgagee Letter, it does not appear that HUD intended to carve out vacant and abandoned properties from the foreclosure moratorium.  HUD has informally confirmed this interpretation.
  • USDA: On March 19, 2020, the USDA issued SFH Guaranteed Servicing Notice (March 19, 2019) which, effective immediately, provides that borrowers with USDA guaranteed loans are subject to a moratorium on foreclosure for a period of 60 days. The moratorium applies to the initiation of foreclosures and to the completion of foreclosures in process.  In addition, deadlines of the first legal action and reasonable diligence timelines are extended by 60 days. Similarly, evictions of persons from properties secured by USDA guaranteed loans are also suspended for a period of 60 days.
  • VA: On March 18, 2020, the VA issued Circular 26-20-8, which strongly encourages loan holders to establish a sixty-day moratorium beginning March 18, 2020, on completing pending foreclosures or imitating new foreclosures on loans.  Additionally, due to the widespread impact of COVID-19, loan holders should consider the impact of completing an eviction action when choosing to retain the property instead of conveying to VA.  VA requests holders not to expose Veterans and their families to additional risk through an eviction, if at all feasible.  Previously, on March 16, 2020, the VA issued Circular 26-20-7, which provides, in relevant part, that (1) lenders should have continuity of operation plans in place to support its ongoing ability to conduct business operations in the event of an interruption to business operations and processes; (2) servicers may employ the following relief to veterans impacted by COVID-19: (a) forbearance, (b) late charge waivers on affected loans, and (c) suspension of credit bureau reporting on affected loans; and (3) appraisers should continue to conduct business as outlined in Chapter 10 of the M26-7, Lenders Handbook.

Federal Government-Sponsored Entities:

  • Fannie Mae: Fannie Mae released a Bulletin for borrowers detailing its response to the COVID-19. Fannie Mae has placed a moratorium on foreclosure sales and evictions for sixty (60) days. In conjunction with the Bulletin, Fannie Mae also issued Lender Letter LL-2020-02, which sets forth guidance for lenders in responding to COVID-19.  The letter provides guidance for lenders concerning topics such as (1) forbearance plan eligibility for borrowers, (2) evaluating borrowers for mortgage modifications, (3) credit bureau reporting, and (4) suspension of foreclosure sales.
  • Freddie Mac: Freddie Mac released a Bulletin for mortgage servicers detailing its response to the COVID-19 and new guidelines for Freddie Mac mortgage servicers during the COVID-19 pandemic. Similar to Fannie Mae, the Bulletin provides guidance for lenders concerning topics such as (1) forbearance plan eligibility for borrowers, (2) evaluating borrowers for mortgage modifications, (3) credit bureau reporting, and (4) suspension of foreclosure sales.

State Guidance

State Legislatures:

  • Enacted Legislation and Executive Orders
    • District of Columbia: On March 17, 2020 Mayor Bowser signed the COVID-19 Response Emergency Amendment Act of 2020, which expires on June 15, 2020. The act provides for, among other things, a prohibition on evictions for as long D.C. is under a public health emergency.
    • New Hampshire: On March 17, 2020, New Hampshire Governor Christopher Sununu issued Emergency Order #4 pursuant to Executive Order 2020-04, which (1) prohibits an owner of non-restricted property or restricted property, as those terms are defined in RSA 540:1-a, from initiating eviction proceedings under RSA 540, and (2) prohibits all judicial and non-judicial foreclosure actions under RSA 479 or any other applicable law, rule or regulation, during the State of Emergency declared in Executive Order 2020-04.
    • New Jersey: The New Jersey Legislature passed Assembly Bill 3859, which allows the New Jersey governor to issue an executive order during a Public Health Emergency, pursuant to the New Jersey Emergency Health Powers Act, prohibiting the removal of any lessee, tenant, or homeowner from a residential property as the result of an eviction or foreclosure action.  Governor Philip Murphy subsequently issued Executive Order No. 106, which prohibits any lessee, tenant, homeowner or any other person from being removed from a residential property as a result of an eviction or foreclosure proceeding.
    • Kansas: On March 17, 2020, Governor Laura Kelly issued Executive Order No. 20-06, which orders all financial institutions operating in Kansas to temporarily suspend the initiation of any mortgage foreclosure efforts or judicial proceedings and any commercial or residential eviction efforts or judicial proceedings until May 1, 2020.
  • Pending Legislation
    • Massachusetts: The Massachusetts Legislature is considering House Docket No. 4935, which, if enacted, would impose a moratorium on evictions and foreclosures during the COVID-19 emergency.
    • Virginia: Currently, Virginia House Bill 340 is on Governor Northam’s desk, and he has until April 11th to take action on the bill. If passed, the bill would provide foreclosure and eviction protections for federal workers upon the closure of the federal government.

State Regulators:

In addition to state legislation and executive order, state regulators across the country have released guidance to regulated entities concerning the COVD-19 pandemic and indicating what the state regulators are doing in response. The Nationwide Multistate Licensing System (“NMLS”) has compiled state regulator guidance issued in response to COVID-19. The NMLS has posted this document to their website, and it is updated regularly. Below, we have included a summary of the information released by state regulators as of (March 20, 2020):

  • Alaska Department of Commerce, Community & Economic Development (“Department”): The Department posted guidance on its website stating that licensed mortgage-broker lenders may require licensed mortgage loan originators to work and undertaken licensed activities from home. The Department stated that it would not take administrative or other punitive action against a licensed mortgage loan originator or the sponsoring licensed company if the mortgage loan originator conducts activities requiring licensure from home. This guidance does not have an expiration date but is subject to revision.
  • Alabama State Banking Department (“Department”): The Department released guidance for any entity licensed by the Department. The Department instructed that licensees need to comply with all applicable statutes, regulations, and data security regulations. The Department noted that not all licenses may be able to work from home if their home location does comply with the applicable statutes, regulations, and data security regulations. This guidance does not have an expiration date but is subject to revision.
  • Arkansas Securities Department (“Department”): The Department released guidance for licensed mortgage loan companies, mortgage loan officers, and branch managers. The Department stated that mortgage loan companies may have mortgage loan officers work from home at unlicensed locations as long as state and federal data security standards are upkept. This guidance is in effect until June 1, 2020 but is subject to revision.
  • Colorado Department of Real Estate (“Department”): The Department released guidance that since Colorado law is silent as to the location at which mortgage loan originators are required to work. Therefore, the Department instructed that licensed mortgage loan originators may work from home. This guidance does not have an expiration date but is subject to revision.
  • Connecticut Department of Banking (“Department”): The Department released guidance for all consumer credit licensees. The Department is allowing consumer credit licensees to work from home during the CORVID-19 pandemic as long as the licensee follows applicable law, notifies the Department in writing, and that no licensable activity can take place at home with a member of the public. This guidance is in effect until April 30, 2020.
  • Iowa Division of Banking (“Division”): The Division released guidance for all entities that it regulates. The Division stated that all licensees may work from home during the CORVID-19 pandemic even if their home is an unlicensed office as long as appropriate data security measures are put into place. This guidance does not have an expiration date but is subject to revision.
  • Idaho Department of Finance (“Department”): The Department released guidance for all entities that it regulates. The Department is allowing licensed and registered entities to allow their employees to work from home even if that location is not a licensed location. Licensed and registered entities must keep up data security, may not advertise the unlicensed location as a licensed location, and may not meet with consumers or have consumers come to an unlicensed location. This guidance is in effect until June 30, 2020 but is subject to revision.
  • Indiana Department of Financial Institutions (“DFI”): The DFI issued temporary guidance offering licensees the ability to take precautions deemed necessary to avoid the risk of exposure or to comply with requirements of voluntary or mandated quarantines and is effective through June 30, 2020, unless otherwise modified or withdrawn.
  • Kansas Office of the State Bank Commissioner (“Commissioner”): The Commissioner released guidance for all entities that it regulates. The Commissioner is allowing licensed and registered entities to allow employees to work from home even if that location is not a licensed location. Licensed and registered entities must keep up adequate data security protection and may not take physical records out of the licensed location if they have confidential information. This guidance does not have an expiration date but is subject to revision.
  • Kentucky Department of Financial Institutions (“DFI”): The DFI released guidance to Kentucky-chartered financial institutions recommending that such institutions take certain actions in response to the COVID-19 pandemic.  Such actions include, among others, (1) working with customers affected by the coronavirus to meet their financial needs, which may include waiving overdraft and/or minimum balance fees, restructuring existing loans, extending loan repayment terms, and easing terms for new loans, (2) managing COVID-19 related staffing issues, and (3) making sure business continuity plans include pandemic planning.
  • Louisiana Office of Financial Institutions Non-Depository Division (“Division”): The Division released guidance for all licensed mortgage lenders, brokers, and originators. The Division is allowing entities to close their licensed locations and work from home, but entities that do so much provide the Division with notice of the new location. This guidance is in effect until April 9, 2020, but is subject to revision.
  • Massachusetts Division of Banks (“Division”): The Division released guidance for all licensed entities. The Division is allowing licensed entities to work from home as long as the unlicensed location is not advertised to the public and licensed entities do not meet with consumers at unlicensed locations. This guidance does not have an expiration date but is subject to revision.
  • Maryland Commissioner of Financial Regulation (“Commissioner”): The Commissioner released guidance for all licensed mortgage brokers, lenders, and servicers. The Commissioner is allowing licensed mortgage brokers, lenders, and servicers to work from home provided that the work would not require the location to be licensed as a branch office under Maryland law. This guidance does not have an expiration date but is subject to revision.  In addition, the Commissioner issued an Industry Advisory on March 19, 2020, advising the industry of Maryland Court of Appeals Chief Judge Mary Ellen Barbera’s March 18, 2020 order, which immediately stays all residential foreclosure and eviction actions in Maryland.
  • Michigan Department of Insurance and Financial Services (“DIFS”): The DIFS is seeking information regarding responses to the COVID-19 pandemic from all Michigan consumer finance licensees and registrants.  Responses were due on Friday, March 20, 2020 by 5:00pm and were required to address  whether (1) the licensee/registrant had temporarily or permanently reduced any services provided in their office locations or by your business, (2) whether the licensee/registrant had implemented a program to allow staff to work remotely and, if so, certain additional information about such program, (3) whether and in what way the licensee/registrant had communicated with their customers to provide them with information regarding any changes the licensee/registrant had implemented in response to the pandemic and how those changes may affect them, and (4) whether the licensee/registrant had proactively reached out to their customers to provide them with information concerning what they should do if they are having trouble making their loan payment.
  • Minnesota Department of Commerce (“Department”): The Department has issued separate guidance to Minnesota Industrial Loan & Thrift Companies, Licensed Mortgage Originators and Servicers (companies and individuals), Licensed Non-Depository Financial Institutions, and Regulated Loan Companies.  The guidance is intend to address certain issues and questions related to changes in branch locations or employees working from home as a result of the COVID-19 pandemic.
  • Mississippi Department of Banking and Consumer Finance (“DBCF”): The DBCF released guidance for licensed mortgage loan originators. The DBCF is allowing licensed mortgage loan originators to work from home provided that data security measures are put in place and the licensed mortgage loan originator does not have consumers meet with the licensed mortgage loan originator at their home. This guidance does not have an expiration date but is subject to revision. The DBCF also issued separate guidance to Mississippi Mortgage Licensees and Consumer Finance Licensees regarding industry pandemic preparedness and outline flexibility in DBCF processes in response to the COVID-19 pandemic.
  • Montana Division of Banking and Financial Institutions (“DBFI”): On March 19, 2020, the DBFI issued a Supervisory Memorandum on Operations During Novel Coronavirus Situation, in which the DBFI provides the industry with answers to FAQs regarding preferred methods of communication as well as notification requirements for branch and loan production office closures and hours changes during the COVID-19 pandemic.
  • Nebraska Department of Baking and Finance (“DBF”): The DBF released guidance for licensed mortgage bankers and sponsored/licensed mortgage loan originators. The DBF is allowing mortgage bankers and mortgage loan originators to work from home provided that they notify the DBF and the DBF approves the new location. All physical documents must remain at a licensed location, but licensees may access information digitally. This guidance is in effect until December 31, 2020 but is subject to revision.
  • New Hampshire Banking Department (“Department”): The Department released guidance for licensed mortgage loan originators. The Department is allowing licensed mortgage loan originators to work from home even if that location further than 100 miles from their supervisory office as would otherwise be required under New Hampshire law. This guidance does not have an expiration date but is subject to revision.
  • New Mexico Financial Institutions Division (“Division”): The Division released guidance for all mortgage licensees. The Division is allowing all mortgage licensees to work from home provided that data security measures are put in place and no mortgage licensee advertise from or meet with consumers from their home if it is an unlicensed location. This guidance is in effect until May 31, 2020 but is subject to revision.
  • Nevada Division of Mortgage Lending (“Division”): The Division released guidance for all licensed mortgage companies and mortgage loan originators. The Division is allowing licensed mortgage companies and mortgage loan originators to work from home even if it would be considered an unlicensed location. This guidance is in effect until May 31, 2020 but is subject to revision.
  • New York Department of Financial Services (“NY DFS”): The NY DFS has asked licensees to submit plans to the NY DFS on how they plan to address the CORVID-19 pandemic. In addition, the NY DFS issued guidance to New York State regulated and exempt mortgage servicers regarding support for borrowers impacted by COVID-19.
  • Oklahoma Department of Consumer Credit (“Department”): The Department has released guidance for licensed mortgage loan originators and their employees. The Department has stated that licensed mortgage loan originators and their employees may work from home as long as they put in place appropriate data security measures. This guidance is in effect until April 30, 2020 but is subject to revision.
  • Oregon Division of Financial Regulation (“Division”): The Division has released guidance for all licensed entities. Licensed entities can work from home provided that the entity provides notice to the department, the entity has procedures in place for data security and more broadly for working from home, and no consumers at met with at unlicensed locations. Mortgage loan originators must keep all physical records at a licensed location. This guidance is in effect until April 30, 2020 but is subject to revision.
  • Pennsylvania Department of Banking and Securities (“Department”): The Department issued FAQs related to compliance with Governor Wolf’s Order that non-life-sustaining businesses shut down their physical operations.
  • Puerto Rico Office of the Commissioner of Financial Institutions (“OCFI”): The OCFI issued Circular Letter CIF Number CC-2020-002 to all financial institutions required to file reports with the OCFI, which extends the deadlines for filing such reports in light of the governmental closure ordered by Governor Garced, due to the State of Emergency declared in response to COVID-19.
  • Rhode Island Division of Banking (“Division”): The Division has released guidance for licensed mortgage loan originators, mortgage lenders, loan brokers, and exempt company registrants. The Division is allowing licensed mortgage loan originators to work from home if they and their sponsoring entities have adequate data security measure in place. Consumers are not allowed to visit any unlicensed location including the home of a mortgage loan originator if it is not a licensed location. This guidance is in effect until April 30, 2020 but is subject to revision.
  • South Carolina Consumer Finance Division of the Board of Financial Institutions (“Division”): The Division has released guidance for licensed mortgage origination and servicing companies. Licensed mortgage origination and servicing companies can work from home provided that they have a contingency plan in place, adequate data security measures, and do not remove any physical records from licensed offices. This guidance is in effect until April 30, 2020 but is subject to revision.
  • South Dakota Division of Banking (“Division”): The Division had released guidance for licensed mortgage loan originators and their sponsoring entities. Licensed mortgage loan originators can work from home provided that they have adequate data security measures in place and do not take any physical records out of licensed locations. This guidance is in effect until June 5, 2020 but is subject to revision.
  • Texas Office of Consumer Credit Commissioner (“Commissioner”): The Commissioner has released guidance for licensed regulated lenders. All licensed regulated lenders can work from home provided that they prepare a written plan describing the steps it is taking, have adequate data security measures, and ensure that all physical records remain in a licensed location. This guidance is in effect until May 31, 2020 but is subject to revision.
  • Texas Department of Savings and Mortgage Lending (“Department”): The Department has issued guidance temporarily suspending any requirement that a physical office be open to the public during posted normal business hours.  Additionally, licensed mortgage loan originators may work from home or another remote location, whether located in Texas or another state, even if the home or remote location is not a licensed branch.  The guidance provides certain requirements in the event that a licensed residential mortgage loan originator or mortgage loan staff work remotely.  These allowances do not amend Texas Financial Code, Chapter 156 and/or 157 and are being allowed strictly due to the COVID-19 pandemic.
  • Vermont Department of Financial Regulation (“Department”): The Department has released guidance for licensed mortgage loan originators and their sponsoring entities. All licensed mortgage loan originators may work from home provided that no licensable activity is taken place with a consumer at an unlicensed location, adequate data security measures are put into place, and a plan is contingency plan is put in place. This guidance does not have a current expiration date but is subject to revision.
  • Washington Department of Financial Institutions (“Department”): The Department released guidance for licensed mortgage loan originators and their sponsoring entities. All licensed mortgage loan originators may work from home provided that adequate data security measures are put in place. Consumers are not allowed to visit licensed mortgage loan originators at unlicensed locations. This guidance is effective until June 5, 2020 but is subject to change.  The DFI also issued guidance to Washington regulated and exempt residential mortgage loan servicers regarding support for borrowers impacted by COVID-19.  The guidance urges such institutions to take reasonable and prudent actions, subject to the requirements of any related guarantees or insurance policies, to support those adversely impacted by COVID-19.
  • Wisconsin Department of Financial Institutions (“Department”): The Department released guidance for licensed mortgage loan originators. All licensed mortgage loan originators may work from home provided that their sponsoring entity notify the Department, a list is kept of all mortgage loan originators who elect to work from home where the home is not a licensed branch, appropriate data security measures are taken, and no physical records are present at unlicensed locations. Consumers are not allowed to visit unlicensed locations. This guidance does not have a current expiration date but is subject to revision.
  • West Virginia Division of Financial Institutions (“DFI”): The DFI issued guidance to West Virginia Regulated Financial Institutions allowing employees of regulated entities to temporarily work from home or some other remote location approved by the financial institutions, whether located in West Virginia or another state. Regulated financial institutions may permit employees to work at home or from a designated remote location, to the extent that the position allows, as long as privacy and security issues may be adequately addressed.  The guidance is in effect from March 13, 2020 through May 1, 2020.

Takeaway

As the federal government and the states work feverishly to address the growing concerns surrounding the COVID-19 pandemic, members of the financial services industry must stay abreast of the rapid changes in the legal and regulatory landscape.  We will continue to monitor for new developments and will update this post to highlight additional federal or state guidance that is issued.

NYDFS Extends Transition Period for Part 419 Compliance by Additional 90 Days

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On March 13, 2020, the New York Department of Financial Services (“NYDFS”) adopted, on an emergency basis, amendments (the “Emergency Adoption”) to the final mortgage servicer business conduct rules found in Part 419 of the Superintendent’s Regulations (the “Final Rules”), to extend the transition period for compliance with the Final Rules by an additional 90 days.  Prior to the Emergency Adoption, the transition period was set to expire on March 17, 2020.

As we previously reported, the NYDFS adopted the Final Rules on December 18, 2019.  The Final Rules made numerous revisions to the prior version of Part 419 that had been adopted, and readopted, on an emergency basis.  To facilitate the mortgage industry’s transition to the new rules, the Final Rules added Section 419.14 to provide a 90-day transition period for mortgage servicers to comply with the Final Rules.  However, the NYDFS indicated that “the transition period stated in Part 419.14 ha[d] proven to be insufficient.”

In issuing the Emergency Adoption, the NYDFS acknowledged the “volume and complexity of the changes required by the [Final Rules], especially computer programming required to address the new reporting, notice and disclosure requirements for the home equity line of credit {‘HELOC’) product, [which] is creating the biggest issue for servicers” as the HELOC product had previously been exempt from Part 419.  The NYDFS also cited, as additional reasons supporting the Emergency Adoption, the additional time needed by regulated institutions for purposes of revising procedures, training compliance staff, and providing information to consumers, as well as the business continuity and pandemic planning around the Coronavirus, which is diverting the limited resources of smaller financial institutions.

Mortgage servicers now have an additional 90-days to transition to the new requirements under the Final Rules.