By: Heather Hill Cernoch
In its efforts to protect homeowners and avoid another mortgage and foreclosure crisis, the New York State Banking Department has issued new rules regarding the business practices of mortgage loan servicers.
The regulations, which go into effect October 1, implement provisions from 2008’s Mortgage Lending Reform Law to create consumer protections for subprime and high-cost home loans.
Servicers handling New York-based mortgages must abide by these new regulations, which include a duty to avoid preventable foreclosures by pursuing loss mitigation efforts. In addition, if a homeowner is being considered for, or is currently in, a trial or permanent modification, servicers are expected to avoid foreclosure actions.
Servicers are also required to have a sufficient staff on hand, written procedures for consumer inquiries and complaints, and methods for ensuring that homeowners do not have to submit multiple copies of required documents.
Daily interactions between servicers and borrowers are also regulated, and lenders are prohibited from employing “unfair or deceptive business practices.”
“New York State is continuing to take important steps toward ensuring that we will not see another mortgage and foreclosure crisis spurred on by irresponsible lenders or by unscrupulous individuals taking advantage of cracks in the system,” said Richard H. Neiman, the state’s superintendent of banks.
Neiman added, “With these business conduct rules for mortgage servicers combined with our existing oversight of mortgage bankers, brokers, and loan originators, we are covering a mortgage throughout its life. From the moment a mortgage is signed in New York State to the time it comes to its end, these loans must now be handled at every step of the process by individuals and companies that are accountable to homeowners.”
Somewhat analogous to servicer guidelines provided by the Home Affordable Modification Program (HAMP), New York’s newly issued requirements are enforceable as law by state and federal regulators.
“We would like for the regulation of mortgage servicers in New York State to serve, not only as a model for other states, but also as a model for national minimum standards that can be enforced across the country,” said Neiman. “Just as we saw with the SAFE Act and the licensing of mortgage loan originators, states can and should serve as examples for lawmaking at the federal level.”
Mon, Aug 23, 2010
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