New York Codes, Rules and Regulations
Title 3 - BANKING
Chapter III - SUPERINTENDENT'S REGULATIONS
Subchapter B - NON-BANKING ORGANIZATIONS
Part 419 - SERVICING MORTGAGE LOANS: BUSINESS CONDUCT RULES
Section 419.10 - Servicing prohibitions and the duty of fair dealing
Universal Citation: 3 NY Comp Codes Rules and Regs ยง 419.10
Current through Register Vol. 46, No. 12, March 20, 2024
(a) A servicer is prohibited from:
(1) engaging in unfair, or deceptive or
abusive business practices or misrepresenting or omitting any material
information in connection with the servicing of a mortgage loan, including, but
not limited to, misrepresenting the amount, nature or terms of any fee or
payment due or claimed to be due on the loan, the terms and conditions of the
servicing agreement or the borrower's obligations under the loan;
(2) requiring funds to be remitted by means
more costly to the borrower than a bank or certified check or attorney's check
from an attorney's account;
(3)
refusing to communicate with an authorized representative of the borrower who
provides a written authorization signed by the borrower, provided that the
servicer may adopt procedures, not including the collection of the
representative's social security number, reasonably related to verifying that
the representative is in fact authorized to act on behalf of the
borrower;
(4) commencing a
residential foreclosure action against a borrower:
(i) if a borrower submits a complete loss
mitigation application to a servicer before the servicer has commenced a
residential foreclosure action against the borrower, unless:
(a) the servicer has sent the borrower a
notice pursuant to section 419.7(f)(2) of this Part that the borrower is not
eligible for any loss mitigation option and the appeal process in section
419.7(h) of this Part is not applicable, the borrower has not requested an
appeal within the applicable time period for requesting an appeal, or the
borrower's appeal has been denied;
(b) the servicer has complied with section
419.7(f)(1) of this Part and the borrower rejects all loss mitigation options
offered by the servicer;
(c) the
borrower is more than 30 days in default under a trial or permanent
modification agreement; or
(d) the
foreclosure is based on a borrower's violation of a due on sale
clause.
(ii) if a
borrower submits an incomplete loss mitigation application to a servicer before
the servicer has commenced a residential foreclosure action against the
borrower, unless the borrower has not provided the servicer with the documents
necessary for a complete loss mitigation application within 15 days (excluding
legal public holidays, Saturdays and Sundays) after the servicer has provided
the notice required by section 419.7(d)(2)(ii) of this Part. A servicer is only
required to comply with the requirements of this subparagraph for a single
incomplete loss mitigation application for a borrower's mortgage
loan;
(5) moving for a
judgment of foreclosure and sale, or conducting a foreclosure sale when:
(i) a borrower is in compliance with the
terms of a trial loan modification, forbearance, or repayment plan;
or
(ii) a short sale or
deed-in-lieu of foreclosure has been approved by all parties (including, for
example, first lien investor, junior lien holder and mortgage insurer, as
applicable), and proof of funds or financing has been provided to the servicer;
or
(iii) a borrower has submitted a
complete loss mitigation application after a servicer has commenced a
residential foreclosure action against the borrower but more than 37 days
before a foreclosure sale, unless:
(a) the
servicer has sent the borrower a notice pursuant to section 419.7(f)(2) of this
Part that the borrower is not eligible for any loss mitigation option and the
appeal process in section 419.7(h) of this Part is not applicable, the borrower
has not requested an appeal within the applicable time period for requesting an
appeal, or the borrower's appeal has been denied;
(b) the servicer has complied with section
419.7(f)(1) of this Part and the borrower rejects all loss mitigation options
offered by the servicer; or
(c) the
borrower is more than 30 days delinquent under a trial or permanent
modification agreement;
(6) failing to provide the borrower with the
notice required by Real Property Actions and Proceedings Law section
1304 at least 90 days before commencing
legal action against the borrower or in the case of a residential cooperative,
failing to provide the debtor with the notice required by Uniform Commercial
Code section 9-611 at least 90 days before disposing of the debtor's
cooperative interest; and
(7)
failing to make the filings with the superintendent as required by Real
Property Actions and Proceedings Law section
1306 and in accordance with the rules
prescribed by the superintendent.
(b) A servicer shall act in good faith and deal fairly in its course of dealings with each borrower in connection with the servicing of the borrower's mortgage loan. However, nothing in this section shall be considered a derogation of the affirmative duty to negotiate in good faith mandated by New York Civil Practice Laws and Rules section 3408. This includes, but is not limited to, the duty to:
(1) safeguard and account for any payment
made by or any money belonging to the borrower;
(2) follow reasonable and lawful instructions
from the borrower consistent with the underlying note and mortgage;
(3) act with reasonable skill, care and
diligence;
(4) consider
alternatives to foreclosure when a borrower demonstrates that he or she is in
imminent risk of delinquency on the mortgage loan as a result of a financial
hardship or has experienced a financial hardship and is unable to maintain the
payment at the current amount required under the mortgage loan or is unable to
make up the delinquent payments;
(5) structure loan modifications to result in
payments that are reasonably affordable and sustainable for the borrower at the
time the modification is made.
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