New York’s COVID-19 Eviction and Foreclosure Prevention and Small Businesses Acts Extended to August 31, 2021—What You Need to Know

Wayne Streibich, Diana M. Eng, and Alina Levi

Lenders, mortgage servicers, and other financial institutions should take note that New York State passed legislation extending the protections set forth in the COVID-19 Emergency Eviction and Foreclosure Prevention Act of 2020 and the COVID-19 Emergency Protect Our Small Businesses Act of 2021 to August 31, 2021. Thus, the requirements and stays with respect to residential and commercial foreclosures and evictions imposed by the legislation remain effective through August 31, 2021.

On May 4, 2021, Governor Cuomo signed a bill extending both (i) the COVID-19 Emergency Eviction and Foreclosure Prevention Act of 2020 (the “EEFPA”); and (ii) the COVID-19 Emergency Protect Our Small Businesses Act of 2021 (“SBA”), to August 31, 2021 (S.6362-A/A.7175-A) (the “Extended Act”). The purpose of the Extended Act, which is effective immediately, is to maintain protections prohibiting residential and commercial evictions, foreclosure proceedings, credit discrimination, and negative credit reporting related to the COVID-19 pandemic until August 31, 2021, if the borrowers, mortgagors, and/or tenants submit the required Hardship Declaration with the foreclosing party, landlord/their agent, or the Court. In practice, however, some courts have extended the stay even without the required Hardship Declaration.  

Highlights of the Extended Act are summarized below, but please refer to the full text of the Extended Act for additional information.

LIMITS OF THE EXTENDED ACT

  • The Extended Act still does not apply to residential eviction and foreclosure actions involving vacant and abandoned properties, listed on the statewide vacant, and abandoned property electronic registry (as such terms are defined in Sections 1309(2) and 1310 of New York’s Real Property Actions and Proceedings Law) prior to March 7, 2020, and which remain on such registry.
  • The Extended Act also does not apply to, and does not affect, any residential or commercial mortgage loan made, insured, purchased, or securitized by a corporate governmental agency of the state constituted as a political subdivision and public benefit corporation or the rights and obligations of any lender, issuer servicer, or trustee of such obligations.
  • The portion of the Extended Act addressing the SBA still only applies to commercial tenants, who independently own and operate their business, have 50 or fewer employees, and experience financial hardship and are unable to pay the rent or other financial obligations under the lease in full or obtain an alternative suitable commercial property as a result of:
      1. significant loss of revenue during the COVID-19 pandemic; and/or

      2. significant increase in necessary expenses related to providing personal protective equipment to employees or purchasing and installing other protective equipment to prevent the transmission of COVID-19 within the business; and/or

      3. moving expenses and difficulty in securing an alternative commercial property make it a hardship for the business to relocate to another location.

  • The Extended Act still permits residential and commercial evictions of tenants, who persistently and unreasonably engage in behavior that substantially infringes on the use and enjoyment of other tenants or occupants or cause a substantial safety hazard to others.

To read the full client alert, please click here

CFPB Issues Debt Collection Interim Final Rule Due to the Ongoing COVID-19 Pandemic

Wayne StreibichDiana M. Eng, and Chenxi Jiao

The CFPB’s interim final rule amends Regulation F to, among other things, (i) require debt collectors to provide written notice to certain consumers about the CDC’s temporary eviction protections; and (ii) prohibit debt collectors from misrepresenting that a consumer is ineligible for eviction protection under the CDC’s moratorium. Debt collectors should take the necessary steps to ensure compliance with the amendment.

On April 19, 2021, the Consumer Financial Protection Bureau (“CFPB”) issued an interim final rule to amend Regulation F at 12 C.F.R. § 1006 (the “IFR”) to require debt collectors to provide consumers with disclosures relating to the Centers for Disease Control and Prevention (“CDC”) order, titled “Temporary Halt in Residential Evictions to Prevent the Further Spread of COVID-19” (86 FR 16731 (Mar. 31, 2021)) (the “CDC Order”). The CDC Order “generally prohibits a landlord, owner of a residential property, or other person with a legal right to pursue eviction or possessory action from evicting for non-payment of rent any person protected by the CDC Order from any residential property in any jurisdiction in which the CDC Order applies.” This prohibition applies to any agent or attorney acting on behalf of a landlord or owner of a residential property. Notably, however, the CDC Order does not cover foreclosure on a home mortgage.

The CFPB issued the IFR due to its concerns that consumers are unaware of their protections under the CDC Order and that debt collectors may be engaging in eviction-related conduct that violates the Fair Debt Collection Practices Act, 15 U.S.C. § 1692, et seq. (the “FDCPA”). The IFR applies to “debt collectors,” “consumers,” and “debt,” as defined in the FDCPA.

To read the full client alert, please click here.

CFPB Proposes COVID-19 Rule to Amend Its Mortgage Servicing Rule and Provide Additional Guidance Related to the Pandemic

Jonathan K. Moore, Scott D. Samlin, Chenxi Jiao, and Louise Bowes Marencik

On April 5, 2021, the Consumer Financial Protection Bureau (“CFPB”) issued a notice of proposed rulemaking that proposes amendments to its Mortgage Servicing Rule (the “Proposed Rule”) to provide additional assistance for borrowers impacted by the COVID-19 emergency. The pandemic has resulted in nearly three million borrowers with delinquent mortgages, which is more homeowners in default than any time since the peak of the Great Recession in 2010. Nearly 1.7 million borrowers will exit forbearance programs in September and the following months upon expiration of the maximum term of 18 months in forbearance for federally backed mortgage loans. The Proposed Rule is intended to ensure that these homeowners have the opportunity to be evaluated for loss mitigation options prior to their loans being referred to foreclosure.

If finalized, the Proposed Rule would apply to all mortgages on a principal residence and amend Regulation X (12 CFR 1024).

To read the full client alert, please click here.

CFPB Proposes Delay of Effective Date for Debt Collection Rules

Jonathan K. Moore and Louise Bowes Marencik

On April 7, 2021, the Consumer Financial Protection Bureau (“CFPB”) issued a Notice of Proposed Rulemaking delaying the effective date of its recent debt collection final rules. The final rules, which were issued on October 30, 2020 and December 18, 2020, were scheduled to become effective on November 30, 2021. However, in light of the ongoing COVID-19 pandemic, the CFPB has proposed delaying the effective date until January 29, 2022, in order to give the affected parties additional time to review and comply with the new rules.

To read the full client alert, please click here.

New Requirements and Stays Imposed by New York’s COVID-19 Emergency Eviction and Foreclosure Prevention Act of 2020

Diana M. Eng and Alina Levi

On December 28, 2020, in response to the COVID-19 pandemic, the New York legislature met in a Special Session and passed the COVID-19 Emergency Eviction and Foreclosure Prevention Act of 2020 (the “Act”) (S.9114/A.11181), which became effective immediately. The Act is aimed at providing relief to tenants facing residential eviction (Part A) and mortgagors/borrowers facing pending or future residential foreclosure proceedings (Part B, Subpart A). In addition, the Act (i) prohibits local governments from proceeding with tax lien sales or commencing tax foreclosures until May 1, 2021, on residential properties (Part B, Subpart B); (ii) prohibits credit discrimination and negative credit reporting (Part B, Subpart C); and (iii) requires local governments to carry-over the Senior Citizens’ Homeowners Exemption and the Disabled Homeowner Exemption to 2021 (Part B, Subpart D). Highlights of the Act are summarized below, but please refer to the full text of the Act for additional information.[i]

Limits of the Act

  • The Act does not apply to residential eviction and foreclosure actions involving vacant and abandoned properties, as defined in RPAPL 1309(2), listed on the statewide vacant and abandoned property electronic registry, as defined in RPAPL § 1310, prior to March 7, 2020, and that remain on such registry.[ii]
  • The Act also does not apply to, and does not affect, any mortgage loan made, insured, purchased, or securitized by a corporate governmental agency of the state constituted as a political subdivision and public benefit corporation or the rights and obligations of any lender, issuer servicer, or trustee of such obligations.[iii]

Eviction Highlights – Part A of the Act

  • Stays pending residential eviction proceedings for 60 days and bars new filings for 60 days through the end of February 2021, or to such later date that the chief administrative judge shall determine is necessary to ensure that the courts are prepared to conduct proceedings in compliance with the Act[iv];
  • Allows residential tenants to submit to their landlord and/or file with the court, a Hardship Declaration,[v] under penalty of perjury regarding their inability to pay their rent or secure alternative housing and suffering a financial hardship or suffering a health-related hardship that will extend the stay on eviction proceedings until May 1, 2021;
  • Certain proceedings can continue if the court receives an authorized new petition stating that the tenant is persistently and unreasonably engaging in behavior that substantially infringes on the use and enjoyment of other tenants or occupants or causes a substantial safety hazard to others;
  • Requires the landlord and the court to serve on tenants, the Hardship Declaration Form, along with all required notices of petition;
  • Requires the state Office of Court Administration to post such information and forms on its website in multiple languages;[vi]
  • Allows tenants to vacate default judgments upon oral or written request; and
  • Creates a presumption of financial hardship upon filing a Hardship Declaration that would support a defense based on financial hardship under the Tenant Safe Harbor Act.[vii]

Foreclosure Highlights – Part B of the Act

Stay of Residential Foreclosures

  • All pending residential foreclosure actions are stayed for at least 60 days through the end of February 2021, or to such later date that the chief administrative judge shall determine is necessary to ensure that the courts are prepared to conduct proceedings in compliance with the Act.[viii]
  • The 60-day stay applies where the owner or mortgagor of the property is a natural person, regardless of how title is held, and owns 10 or fewer dwelling units whether directly or indirectly.
  • Any owner, borrower, mortgagor, or natural person who owns 10 or fewer residential dwellings (as long as this includes the borrower’s primary residence) and experiences a financial hardship, can file a Hardship Declaration[ix] with the lender, its agent, or the court to stay a pending foreclosure proceeding until May 1, 2021, and prevent the commencement of a foreclosure action until May 1, 2021.
  • Where a judgment of foreclosure sale was issued before December 28, 2020, but has not yet been executed, execution of the judgment shall be stayed until the court holds a status conference with the parties. If borrower/mortgagor submits a Hardship Declaration prior to the execution of the judgment, the action shall be stayed until May 1, 2021.

Statute of Limitations

  • The statute of limitations to foreclose will be tolled during the initial 60-day stay. The Act also provides that “any specific time limit for the commencement of an action to foreclose a mortgage shall be tolled until May 1, 2021.”[x]

Requirements for New Residential Mortgage Foreclosure Actions

  • New York Courts will not accept new foreclosure complaints for filing, unless the foreclosing party files an Affidavit of Service stating that:

(a) the required notices under RPAPL § 1303 (Help for Homeowners in Foreclosure/Notice to Tenants or “1303 Notice”) and RPAPL § 1304 (the “90-Day Notice”) and the Hardship Declaration (in English and mortgagor’s primary language, if other than English[xi]) were served on borrower/mortgagor; and

(b) attesting that at the time of filing, neither the foreclosing party nor its agent has received a Hardship Declaration from the mortgagor.

  • Importantly, the foreclosing party should not rely on 1303 Notices served, or 90-Day Notices that were mailed, before the Act was effective. Rather, the foreclosing party should serve new 1303 Notices and mail new 90-Day Notices with the required Hardship Declaration.[xii]
  • After a foreclosure action is commenced, the court shall seek confirmation on the record or in writing that borrower/mortgagor has received a Hardship Declaration and has not returned the Hardship Declaration to the foreclosing party or its agent.
  • If the court determines that the borrower/mortgagor has not yet received a Hardship Declaration form, the court must stay further proceedings for no less than 10 business days to ensure borrower/mortgagor receives and fully considers whether to submit a Hardship Declaration.

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New York’s Department of Financial Services Issues Regulation for Financial Institutions to Provide Relief to Consumers Suffering Financial Hardship Resulting from COVID-19 Pandemic

Wayne StreibichDiana M. Eng, Andrea M. RobertsScott D. Samlin

On March 21, 2020, in response to the COVID-19 pandemic, Governor Cuomo issued Executive Order 202.9, directing institutions regulated by New York’s Department of Financial Services (“NY DFS”) to provide financial relief to New York consumers experiencing financial hardship as a result of the pandemic. As a result, on March 24, 2020, NY DFS enacted Part 119 of Title 3 of the Official Compilation of Codes, Rules and Regulations of the State of New York (“NYCRR”) establishing standards and procedures that a “Regulated Institution” must follow in its review of requests for relief pursuant to Executive Order 202.9. Importantly, Section 119.2 defines a “Regulated Institution” as “any New York regulated banking organization as defined under New York Banking Law and any New York regulated mortgage servicer entity subject to the authority of the Department.” (Emphasis added).

Highlights of the NY DFS Regulation1

Section 119.3 directs the Regulated Institution to do the following for any individual who can demonstrate financial hardship as a result of the COVID-19 pandemic:

  • In connection with a residential mortgage of a property located in NY: (i) make applications for forbearance of any payment due widely available to any individual who resides in NY and (ii) grant such forbearance for a period of 90 days (subject to the safety and soundness requirements of the Regulated Institution). This provision does not apply to, and does not affect mortgage loans “made, insured, or securitized by any agency or instrumentality of the United States, any Government Sponsored Enterprise, or a Federal Home Loan Bank, or the rights and obligations of any lender, issuer, servicer or trustee of such obligations, including servicers for the Government National Mortgage Association.”
  • With respect to banking organizations: (1) eliminate fees charged for the use of ATMs that are owned or operated by the regulated banking organization; (2) eliminate any overdraft fees; and (3) eliminate any credit card late payment fees. (Regulated Institutions are not limited to these three requirements and may take additional actions if they so desire.)

Within ten (10) business days of the implementation of this regulation, i.e., by April 7, 2020, the Regulated Institution shall e-mail, publish on their website, mass mail, or otherwise broadly communicate to its customers how to apply for relief. The criteria, developed by the Regulated Institution, “shall be clear, easy to understand, and reasonably tailored to the requirements of the [R]egulated [I]nstitution to assess whether it will provide, consistent with the goals of Executive Order 202.9 and this regulation, applicable state and federal law, and the principles of safe and sound business practices, COVID-19 relief.” 3 NYCRR § 119.3(d)(1).

In addition, Section 119.3(e) outlines the requirements for processing applications for relief, as follows:

  • The Regulated Institution must process and respond to the request for relief no later than ten (10) business days after receiving all the information it needs to process the application;
  • The Regulated Institution must process the application for relief expeditiously; the Regulated Institution is responsible for developing and implementing the procedures to do so; and
  • Decisions on the application for relief shall be made in writing and provide the consumers the next steps if they are approved or denied the request.

Finally, Section 119.39(4) modifies Section 39 of the New York Banking Law concerning unsafe and unsound business practices. Under the modified section, it is an “unsafe and unsound business practice” if any Regulated Institution does not “grant a forbearance of any payment due on a residential mortgage for a period of ninety (90) days to any individual who has applied for such forbearance and demonstrated a financial hardship as a result of the COVID-19 pandemic as described herein.” NY DFS will consider, among other things, the adequacy of the process established by the Regulated Institution, the thoroughness of the review of the application, and the payment history, creditworthiness and financial resources of the borrower, in assessing whether a regulated institution has engaged in an unsafe or unsound practice. Regulated Institutions must also maintain copies of all files related to implementation of Part 119 for seven (7) years from March 24, 2020 (date of implementation of the regulation) and must make such files available for inspection at the NY DFS’ next examination of the Regulated Institution.

The standards and procedures set forth in Part 119 shall be in effect for ninety (90) days. After the expiration of the 90-day period, NY DFS will renew this emergency regulation, if necessary.

Conclusion

Regulated Institutions must implement processes and procedures to comply with Part 119 by April 7, 2020, including immediately setting up procedures to review applications for relief and taking the necessary steps to notify its customers of how to apply for such relief. Thus, Regulated Institutions should determine which of its loans, if any, are subject to this regulation and accept and review its customers for forbearance relief as described in the regulation.

Mr. Streibich would like to thank Diana M. Eng, Andrea M. Roberts, and Scott D. Samlin for their assistance in developing this alert.


1 This Alert provides the highlights of the regulation, which does not apply to any commercial mortgage or any other loans not described in the regulation. Please visit the NY DFS website for the complete regulation: dfs.ny.gov/system/files/documents/2020/03/re_new_pt119_nycrr3_text.pdf.