3 NYCRR Part 419 – Mortgage Loan Servicer Business Conduct Rules FAQs

The recently promulgated 3 NYCRR Part 419 (“Final Part 419”) restates many of the requirements contained in the regulation originally proposed on an emergency basis and codifies certain requirements imposed by Regulations X and Z and best practices that have become commonplace since Part 419 went in effect in 2010. As such, most of the requirements of the Final Part 419 should be familiar to anyone who has been engaged in the mortgage loan servicing industry over the last decade. However, in connection with the promulgation of Final Part 419, the Department has received a number of inquiries about the requirements now imposed by Final Part 419. This document answers the most commonly asked questions the Department has received to date regarding Part 419. To the extent that you have any question that is not addressed by this document, the Department encourages you to submit such question to [email protected]. Please note that the Department may revise or update this information from time to time, as appropriate.

What is the effective date of Part 419?

The effective date of the Final Part 419, as extended, is June 15, 2020.

Does Part 419 apply to entities not required to be registered pursuant to Section 590(2)(b-1) of the New York Banking Law?

Yes. Pursuant to Section 419.1(l), the term “Servicer” includes any entity engaging in the servicing of a mortgage loan in the State of New York, regardless of whether such entity is required to be registered pursuant to Section 590(2)(b-1) of the New York Banking Law.

Does Part 419 apply only to a person or entity servicing mortgage loans on behalf of a third party?

No. Part 419 applies to any person or entity engaged in the servicing of mortgage loans in the State of New York. This is captured in Section 419.1(m), which specifies that “Servicing mortgage loans” applies to anyone “who makes or holds a mortgage loan if such Person also directly or indirectly is the holder of the mortgage servicing rights or has been delegated servicing functions for the Mortgage Loan.”

Does Part 419 apply to Home Equity Lines of Credit (HELOCs)?

Yes. With the exception of the periodic statement required pursuant to Part 419.4(c), the requirements of Part 419 apply to first lien HELOCs. With respect to the periodic statement, the Department will continue to review practices surrounding these statements and the impact on consumers. However, until further notice, a servicer that furnishes a periodic statement to a borrower that complies with the requirements of 12 CFR § 1026.7(a) is not required to furnish a periodic statement to such borrower pursuant to Part 419.4(c).

Does Part 419 apply to Reverse Mortgages?

Yes. Part 419 establishes general business conduct rules that apply to the servicing of all mortgage loans, including reverse mortgage loans. In addition to the requirements of Part 419, anyone servicing a reverse mortgage loan must also comply with the requirements of 3 NYCRR Part 79.

Do the definitions codified in 3 NYCRR Part 418 apply to Part 419?

Yes. For the purposes of Part 419, unless a term is defined differently within that part, the terms of Part 419 have the same meaning as set forth in 3 NYCRR Part 418.

Is the practice of “bill and receipt” (creating a periodic statement for the next payment due once the payment for the current month is received) permissible under Part 419?

Yes, under certain circumstances such as, if the relevant periodic statement has already been sent, the subsequent payments could either be reflected in the next periodic statement or in a supplemental or interim periodic statement transmitted to the borrower before the next periodic statement. Any supplemental periodic statement provided to the borrower must comply with the provisions of 419.4(c).

In Section 419.4(a), what period does the term “computation year” refer to?

The term “computation year” in Part 419.4(a) refers to the “escrow account computation year” that conforms to the definition under 12 CFR § 1024.17(b), or a 12-month period that a servicer establishes for the escrow account beginning with the borrower’s initial payment date.

Is there a small servicer exemption under Part 419?

No. Small servicers are not exempt from the requirements of Part 419.

What is a transferee servicer required to send to a borrower under Section 419.12(a)?

The first monthly statement provided to a borrower by a transferee servicer following the transfer of the servicing rights must be accompanied by a copy of the transferee servicer’s welcome packet and a payment history for the preceding 36 months of the borrower’s account showing the date, amount, and application of all payments credited to the account, and the unpaid balance for each 12-month period covered by the preceding 36 months payment history. If, upon acquisition, the transferred loan has a payment history of less than 36 months, then the transferee servicer shall provide a payment history covering that period.

Can a servicer send the billing statements, notices and disclosures required under Part 419 electronically?

Unless otherwise noted, the statements, notices and disclosures required under Part 419 (“Part 419 Notices”) may be provided to a borrower in electronic format provided that:

such notices comply with the requirements of Part 419 and Article III of the New York State Technology Law;
the entity complies with applicable provisions of the Electronic Signatures in Global and National Commerce Act (E-Sign Act) (15 U.S.C. 7001 et seq.);
the borrower has opted to receive paperless billing;
the borrower has agreed to receive Part 419 Notices electronically and provided an email address for the notification of such;
the servicer retains a record documenting such agreement by the borrower;
if the borrower is required to provide log-in credentials in order to access Part 419 Notices, such notices must be kept available for successive log-ins for a period of no less than 90 days;
the borrower is able to print the Part 419 Notices; however, in the event the borrower is unable to print such notices and requests paper copies, such copies are forthwith mailed to the borrower; and
the borrower is alerted to the availability of any such notice via the email address provided by the borrower.

The underlying investor/owner of the mortgage loan is requiring a property valuation, but the borrower has already been charged for one property valuation within the last 12 months, can the borrower be charged again?

No. Pursuant to Part 419.5(e), a servicer may not charge a property valuation fee to a borrower more than once in a 12-month period.

The borrower is requesting a service that requires a property valuation, but the borrower has already been charged for one property valuation within the last 12 months, can the borrower be charged again?

Pursuant to Part 419.5(e), a servicer may not charge a property valuation fee to a borrower more than once in a 12-month period; however, a servicer may charge for another property valuation in a 12-month period if the borrower: (i) requested the property valuation; (ii) was given prior written notice of the fee associated with the procurement of the valuation; and (iii) consents to pay said fee.

Will the passage of Part 419 result in any changes to the Volume of Servicing Reports required to be submitted to the Department (“VOSRs”)?

No. At this time, the Department does not anticipate making any changes to the VOSRs.

When is a loss mitigation application complete?

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 in the:

45-day delinquency notice provided pursuant to Part 419.7(c)(2)(v); or
5-day loss mitigation acknowledgment required pursuant to Part 419.7(d)(2)(ii).

However, if, the servicer reasonably determines that additional information or correction is required to complete the application, the borrower must be given a reasonable amount of time to provide such additional information or correction. In the interim, the servicer must abide by the prohibitions outlined in Part 419.10(a). If the borrower provides the additional information or correction within the time specified by the servicer, the application shall be considered complete as of the time the information is received.

Servicers are reminded that Part 419 requires that they clearly communicate what information is required to complete an application to the borrower and to work with borrowers in good faith to help them complete loss mitigation applications.

Is an attorney considered to be a Third-Party Provider under Section 419.11?

Yes. Pursuant to Part 419.1(p), the term “third-party provider” includes any person or entity retained by or on behalf of the servicer, including, but not limited to, foreclosure firms, law firms, foreclosure trustees, and other agents, independent contractors, subsidiaries and affiliates, that provides insurance, foreclosure, bankruptcy, mortgage servicing, including loss mitigation, or other products or services, in connection with the servicing of a mortgage loan.

Is a servicer required to conduct an escrow account analysis pursuant to 419.2(b) for borrowers whose loans have been placed in forbearance as a result of COVID-19?

To the extent that a borrower has been granted a forbearance under Part 119, any New York State statute that may grant borrowers extended forbearance or the CARES Act, the servicer may delay the escrow account analysis and borrower notice and explanation until such time as the servicer is considering what repayment or loan modification options to offer to the borrower to pay off the amount of the forbearance, inclusive of any extended forbearance. A notice and explanation complying with the requirements of 419.2(b) must be sent to the borrower at the end of the forbearance period, but before the servicer offers the borrower a repayment or loan modification for the total amount of the loan forbearance. There is no need to provide borrowers such notice and explanation if a forbearance extension request has been initiated.