Attorney General James Again Warns Mortgage Servicers of Obligation to Assist Homeowners in Need of COVID-19 Relief

AG James Announces Mortgage Enforcement Unit Will Review Applications for NYS Homeowner
Assistance Funds to Ensure New Yorkers Receive Required Relief From Mortgage Industry

NEW YORK – New York Attorney General Letitia James today took action to provide support to New Yorkers still recovering from the financial effects of the coronavirus disease 2019 (COVID-19) pandemic. In a letter to mortgage servicers operating in New York and mortgage industry trade associations, Attorney General James reiterates her expectation that they participate in New York’s recovery from the COVID-19 pandemic by providing long-term relief to homeowners in accordance with New York state law, as well as with federal regulations and guidelines. Attorney General James also lays out, in her letter, that the Office of the Attorney General’s (OAG) Mortgage Enforcement Unit (MEU) will be helping to oversee the distribution of New York state’s Homeowner Assistance Fund (HAF) announced last week by New York Governor Kathy Hochul.

“While the support provided by the Homeowner Assistance Fund is substantial, the number of homeowners facing COVID-related distress is far greater,” said Attorney General James. “To help the greatest number of homeowners and ensure that the family home stays in the family, HAF funds must supplement rather than replace the mortgage industry’s own efforts. My office will continue to ensure that mortgage servicers comply with their legal obligations as we work to protect New York families and their homes. If we plan to rebuild our economy, we must ensure that homeowners are granted the relief they need.”

Today’s letter follows Attorney General James’ warning at the onset of the pandemic, in April 2020, when she called on mortgage servicers to quickly provide forbearances to COVID-impacted homeowners and to prepare for the day when those forbearances would expire by establishing seamless transitions into affordable and sustainable modifications. Since then, the OAG has monitored compliance with COVID-related relief requirements imposed by state and federal laws and regulations, including investigating whether servicers have offered homeowners the forbearance relief and post-forbearance modifications required by New York Banking Law § 9-x.

Additionally, Attorney General James’ letter outlines expectations for mortgage servicers as forbearance plans expire, including that servicers comply with streamlined modification programs now required by various federal agencies and government-sponsored enterprises (Fannie Mae and Freddie Mac) and provide comparable relief (pursuant to New York state Banking Law § 9-x and New York’s mortgage servicing regulations) to homeowners whose mortgages are owned by private investors through private label securities or by banks in their own portfolios. Attorney General James emphasizes that servicers must invest in adequate staffing and improve their customer communications, so that they can handle any surge in requests for assistance. Servicers’ failure to prepare for this moment will be taken into account by the OAG. 

Attorney General James also announced that the OAG’s MEU will be helping to oversee the distribution of New York state’s Homeowner Assistance Fund (HAF), by ensuring that mortgage servicers play their part by offering homeowners all available loss mitigation options before that homeowner seeks an outside HAF grant, in order to help the program save as many homes as possible.

As detailed in Attorney General James’ letter, the MEU will review HAF applications to determine if a servicer’s loss mitigation programs — such as a deferral of missed payments or a streamlined loan modification — would result in an affordable and sustainable monthly payment. When a legally mandated modification is not offered to a potentially eligible homeowner, the MEU will contact mortgage servicers for an explanation. The MEU will also monitor mortgage servicers’ compliance with federal or state laws, regulations, or guidance. This is in keeping with the U.S. Department of Treasury’s instruction that HAF be used to supplement, and not replace, loss mitigation.

In the weeks to come, the MEU will be reaching out to the mortgage industry, as well as the legal services and housing counseling agencies that assist New York homeowners, to further explain its role in the HAF application process and how to coordinate with MEU.

The HAF MEU will be co-directed by Assistant Attorneys General Mark Ladov and Elizabeth M. Lynch, who have worked on numerous OAG investigations of mortgage servicing and mortgage fraud under the supervision of Consumer Frauds & Protection Bureau Chief Jane M. Azia and Deputy Bureau Chief Laura Levine. HAF MEU will be under the direct supervision of Chief Deputy Attorney General Chris D’Angelo of the Division for Economic Justice and Chief Deputy Attorney General Meghan Faux of the Division for Social Justice. The HAF MEU is being established with support from Special Assistant for Housing & Community Development Kerri White; as well as from Data Scientist Jasmine McAllister and Senior Data Analyst Akram Hasanov — both under the supervision of Director Jonathan Werberg and Deputy Director Megan Thorsfeldt of the Research and Analytics Department. Both the Division for Economic Justice and the Division for Social Justice are overseen by First Deputy Attorney General Jennifer Levy.