Virus Effects Foreclosures

By Executive Order dated March 21, 2020, the Governor of New York temporarily modified through April 20, 2020 Subdivision 2 of Banking Law Section 39 to provide that it shall be deemed an unsafe and unsound business practice if in response to the pandemic any bank which is subject to the jurisdiction of the Department of Financial Services shall not grant a forbearance of ninety (90) days to any person or business who has a financial hardship as a result of the COVID-19 pandemic.

The Superintendent of the Department of Financial Services is empowered to ensure under reasonable and prudent circumstances that any licensed or regulated entity provide to any New York State consumer an opportunity for payment forbearance for a mortgage for any person or entity facing financial hardship due to the COVID-19 pandemic.  The Superintendent is to promulgate emergency regulations to require that the application for such forbearance be made widely available for consumers and such application is to be granted in all reasonable and prudent circumstances for the period of the emergency.

From a moral or ethical point of view this is certainly understandable and its duration (for the moment) is modest.  Nonetheless the language is a bit confusing because commercial mortgages do not involve consumers and other language refers to any person or entity suggests that commercial mortgages would be involved, as does other language referring to any person or business.

At the same time the obligations for the forbearance fall only to entities regulated by the Department of Financial Service. 

All lenders with defaulted mortgages will want to be aware of these requirements.

Mr. Bergman, author of the four-volume treatise, Bergman on New York Mortgage Foreclosures, LexisNexis Matthew Bender (rev. 2019), is a partner with Berkman, Henoch, Peterson, Peddy & Fenchel, P.C. in Garden City, New York. He is also a member of the USFN, The American College of Real Estate Lawyers, The American College of Mortgage Attorneys, an adviser to the New York Times on foreclosure issues and writes a regular servicing column for the New York Law Journal. He is AV rated by Martindale-Hubbell, his biography appears in Who’s Who In American Law and he has been for years listed in Best Lawyers In America and New York Super Lawyers.