Changes to Mortgage Servicing Laws in NYS

New York State Department of Financial Services has issued an update regarding Regulations for Servicing Mortgage Loans (Part 419). Please review this explanatory letter before continuing.

Here is a link to the rules that became effective Dec 18, 2019 with a grace period up to March 17, 2020.

In short, the law requires that entities be registered with the Superintendent in order to engage in the business of servicing mortgage loans in this state. Nationally, most affiliates that service in-house are considered a small servicer under federal law, however, it does not appear that these exemptions extended to small servicers apply under New York state law.

What if your mortgages are already outsourced?

Even if your mortgages are being serviced by a third-party entity, your affiliate is considered to be a “passive mortgage loan servicer” and must abide by state laws. The link to the Passive Mortgage Loan Servicer Exemption, along with the formal definition, can be found here.

What are your options if you are still servicing mortgages?

  1. Utilize a third-party licensed servicer for your remaining mortgages and then seek an exemption from DFS as a passive mortgage servicer
  2. Continue servicing mortgages and apply for an exemption to licensure through DFS
  3. Seek legal counsel for risk management advice as it relates to servicing mortgages