Mortgage Forbearance: Under NY Executive Order 202.9
Not Waiver or Deferral
Due to the significant economic pressures caused by the coronavirus pandemic, New York State’s Governor Cuomo signed an executive order to induce state-regulated financial institutions to waive mortgage payments for ninety days.
Issued on March 21, Executive Order 202.9 provided the Department of Financial Services the authority to provide forbearance of payments towards a mortgage for any entity or individual encountering financial troubles. However, the forbearance relief does not apply to commercial loans secured by a property and is typically only applicable to homeowners.
A mortgage forbearance is a deal between a lender and borrower in which the lender decides not to foreclose on a mortgage when a borrower has a difficult time meeting payment obligations. The borrower consents to a permanent mortgage plan, including a loan modification, which will eventually bring the borrower current on payments. A loan modification, should be noted, is a loan refinancing that changes the terms of your existing loan.
The Department of Financial Services released a statement intended to provide clarity and guidance on Executive Order 202.9: “the emergency regulation is not applicable to and does not affect any 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.” Institutions beyond the scope of the Department of Financial Services’ policies are controlled by the federal government.
Importantly, do not stop making your mortgage payments without obtaining consent from your mortgage servicer. If you can continue to make payments, you should do so. It is possible that the newness of this forbearance system may negatively impact your credit score and thus, your ability to purchase a home. However, should you experience financial difficulty, you should contact your servicer and explain the need for a mortgage forbearance. It is likely that you will have to submit proof of financial hardship; examples of such proof include loss of employment or being furloughed for a temporary period due to the coronavirus pandemic.
While your monthly mortgage payments may be suspended for ninety days, your property taxes and homeowners insurance will be paid by mortgage servicers using your current escrow account balance. Should your escrow account not have sufficient funds to pay for said taxes and insurance, it will be placed on escrow shortage. Once the ninety days of forbearance have ended, the escrow shortage will be added to your monthly mortgage payments.
Call HoganWillig’s Business Department at 716-636-7600 if you have any questions about the information discussed here or with any other questions you may have.
DISCLAIMER: This article has been published as a service to the general public, and, as such, is intended for general purposes only. The information contained within this article should not be considered and/or construed as legal advice. Each reader is advised to consult legal counsel to determine how the contents of this article may apply to their particular facts and circumstances.
For changing and up-to-date legal information, visit our COVID-19 Resource Center.