N.Y. Comp. Codes R. & Regs. Tit. 3 § 419.10 - Servicing prohibitions and the duty of fair dealing

(a) A servicer is prohibited from:

(1) engaging in unfair, or deceptive or abusive business practices or misrepresenting or omitting any material information in connection with the servicing of a mortgage loan, including, but not limited to, misrepresenting the amount, nature or terms of any fee or payment due or claimed to be due on the loan, the terms and conditions of the servicing agreement or the borrower's obligations under the loan;

(2) requiring funds to be remitted by means more costly to the borrower than a bank or certified check or attorney's check from an attorney's account;

(3) refusing to communicate with an authorized representative of the borrower who provides a written authorization signed by the borrower, provided that the servicer may adopt procedures, not including the collection of the representative's social security number, reasonably related to verifying that the representative is in fact authorized to act on behalf of the borrower;

(4) commencing a residential foreclosure action against a borrower:

(i) if a borrower submits a complete loss mitigation application to a servicer before the servicer has commenced a residential foreclosure action against the borrower, unless:

(a) the servicer has sent the borrower a notice pursuant to section 419.7(f)(2) of this Part that the borrower is not eligible for any loss mitigation option and the appeal process in section 419.7(h) of this Part is not applicable, the borrower has not requested an appeal within the applicable time period for requesting an appeal, or the borrower's appeal has been denied;

(b) the servicer has complied with section 419.7(f)(1) of this Part and the borrower rejects all loss mitigation options offered by the servicer;

(c) the borrower is more than 30 days in default under a trial or permanent modification agreement; or

(d) the foreclosure is based on a borrower's violation of a due on sale clause.

(ii) if a borrower submits an incomplete loss mitigation application to a servicer before the servicer has commenced a residential foreclosure action against the borrower, unless the borrower has not provided the servicer with the documents necessary for a complete loss mitigation application within 15 days (excluding legal public holidays, Saturdays and Sundays) after the servicer has provided the notice required by section 419.7(d)(2)(ii) of this Part. A servicer is only required to comply with the requirements of this subparagraph for a single incomplete loss mitigation application for a borrower's mortgage loan;

(5) moving for a judgment of foreclosure and sale, or conducting a foreclosure sale when:

(i) a borrower is in compliance with the terms of a trial loan modification, forbearance, or repayment plan; or

(ii) a short sale or deed-in-lieu of foreclosure has been approved by all parties (including, for example, first lien investor, junior lien holder and mortgage insurer, as applicable), and proof of funds or financing has been provided to the servicer; or

(iii) a borrower has submitted a complete loss mitigation application after a servicer has commenced a residential foreclosure action against the borrower but more than 37 days before a foreclosure sale, unless:

(a) the servicer has sent the borrower a notice pursuant to section 419.7(f)(2) of this Part that the borrower is not eligible for any loss mitigation option and the appeal process in section 419.7(h) of this Part is not applicable, the borrower has not requested an appeal within the applicable time period for requesting an appeal, or the borrower's appeal has been denied;

(b) the servicer has complied with section 419.7(f)(1) of this Part and the borrower rejects all loss mitigation options offered by the servicer; or

(c) the borrower is more than 30 days delinquent under a trial or permanent modification agreement;

(6) failing to provide the borrower with the notice required by Real Property Actions and Proceedings Law section 1304 at least 90 days before commencing legal action against the borrower or in the case of a residential cooperative, failing to provide the debtor with the notice required by Uniform Commercial Code section 9-611 at least 90 days before disposing of the debtor's cooperative interest; and

(7) failing to make the filings with the superintendent as required by Real Property Actions and Proceedings Law section 1306 and in accordance with the rules prescribed by the superintendent.

(b) A servicer shall act in good faith and deal fairly in its course of dealings with each borrower in connection with the servicing of the borrower's mortgage loan. However, nothing in this section shall be considered a derogation of the affirmative duty to negotiate in good faith mandated by New York Civil Practice Laws and Rules section 3408. This includes, but is not limited to, the duty to:

(1) safeguard and account for any payment made by or any money belonging to the borrower;

(2) follow reasonable and lawful instructions from the borrower consistent with the underlying note and mortgage;

(3) act with reasonable skill, care and diligence;

(4) consider alternatives to foreclosure when a borrower demonstrates that he or she is in imminent risk of delinquency on the mortgage loan as a result of a financial hardship or has experienced a financial hardship and is unable to maintain the payment at the current amount required under the mortgage loan or is unable to make up the delinquent payments;

(5) structure loan modifications to result in payments that are reasonably affordable and sustainable for the borrower at the time the modification is made.

Notes

N.Y. Comp. Codes R. & Regs. Tit. 3 § 419.10

Amended New York State Register December 18, 2019/Volume XLI, Issue 51, eff. 12/18/2019