Through a stroke of lucky timing, the New York Department of Financial Services (NYDFS) had gained traction with a reorganized and strengthened consumer advocacy mission just before the COVID-19 pandemic erupted in early 2020.
Homeowners, renters, borrowers, lenders and mortgage servicers had one less thing to worry about as they absorbed the implications of pandemic-sparked forbearance rules and other regulatory shelters: realigned NYDFS operations were already in synch with the servicers that operated in the state, said Winston Berkman-Breen, director of Consumer Advocacy for the New York State Department of Financial Services.
Now, as the temporary measures ease, the transition to repairing and rebuilding likely will be smooth, said Berkman-Breen, and the department is poised to amplify communication with consumers so they, too can regain steady footing.
“There’s already a blueprint there. NYDFS expectations are the same as they have always been,” he said. “The system that already exists is capable of navigating this difficult time. There have been new elements but they’re not a dramatic change to the existing structure.”
The department has been crystal-clear that its overriding priority is to “keep customers in their homes,” said Allison J. Schoenthal, a partner with the New York City firm law firm Goodwin Proctor LLP. In a move that proved prescient, the NYDFS’ 2019 update of its standards for mortgage servicers, focused on clear and responsive communications with borrowers, both positioned the companies to better weather the COVID chaos and oriented them to ongoing change, said Schoenthal.
Changes that required, for instance, clarifying customer statements, also meant that servicers had to learn how to change, she said. “These rules came out and they were comprehensive, and [companies] had to change to comply, then COVID hit, and they had to respond to that. Now, the [federal] CFPB is more active and also is proposing rules. It’s a lot of shifting your policies, procedures, rules and talking points, and means training customer service,” she said. “You have to be nimble in your compliance and in consumer communications, you have to explain not only their options but also the reasons behind them.”
While the Consumer Financial Protection Bureau is reinvigorated under the Biden administration, there’s plenty of room for it to retake a leading role and coordinate with the NYDFS, said Schoenthal.
“Now that the CFPB is expected to step back up to consumer protection the DFS might shift its priorities to cybersecurity, climate and cryptocurrencies,” predicted Schoenthal.
With the regulatory ‘machinery’ in place for a year and a half, Berkman-Breen said his goal now is to make sure it’s operating smoothly and at full tilt. The department is “trying to get ahead of things with the industry and with advocacy communities,” he said, so that when forbearance grace periods expire, “people are offered appropriate exit strategies. Those aren’t expectations. That’s prescribed by law.”
Sorting through the unintended consequences of COVID damage to consumers’ credit reports is high on Berkman-Breen’s to-do list. “We are already thinking through how to look at this through the state regulatory lens how credit scores might be adversely impacted. Current data analysis is inconclusive but we should be intentional and thoughtful,” he said.
He’s also intent on parsing the factors that play into racial injustice “through the lens of lending discrimination,” citing the department’s recent reports and settlements.
And, yes, New York intends to take the lead among the states for the financial and homeownership ramifications of climate change.“It has financial risk implications but also lived experience, through river flooding, exposed coastlines – real implications for people,” said Berkman-Breen.
The post-COVID recovery economy is a chance to tackle big issues, he added, especially given that the department entered the crisis with big changes already settling out. “Our system is operating as intended,” said Berkman-Breen. “This is a moment for everyone to be as proactive as possible and get some of the best outcomes.”
