On December 17, NYDFS introduced a new regulation, NEW 3 NYCRR 120, Compliance with Banking Law Section 28-bb, which would require nonbank mortgage bankers in New York State to collect and report data related to home loans to ensure that mortgage bankers meet the credit needs of their communities, especially in low- and moderate-income areas, while maintaining safe and sound business practices. The proposed rule would subject licensed non-bank mortgage lenders that originate 200 or more HMDA loans in New York State in the last calendar year to lending and service evaluations within lending-based and branch-based assessment areas. These evaluations will assign ratings based on the mortgage banker’s effectiveness in serving the community.

The regulation would mandate that mortgage bankers delineate assessment areas within the state of New York, which will be used to evaluate their lending and service performance. These areas must include whole geographies and cannot exclude low- or moderate-income areas arbitrarily. The regulation would also introduce lending and service tests to assess mortgage bankers’ records in meeting community credit needs, focusing on innovative practices and community development services.

The Superintendent of Financial Services will review applications and assess mortgage bankers’ performance in meeting community credit needs, considering factors like lending activity, geographic distribution, and borrower characteristics.

In high-cost areas where housing affordability is a concern, NYDFS may consider mortgage bankers’ activities in middle-income geographies, in addition to low- and moderate-income areas. This flexibility would aim to address credit shortages and support community stability.

The compliance date for this regulation is set for six months after its publication in the State Register, allowing mortgage bankers a transitional period to align their practices with the new requirements.