NYDFS Issues Guidance on Fees Paid to Register Mortgages in Default

The New York Department of Financial Services (NYDFS) recently issued an industry letter providing guidance to New York mortgagees concerning a fee imposed by certain counties, cities, and other municipalities for the registration of mortgages declared to be in default (Registration Fee).

The industry letter, in part, reiterates the New York Mortgage Loan Servicer Business Conduct Rules’ (Part 419’s) requirement that mortgagees may only charge mortgagors certain specified fees—i.e., attorney’s fees, late and delinquency fees, property valuation fees, and fees reasonably related to the cost of services actually rendered to a mortgagor.  The NYDFS notes that a Registration Fee is not one of the specified fees permitted under Part 419 and, as a result, such fee may not be charged to, or collected from, a mortgagor.  The NYDFS states that if a Registration Fee was charged to a mortgagor’s account but was not collected, the mortgagee must remove and reverse the Registration Fee charge from the mortgagor’s account.  Additionally, if the mortgagee has collected a Registration Fee from a mortgagor, the mortgagee must refund and credit the full amount of the Registration Fee to the mortgagor’s account.

Further, mortgagees are directed to create a log for all mortgagors that have either been charged or paid a Registration Fee.  The log, which will be inspected by the NYDFS during the next NYDFS examination of the mortgagee, must contain the amount of the Registration Fee (whether charged or collected), and the date that the Registration Fee was removed from or refunded to, as applicable, the mortgagor’s account.