ANHD Submits Comments on NYSDFS Proposal for Nonbank Mortgage Lenders
ANHD recently submitted commentary on proposed regulations by the New York State Department of Financial Services (NYSDFS) that would establish a Community Reinvestment Act (CRA)-like framework for nonbank mortgage lenders operating in New York State.
We welcome these new regulations, which aim to promote equitable lending practices and ensure that financial services benefit all neighborhoods—particularly low- and moderate-income communities.
In our letter, we also offered recommendations to further strengthen the proposal, including measures to undo the legacy of redlining and center community input to ensure that lending and financial resources stay within the communities these institutions serve.
You can read our submitted commentary below.
March 31st, 2025
VIA ELECTRONIC FILING
Terry McMahon
Via Email: terry.mcmahon@dfs.ny.gov
RE: Association for Neighborhood and Housing Development Comments on the New 3
NYCRR120—with Banking Law Section 28-bb
Dear Mr. McMahon:
I am writing on behalf of the Association for Neighborhood and Housing Development (ANHD) to provide comments on the revised proposed regulation issued by the New York State Department of Financial Services (NYSDFS), which expands the New York Community Reinvestment Act (CRA) to include non-depository mortgage lenders. This expansion is required following the passage of S.5246-A/A.6247-A, amending the NYS CRA.
ANHD is a nonprofit membership organization made up of over 80 community organizations across New York City, dedicated to building community power to secure affordable housing and create thriving, equitable neighborhoods for all New Yorkers. We also convene the Equitable Reinvestment Coalition (ERC), a member-led coalition focused on holding financial institutions accountable for the racial and economic inequities they have historically contributed to and continue to perpetuate. Alongside years of responsible banking work, we aim to provide additional insight on how to further improve regulatory frameworks in New York State that could help upend systemic discriminatory lending practices that have had lingering effects on low-wealth communities, communities of color, and other marginalized groups.
This letter builds upon the comments we submitted in response to the November 2021 NYSDFS press release.1 We appreciate the thoughtfulness reflected in this rulemaking process, and we look forward to its swift implementation.
ANHD commends Governor Hochul, Superintendent of Financial Services Adrienne A. Harris, community organizations, and elected officials who have helped make this expansion of the NYS CRA a reality. Ensuring that lenders—particularly non-depository mortgage lenders—support access to home loans in the communities they serve is vital. This is especially important for low- and moderate-income residents and historically underserved communities of color, who continue to face inequitable access to financial products due to the enduring legacy of redlining. Expanding fair access to homeownership opportunities is essential to promoting social mobility and economic security for all New Yorkers.
We will first touch on providing recommendations applicable to the proposed regulations that could further enhance reinvestment into historically underserved communities in New York State through mortgage companies, which would include:
● Reevaluate permitting mortgage companies with over 1,000 loan originations in each of the past two years to be assigned a single statewide assessment area;
● Lowering the lending threshold for mortgage companies to be evaluated to 100 loans would allow crucial insight into their lending patterns.
We are also making suggestions that the following recommendations should apply to non-bank mortgage lenders, as well as banks and credit unions, in a subsequent rulemaking process. This would prioritize equitable reinvestments for all New Yorkers impacted by historically discriminatory lending practices.
Our recommendations include:
● Incorporating and centering race into performance evaluations.
● Incorporating the performance context into the rating categories of the examined financial institutions.
● Factoring in the cost of loans to ensure affordability and accessibility.
● Emphasizing loan originations over purchases to better assess lending impact.
● Ensuring and promoting public input in the CRA evaluation process, with clear benchmarks for downgrading institutions that fail to meet performance expectations.
These steps will help create a more transparent, accountable, and equitable lending environment for all communities across New York State.
Historical Context
The 2021 NYSDFS report, Report on Inquiry into Redlining in Buffalo, New York, highlights the significant lending disparities among non-depository mortgage lenders, particularly along racial lines. For instance, in NYSDFS’s analysis of HMDA lending patterns (2016–2019), loans to minority borrowers comprised only 9.74%
of total loans, despite minority populations accounting for approximately 20% of the region’s population2 . Additionally, non-depository lenders originated about 37% of mortgages in the Buffalo MSA3 , significantly increasing their market share as traditional banks exit the mortgage lending sector. This trend underscores the urgent need to expand CRA regulations to ensure that non-depository mortgage lenders are effectively serving the communities and reinvesting crucial services in them.
Furthermore, as detailed in the report, NYSDFS investigations into financial institutions revealed weaknesses in fair lending and compliance programs among non-depository mortgage lenders. One such case involved Hunt Mortgage Corporation4 , which ultimately reached a settlement agreement with NYSDFS, requiring the lender to implement the following corrective actions:
● Increase marketing efforts to minority communities, particularly in majority-minority neighborhoods.
● Develop a special financing program with at least $150,000 in discounted or subsidized financing for properties in majority-minority neighborhoods.
● Provide annual fair lending training to employees and agents.
● Conduct an annual fair lending compliance audit.5
The expansion of CRA regulations to include non-depository mortgage lenders is a critical step in protecting
low- and moderate-income residents across New York State, particularly in communities of color that have historically been marginalized and underserved. This reform represents a meaningful advancement in equitable reinvestment and the fair access to housing that all New Yorkers deserve.
Assessment areas
ANHD supports the proposal to establish lending-based assessment areas in each Metropolitan Statistical Area (MSA) or non-metropolitan area where a mortgage lender has originated at least 100 mortgage loans outside of branch-based assessment areas over the past two years.6 This is a crucial and logical approach, given that most mortgage lenders do not operate physical branches.
However, we strongly urge the DFS to reconsider the proposal allowing mortgage bankers that have originated at least 1,000 loans in the past two years to be evaluated using a single statewide
assessment area. A statewide assessment area would fail to capture local lending patterns, economic conditions, and community-specific needs, which vary significantly across New York State.7
As highlighted in the 2021 DFS report, a statewide analysis showed that mortgage companies originated more loans in census tracts with a majority of people of color. However, when examining
lending in the Buffalo MSA specifically, banks originated more loans than mortgage companies in majority-POC neighborhoods. This again highlights the need for localized assessment areas, as they provide a clearer picture of lending disparities at the regional level.8
Furthermore, establishing lending-based assessment areas encourages lenders to track their own performance, a practice that has proven beneficial. DFS itself has noted that these assessment areas allow fair lending issues to be more readily identified and addressed—whether by lenders, regulators, or enforcement agencies. By contrast, a single statewide assessment area would significantly weaken oversight and hinder efforts to correct market-specific lending disparities, once again putting communities of color at a disadvantage in accessing financial resources.
Additionally, the largest mortgage lenders, those originating at least 1,000 loans annually, have the capacity and resources to meet local credit needs. Lending-based assessment areas at the MSA or non-metropolitan level would incentivize these institutions to proactively monitor the geographic distribution of their loans and ensure they are adequately serving the credit needs of the communities in which they operate.
Applying this proposal across all mortgage companies is also feasible. Between 2022 and 2023, only 15 mortgage companies in New York originated 1,000 or more loans out of 197 total mortgage
lenders in the state. Of these:
● Only one company would need to create more than 10 lending-based assessment areas.
● Four would have six to eight assessment areas, and
Ten would have four or fewer, including five companies that would only need one or two.9
Given these factors, we strongly urge DFS to require all mortgage companies meeting 1,000 loan originations to establish lending-based assessment areas at the MSA or nonmetropolitan level rather than defaulting to a statewide assessment area, which could miss addressing local credit needs and exacerbate financial inequities.
Lower the lending threshold for when mortgage companies will be evaluated to 100 loans
In alignment with many advocacy organizations submitting commentary, ANHD proposes that DFS lower the threshold for mortgage company evaluations from 200 originated loans in the last calendar year to 100 originated loans.
This adjustment would bring New York’s institutional coverage more in line with Illinois’ recently finalized regulations for mortgage companies. Additionally, this is the HMDA threshold 10 at the federal level, which both set an important precedent, allowing for further coverage of the communities’ mortgage companies are serving.
Rationale for Lowering the Threshold:
● Current Proposal (200 Loans): Based on 2023 lending data, setting the threshold at 200 loans would cover only 57 mortgage companies out of the 177 that made at least one origination in
New York—accounting for just 32% of all mortgage lenders.11
● Proposed Change (100 Loans): Lowering the threshold to 100 originated loans would cover 78 mortgage companies, increasing coverage to 44% of all mortgage lenders in New York. The
Illinois’s approach further supports this recommendation. Their finalized regulations require:
● A lending test for all mortgage companies with 50+ loan originations in the last calendar year.
● An additional service test for mortgage companies originating 200+ loans annually.12
With Illinois’ 50-loan threshold, 39% of active mortgage companies in the state were covered based on 2023 reported loans—comparable to the 44% coverage New York would achieve with a 100-loan threshold and significantly higher than the 32% coverage under the current 200-loan threshold proposal.13
Recommended to DFS for New York State:
● All mortgage companies with at least 100 loans should be evaluated under a lending test.
● Mortgage companies with 200+ loans would be subject to a service test, mirroring Illinois’ regulatory structure.
We urge DFS to adopt these recommendations in New York State to ensure a more comprehensive evaluation of mortgage lending practices. Implementing these changes will help identify and address lending disparities more effectively while also working to undo historical injustices that have disproportionately impacted low- to moderate-income New Yorkers, particularly communities of color across the state.
Incorporating Race
ANHD and its member organizations recognize the critical importance of both racial and financial equity, as these factors work hand in hand to create opportunities and expand access to resources for communities that have historically been underserved by mainstream financial institutions and non-bank mortgage lenders. This is highlighted in the NYS attorney general’s report, titled “Racial Disparities in Homeownership: How Lending Practices Have Prevented New Yorkers of Color from Purchasing Homes and Deepened Wealth Inequality,” which showed the disparities in financing and property values across neighborhoods along racial lines when quoting, “Despite discrimination being prohibited, communities of color remain under-resourced and undervalued. In 2021, the average value of a New York City home paid for by financing was $824,000 in a neighborhood of color, versus $1.23 million in a majority-white neighborhood.”14
With that in mind, it is imperative that the law be race-conscious and that DFS incorporate race- conscious evaluations in subsequent rulemaking. The intent behind this legislation was clearly stated in Governor Hochul’s announcement upon its final passage (bold added for emphasis):
“This expansion of the New York Community Reinvestment Act further strengthens this state’s commitment to ensuring all New Yorkers have the opportunity for homeownership,” Governor Hochul said. “This legislation will ensure everyone has fair and equal access to lending options in their pursuit of purchasing a home, especially in communities of color, which continue to be impacted by the effects of the pandemic and have historically faced many more hurdles when seeking a mortgage.”15
By aligning DFS’s rulemaking with the intent of the law, we can ensure that equity remains central to its implementation, addressing historical disparities and advancing fair lending practices across New York State.
Performance context, ranges & category rating
We recommend a hybrid exam structure for mortgage bankers, modeled after the Community Reinvestment Act (CRA) framework but tailored to the unique nature of non-depository lenders, that
ties into the performance context. Additionally, DFS should consider incorporating key elements of this structure into traditional bank CRA exams for state-chartered banks and other financial entities that DFS examines.
Performance Context
DFS should conduct an in-depth analysis of community needs, incorporating demographic data, mortgage trends, relevant studies, and direct community input through public comments and proactive outreach. Additionally, DFS should assess the lender’s capacity to meet various community credit needs, considering factors such as financial condition, size, legal constraints, and local economic conditions.
Lenders should also be evaluated on their efforts to understand and respond to local credit needs, including:
● Proactive engagement with the community to assess financial service gaps.
● Methods used to analyze local needs such as data-driven studies and consultation with key stakeholders.
● The diversity and representativeness of organizations consulted, ensuring outreach efforts reflect the racial, ethnic, linguistic, and socioeconomic make-up of the communities served.
Establishing performance ranges tied to each of the ratings an institution can receive, like the approach in the 2023 federal CRA rules. This would establish transparent expectations of what would
be considered outstanding or satisfactory lending performance, as well as lending performance that shows a need for improvement and substantial noncompliance or indifference to meet the credit needs of the entire community. These ranges would compare a specific institution’s lending to the rest of the market, as well as specific demographics such as the percentage of households with low and moderate income in a specific assessment area. DFS could use the federal CRA’s performance ranges as a guide in setting these up. For instance, the 2023 federal CRA rules establish that large banks must generally lend at either 80% of aggregate lending or 60% of local demographics to receive a “Low Satisfactory” rating in a specific assessment area.16
The federal regulators implemented performance ranges “to increase consistency in evaluations and provide improved transparency and predictability regarding the retail lending performance needed to achieve a particular conclusion.”17 There are many benefits to this approach. All stakeholders—community members, covered institutions, and DFS examiners—will benefit from knowing how much lending is deemed satisfactory or outstanding. That clarity could streamline the lending test review for DFS examiners and provide more time to review qualitative aspects of a covered institution’s CRA performance. This will also do more to encourage lenders below satisfactory performance to prioritize increasing lending to borrowers and communities with low or moderate incomes; streamlining ranges and benchmarks would benefit everyone involved in this process.
Outreach & Engagement
All banks, including mortgage lenders, should be evaluated on their marketing, outreach, and engagement efforts to ensure they are effectively reaching underserved and underbanked communities. Key areas of assessment should include:
● Marketing & Outreach—How well the lender promotes its services and products to diverse and underserved populations.
● Community Engagement—The lender’s efforts to understand and address local credit needs through direct communication with community members about available services.
● Community Development Initiatives—Participation in outreach programs, redevelopment projects, and financial education efforts to support long-term community stability and access to financial resources.
By adopting this structured/hybrid approach, DFS can create a more transparent and effective process for examination that creates guardrails for lenders to be accountable while ensuring
communities receive fair and equitable access to credit.
Add the cost of loans to the lending test criteria
DFS should include the cost of loans as a factor in the lending test for both mortgage companies under the currently proposed regulations and for state-chartered banks and credit unions in the
following rulemaking. Evaluating loan costs would strengthen assessments of harmful lending practices, ensuring that covered financial institutions are not engaging in practices that disproportionately harm low- to moderate-income (LMI) borrowers, especially communities of color.
Mortgage lenders are already required to report data on loan costs, including interest rates relative to the Average Percent Offer Rate (APOR) and closing costs. DFS examiners can use this data to
identify patterns of high-cost lending and detect outliers, which will help prevent predatory lending practices.
Considering loan costs is critical in evaluating how mortgage lenders serve credit needs, as the quality of loans is just as important as the number of loans originated. By incorporating this criterion, DFS can enhance consumer protections and ensure fairer lending practices across New York State.
Banks vs. Non-Banks: Key Differences & Regulatory Considerations
The current law applies only to mortgage bankers licensed by DFS, with licensure contingent on the lender originating 1-4 family mortgages on owner-occupied homes. However, many of these licensed lenders, along with non-licensed lenders, also originate multifamily loans and non-owner-occupied 1-4 family loans. Additionally, while both banks and nonbanks purchase loans, purchasing alone does not appear to trigger licensure unless the lender is also originating loans.
Key Differences Between Banks and Non-Banks
There are several fundamental differences between banks and non-banks that impact their lending practices and regulatory oversight:
● Funding Sources: Unlike banks, nonbanks do not take deposits and must raise capital from investors, banks, and loan sales.
● Loan Sales & Secondary Market Reliance: According to Home Mortgage Disclosure Act (HMDA) data, non-bank mortgage lenders have significantly expanded their market share, originating 63.9% of first-lien, owner-occupied, site-built home purchase loans in 2021, up from 60.7% in 2020. While HMDA data provides insights into mortgage origination, it offers limited information on loan sales by non-bank lenders. However, industry analyses suggest that a substantial portion of these loans are sold to government-sponsored enterprises (GSEs) like Fannie Mae and Freddie Mac, highlighting nonbanks’ reliance on the secondary market to
maintain liquidity and manage risk.18
● Government-Backed Loans: Nonbanks tend to originate more government-backed loans, likely because these loans are easier to sell on the secondary market.
Ensuring Accountability for Bank Financing of Non-Banks
DFS approves banks to issue warehouse lines of credit to mortgage bankers, effectively financing their lending operations. To uphold the intent of the new non-bank CRA exams, DFS should ensure that these exams are reflected in the oversight of approved banks. Specifically, banks that finance non-bank lenders found to be non-compliant under the new CRA law should face consequences for enabling such lending practices, such as a downgrade in rating. This accountability should extend to other partnerships between banks and non-bank lenders, reinforcing sound lending and investment standards.
Enhancing Public Participation & Community Input
ANHD commends DFS’s efforts to encourage public comments on CRA evaluations through its website and for maintaining a schedule of upcoming exams. 19 However, public comments are not explicitly included in the proposed regulations for non-mortgage lenders or the finalized regulations for banks.
To ensure continued public engagement, we recommend that DFS update both regulations to allow the public to provide input on how well institutions are meeting the credit needs of their communities.
Additionally, we encourage DFS to
● Require institutions to post CRA notice in branches and on websites to encourage public participation in the evaluation process, following the model used in Illinois for banks, credit
unions, and mortgage companies.20
● Facilitate public comments on performance evaluations by posting comment deadlines and examiner contact information on the DFS website.
These measures will increase transparency, strengthen public engagement, and ensure accountability in assessing how financial institutions serve their communities. Ultimately, and building
from community input and accountability, non-mortgage lenders and any institution found engaging in discriminatory or predatory lending should be
DFS should incorporate a fair lending analysis, like the framework used for banks under CRA, to ensure compliance with statutory requirements. This analysis should evaluate practices intended to discourage applications for credit and evidence of prohibited discriminatory or other illegal credit practices. If DFS identifies data indicating violations or if another government entity has already determined that a lender has violated fair lending or consumer protection laws, the institution should face a downgrade or failure in its CRA evaluation. Implementing this approach will help hold lenders accountable, prevent discriminatory practices, and strengthen consumer protections across New York State.
Conclusion
We hope that DFS will consider adopting these proposals, which could help provide DFS with a more comprehensive understanding of how mortgage companies, banks, and credit unions are meeting the needs of their communities across New York State and setting a foundation to undo systematic wrongdoing that prevents many low- and moderate-income New Yorkers from financial security they deserve. These recommendations will ultimately strengthen New York State CRA regulations, reinforcing the state’s commitment to ensuring that every New Yorker has equitable access to essential financial products and services.
Thank you for your time and consideration of our views on a matter dear to us and our member organizations. If you have any questions, please contact Steven Molina, Equitable Reinvestment Policy Associate, at steven.m@anhd.org or myself at Barika.W@anhd.org.
Sincerely,
Barika X. Williams
Executive Director
Association for Neighborhood and Housing Development
1 New York State Department of Financial Services. (2021, November 1). Governor Hochul Signs Legislation Expanding
New York Community Reinvestment Act to Non-Depository Mortgage Lenders
https://www.dfs.ny.gov/reports_and_publications/press_releases/pr202111011
2 New York State Department of Financial Services. (2021). Redlining in Buffalo: The Need for Reform in Financial
Services Regulation (p.14).
https://www.dfs.ny.gov/system/files/documents/2021/02/report_redlining_buffalo_ny_20210204_1.pdf
3 Ibid. (page.14)
4 Ibid. (page 15)
5 Ibid. (page 18)
6 New York State Department of Financial Services. New 3 NYCCR 120. Compliance with Banking Law Section 28-bb.
Page 6. Available online at https://www.dfs.ny.gov/system/files/documents/2025/02/rp-bank-3nycrr120-text.pdf.
7 Ibid. Page 7
8 New York State Department of Financial Services. (2021). Redlining in Buffalo: The Need for Reform in Financial
Services Regulation (p.14).
https://www.dfs.ny.gov/system/files/documents/2021/02/report_redlining_buffalo_ny_20210204_1.pdf
9 The National Community Reinvestment Coalition analysis of 2022-2023 HMDA data of all mortgage companies active in
New York state during 2022 and 2023. Identified as mortgage companies using Bob Avery’s FHFA file (2018-2022) and
by agency and lender codes in their HMDA submissions. Includes all loan originations and loan purposes, with no additional filters applied.
10 Consumer Financial Protection Bureau. (n.d.). Home Mortgage Disclosure Act (HMDA) FAQs. Retrieved from
https://www.consumerfinance.gov/compliance/compliance-resources/mortgage-resources/hmda-reporting-
requirements/home-mortgage-disclosure-act-faqs/
11 The National Community Reinvestment Coalition analysis of 2023 HMDA data of all mortgage companies active in New
York state during 2023. Identified as mortgage companies using Bob Avery’s FHFA file (2018-2022) and by agency and
lender codes in their HMDA submissions. Includes all loan originations and loan purposes, with no additional filters
applied.
12 Illinois Register. Volume 48, Issue 20. May 17, 2024. Pages 7181 and 7188. Available online at
https://www.ilsos.gov/departments/index/register/volume48/register_volume48_20.pdf.
13 The National Community Reinvestment Coalition analysis of 2023 HMDA data of all mortgage companies active in
Illinois during 2023. Identified as mortgage companies using Bob Avery’s FHFA file (2018-2022) and by agency and lender codes in their HMDA submissions. Includes all loan originations and loan purposes, with no additional filters applied.
14 New York State Office of the Attorney General. (n.d.). Racial disparities in homeownership: A report on the racial
homeownership gap in New York State. https://ag.ny.gov/sites/default/files/reports/oag-report-racial-disparities-in-homeownership.pdf
15 New York State Department of Financial Services. (2021, November 1). Governor Hochul Signs Legislation Expanding
New York Community Reinvestment Act to Non-Depository Mortgage Lenders
https://www.dfs.ny.gov/reports_and_publications/press_releases/pr202111011
16 Federal Register. Vol. 89, No. 22. February 1, 2024. Page 6881. Available online at
https://www.govinfo.gov/content/pkg/FR-2024-02-01/pdf/2023-25797.pdf
17 Ibid. Page 6787.
18 ¹ Consumer Finance Monitor. (2022, June 21). 2021 HMDA data released.
https://www.consumerfinancemonitor.com/2022/06/21/2021-hmda-data-released/
19 Examinations and Exam Reports. New York Department of Financial Services. Available online at
https://www.dfs.ny.gov/reports_and_publications/exam_reports.
20 Illinois Register. Volume 48, Issue 20. May 17, 2024. Pages 7088 (credit unions), 7162 (banks), and 7207 (mortgage
companies). Available online at https://www.ilsos.gov/departments/index/register/volume48/register_volume48_20.pdf.