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On January 7, the NYDFS finalized a rule amending its banking regulations to implement New York's state Community Reinvestment Act requirements for certain nonbank mortgage lenders. The rule requires DFS to review how covered mortgage bankers serve the credit needs of their communities.
The final rule fills in the details of legislation enacted in 2021 that applied a community lending framework to mortgage bankers but did not spell out how DFS would conduct reviews or what standards would apply. The finalized rule now establishes who is covered, how lenders will be evaluated, and how the results may affect regulatory approvals.
The final rule makes several notable determinations, including the following:
- Coverage threshold based on New York lending volume. Lenders that originated at least 200 HMDA-reportable mortgage loans in New York state during the prior calendar year are subject to evaluation.
- CRA-style evaluations tailored to mortgage banking. NYDFS will conduct lending and service tests modeled on the Community Reinvestment Act, but adjusted to reflect that mortgage bankers do not take deposits and operate differently from traditional banks. Notably, the traditional "Investment Test" is replaced by a broader "Service Test" that includes community outreach and innovative lending
- Assessment areas designed for branchless lenders. To account for online and nationwide operations, mortgage bankers will be evaluated based on where they do a significant amount of lending, rather than only where they maintain physical offices.
- Ratings tied to regulatory approvals. NYDFS may consider a mortgage banker's performance when acting on licensing, branch, change-of-control, and other applications, and may deny or condition approvals based on the assessment.
- Public disclosure of results. NYDFS will issue written summaries of assessment outcomes and make them available to the public, adding transparency and reputational considerations to compliance risk.
Institutions will be evaluated using HMDA data and other information to assess the distribution of their loans, as well as their participation in community development-related services. Notably, while the department will evaluate 'qualified investments' and grants if they are made, the regulation explicitly states that mortgage bankers are not required to make such investments to achieve a passing rating on their performance test.
The effective compliance date for these rules is January 7, 2026.
Putting It Into Practice: New York has been one of the more active states in advancing consumer protection and fair lending initiatives during the current administration, particularly where federal policy and enforcement priorities remain in flux (previously discussed here and here). Mortgage companies active in New York should assess whether they meet the origination threshold, evaluate how their lending footprint translates ahead of the July 2026 compliance date. Companies with multistate operations should also monitor whether other states pursue similar nonbank CRA regimes and consider aligning compliance strategies accordingly.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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