New York State Department Of Financial Services Adopts Regulations Implementing The Community Reinvestment Act Covering Mortgage Bankers

In January 2026, the New York State Department of Financial Services ("DFS") adopted its regulations (the "Regulations") implementing the provisions of the state's Community Reinvestment Act covering non-bank, independent mortgage bankers, also known as independent mortgage bankers, licensed under the New York Licensed Mortgage Bankers Law ("Mortgage Bankers"). Because the federal Community Reinvestment Act only applies to insured depository institutions, some states, including Illinois, Massachusetts, and New York, have adopted similar laws and applied those laws to non-depository mortgage companies. The Regulations impose filing, self-testing, and self-assessment requirements on Mortgage Bankers; require DFS to evaluate Mortgage Bankers, including by testing their performance in meeting community credit needs; and implicate applications. The evaluation requirements are similar to those imposed on insured depository institutions under the federal Community Reinvestment Act and its implementing regulations.

While the Regulations became effective the same day of their publication—January 7, 2026—the compliance date is July 7, 2026.

Filings

The Regulations require Mortgage Bankers to file, upon DFS's request, a copy of each report and document that the Mortgage Banker is required to prepare or file with a federal, state, or local agency and which relates to the credit needs of its community. Such documents include any data and supporting materials prepared or submitted for the purposes of compliance with the Home Mortgage Disclosure Act ("HMDA") or any other federal, state, or local requirement. At the Mortgage Banker's option, it may provide other information concerning its performance in meeting the credit needs of its community.

Self-Testing

The Regulations also impose a testing requirement, requiring each Mortgage Banker to test its collection and reporting of data, including HMDA data, as part of its routine internal controls to ensure the completeness and accuracy of its data and compliance with all data reporting requirements as well as the Mortgage Banker's own policies and procedures.

Evaluations

The Regulations require DFS to evaluate a Mortgage Banker's record of performance in helping to meet the credit needs of the community of each Mortgage Banker who has originated 200 or more residential mortgage loans in New York State in the last calendar year reportable under HMDA. Among other things, DFS will consider the following discriminatory or other credit practices that violate an applicable law as adversely affecting a Mortgage Banker's performance:

• discrimination against applicants on a prohibited basis;
• violation of either section 6-l of the New York Banking Law or the Home Ownership and Equity Protection Act;
• violation of section 5 of the Federal Trade Commission Act
• violation of section 8 of the Real Estate Settlement Procedures Act; and
• violation of the Truth in Lending Act provisions regarding a consumer's right of rescission.

The evaluation may be performed on-site; require the submission of written responses; consist of interviews and branch visits; and require any other information as DFS deems necessary. In addition, DFS may rely, in part, on similar evaluations by other federal, state, and local agencies.

As part of the evaluation, DFS conducts performance tests consisting of lending tests and service tests of a Mortgage Banker's "assessment areas." The Regulations require a Mortgage Banker to delineate at least one assessment area (i.e., a geographic area) in the state, which must meet certain geographical and loan volume criteria, within which DFS will evaluate the Mortgage Banker's record of helping to meet the credit needs of its community. If a Mortgage Banker has one or more branches within the state, the Mortgage Banker is required to delineate one or more branch-based assessment areas, which must meet its own criteria.

DFS will apply the performance tests in the context of:

• demographic data (e.g., median income levels, housing data;
• performance of all mortgage lenders (including banking institutions) in the assessment area;
• lending and service opportunities in the assessment area;
• the Mortgage Banker's product offerings and business strategy, institutional capacity and constraints, past performance, and market shared in the assessment area;
• community input; and
• any information deemed relevant by DFS.

Lending Test

The lending test evaluates a Mortgage Banker's record of helping to meet the credit needs of its assessment area(s) through lending activity. Specifically, DFS evaluates a Mortgage Banker's lending performance under criteria that may include the following:

• the number and amount of the Mortgage Banker's mortgage loans in the assessment area;
• the geographic distribution of the Mortgage Banker's mortgage loans based on the loan location;
• the distribution, particularly in the assessment area, of the Mortgage Banker's mortgage loans based on borrower characteristics, including the number and amount of mortgage loans to low-, moderate-, middle-, and upper-income individuals; and
• the Mortgage Banker's use of innovative or flexible lending practices, in a safe and sound manner, to address the credit needs of low- or moderate-income individuals or geographies, or underserved individuals or geographies, including governmentally insured, guaranteed, or subsidized loan programs for housing, as appropriate for each borrower.

A Mortgage Banker's rating on the lending test may be adversely affected by harmful practices such as those intended to discourage application for an extension of credit offered by the Mortgage Banker, or which may result in harm to low- and moderate-income individuals. In addition, no Mortgage Banker may include a mortgage loan origination for consideration if another non-depository mortgage banker or depository institution claims the same mortgage loan origination.

Service Test

The service test evaluates a Mortgage Banker's record of helping to meet the credit needs of its assessment area by analyzing both the availability and effectiveness of a Mortgage Banker's systems for delivering mortgage loan products and the extent and innovativeness of a Mortgage Banker's "community development services," qualified investments, community outreach, marketing, and educational programs.

A "community development service" is a service that has community development as its primary purpose and is related to the provision of financial services. Generally, the Regulation defines "community development" as mortgage products and other efforts to assist with affordable housing for low- or moderate-income individuals; mortgage products made as part of a special purpose credit program; community services target to low- or moderate-income individuals; activities that revitalize or stabilize low- or moderate-income geographies, designated disaster areas, or distressed or underserved nonmetropolitan middle-income geographies, or activities that seek to prevent defaults or foreclosures on loans described above.

Specifically, DFS evaluates a Mortgage Banker's community development services under criteria that may include the following:

• the extent to which the Mortgage Banker provides community development services;
• the innovativeness and responsiveness of community development services; and
• the range of services provided, and the degree to which the services are tailored to meet the needs of low- and moderate-income geographies and individuals, and other underserved communities and individuals.

Note that not offering a particular type of community development service is not, on its own, a bar to achieving any rating on the service test.

In addition, DFS evaluates a Mortgage Banker's qualified investments under criteria that may include the following:

• the dollar amount of qualified investments;
• the innovativeness or complexity of qualified investments;
• the responsiveness of qualified investments to credit and community development needs; and
• the degree to which the qualified investments are not routinely provided by private investors.

A Mortgage Banker is not required to make qualified investments to achieve any rating on the service test.

Evaluation Results

Based on the evaluation, DFS will provide a written summary and assign a rating (Outstanding, Satisfactory, Needs to Improve, or Substantial Noncompliance) to the Mortgage Banker, both of which will be made available to the public. A Mortgage Banker that received an "Outstanding" on its most recent evaluation will generally be evaluated less frequently than a Mortgage Banker that received a lower rating. As previously noted, DFS can lower a Mortgage Banker's rating based upon credit practices that violate applicable laws.

Licensing

Under the Regulations, when taking any action on any Mortgage Banker's application (e.g., to open a branch, for changes of control), DFS is required to take into account a Mortgage Banker's record of performance in helping to meet the credit needs of its entire community, including low and moderate income neighborhoods and consistent with safe and sound operation of the Mortgage Banker. Based on the assessment, DFS may deny any application, including an application to open and maintain a branch office and a change of control application of a licensee or issue a conditional approval. This is similar to how the federal banking regulators use CRA data when evaluating applications submitted by insured depository institutions.

The Regulations create a framework for the DFS to evaluate Mortgage Bankers' record of performance in helping to meet the credit needs of the community while imposing disclosure and self-assessment requirements on those Mortgage Bankers. With a six-month runway to comply, Mortgage Bankers should promptly review their policies, procedures, and operations to align with the Regulations.

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