On December 21, 2023, the New York Department of Financial Services (“NYDFS”) finalized guidance on how the banks and mortgage institutions it regulates (“New York Institutions”) should manage climate-related financial and operational risks (the “Guidance”). The Guidance establishes extensive obligations for New York Institutions, which—even if tailored by the state to be proportionate to size and activities—may create a significant burden. This is particularly true for mortgage bankers and mortgage servicers, which, historically, have not been subject to the same prudential standards and risk management expectations as banks.

While the Guidance largely tracks the December 2022 proposed guidance, it includes some significant changes, particularly with respect to operational resilience and the roles of the governing body or board of directors and management.

The Guidance became effective upon issuance, although NYDFS has not established a timeline for implementation at this time. In this Legal Update, we provide background on the NYDFS’s climate risk management initiative and discuss the Guidance.

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