New York state is extending its Community Reinvestment Act (CRA) obligations to non-bank mortgage lenders, a move that will require these institutions to demonstrate equitable access to home loans, particularly for low- and moderate-income New Yorkers. The New York State Department of Financial Services (DFS) adopted the regulations in January 2026, with compliance required by July 7, 2026.
Closing a Regulatory Gap
Historically, the federal CRA has applied primarily to insured depository institutions – traditional banks. As non-bank mortgage companies have grown to represent a significant portion of the mortgage market – accounting for approximately 64% of mortgage originations nationwide in the second quarter of 2025, according to the DFS – regulators have sought to apply similar oversight to this sector. This new rule aims to address a perceived regulatory gap, bringing larger non-bank lenders into a CRA-style framework.
Regulations and Requirements
The regulations, formally known as 3 NYCRR Part 120, will apply to New York State Department of Financial Services (DFS)-licensed non-depository mortgage bankers that originated 200 or more New York State mortgage loans in the prior calendar year. These lenders will be subject to filing, self-testing, and self-assessment requirements. The DFS will evaluate these lenders, mirroring the evaluation process used for insured depository institutions under the federal CRA.
A key component of the regulations involves the filing of reports and documents already prepared for federal, state, or local agencies, particularly those related to the Home Mortgage Disclosure Act (HMDA). Lenders may also voluntarily submit additional information demonstrating their performance in meeting community credit needs. This data will be used by the DFS to assess how effectively these lenders are serving the credit needs of their communities.
Defining Assessment Areas
Recognizing that many non-bank lenders operate without traditional branch networks, the DFS will define “assessment areas” based on where loans are actually made. This approach ensures that both branch-based and online lenders are evaluated based on their lending activity, rather than physical presence. What we have is a significant departure from traditional CRA assessment areas tied to branch locations.
Evaluation Criteria and Ratings
The DFS evaluation will include both a lending test and a service test. The lending test will examine the distribution of loans across neighborhoods and income levels, while the service test will review programs, services, outreach, marketing, and education initiatives designed to support community development. The DFS will consider local demographics, market conditions, and peer performance when conducting these evaluations.
Lenders will receive one of four public ratings: Outstanding, Satisfactory, Needs to Improve, or Substantial Noncompliance. The DFS will publish written evaluations, which will be considered when reviewing license applications, branch or office applications, and other regulatory requests. This public rating system introduces a new level of transparency and accountability for non-bank mortgage lenders in New York.
Building on Existing Frameworks
These new regulations build upon New York’s 2021 update to its state CRA, demonstrating a continued commitment to expanding CRA principles beyond traditional banking institutions. The move aligns New York with other states, including Illinois and Massachusetts, that have already adopted similar laws to apply CRA-like requirements to non-depository mortgage companies.
Implications for Lenders
The new regulations will likely require non-bank mortgage lenders to invest in data collection and analysis capabilities to demonstrate compliance. They may also need to enhance their community outreach and development programs. Lenders that consistently receive lower ratings could face increased regulatory scrutiny and potential restrictions on their ability to expand operations in New York.
The compliance date of July 7, 2026, provides lenders with a six-month window to prepare for the new requirements. This timeframe will be crucial for lenders to assess their current practices, implement necessary changes, and ensure they are positioned to meet the DFS’s expectations.
Broader Context
This regulatory action reflects a broader trend among state regulators to extend CRA-like oversight to non-bank financial institutions. As these institutions continue to gain market share, regulators are increasingly focused on ensuring they meet the same community reinvestment obligations as traditional banks. The New York regulations could serve as a model for other states considering similar measures.
