Effective July 7, 2026, mortgage companies that extend at least 200 mortgage originations in NY state are subject to a new regulation that requires them to meet the credit needs of the communities they serve. One of the first and most important things those mortgage companies must understand is how important the concept of "assessment areas" is and how it affects the benchmarks used to determine if their performance is satisfactory. A casual delineation of an assessment area can make it much more difficult to show regulators you are "meeting the need for credit services" in the communities you have designated as your markets.
What is an assessment area?
Part 120 to Title 3 of the Official Compilation of Codes, Rules and Regulations of the State of New York, in section 120.5 spells out the do's and don'ts of assessment area delineation (tracts, counties, MSAs, MDs, non-MSAs). The regulations do provide some flexibility in the configuration of assessment areas. That's where it's important to understand not only what you must do and what you must not do, but also what you can do. That's where you can make your job (proving to examiners that you are meeting the credit needs of the communities you serve) easier or more difficult.
How does assessment area delineation affect your performance?
The regulation focuses particularly on the needs of low- and moderate-income census tracts (geographic dispersion) and low- and moderate-income borrowers (borrower distribution) in the markets you serve. Your "penetration rate" lending in those communities is compared to the income demographics and the market activity of other lenders active in your assessment area(s). When you expand or contract your assessment area(s) you are affecting not only your performance, you are affecting the benchmarks against which your performance is compared and rated. That's why it's so important to be cognizant of what your assessment area options are and how they affect your performance benchmarks.
You can designate an entire county or MSA as your defined community. That's easy. But it also may be unrealistic. And unrealistic assessment areas can result in unrealistic performance standards.
You can make your job easier or you can make it more difficult
As explained above, a casually defined assessment area may be easy to designate but it can make it harder to pass your performance exam. Therefore, it's important that you understand what your assessment area options are and the performance implications for each potential assessment area configuration.
When done correctly you should be able to identify each potential assessment area(s) configuration and determine the impact on your performance requirements and your performance results compared to those requirements.
It's not difficult to do and it's definitely worth the effort.
An "Assessment Area Mapping Exercise" will (1) result in more realistic performance standards, (2) allow you to know exactly what you must do to show you are fulfilling your responsibilities, and (3) enable you to set target performance goals (no more guessing).
There's no time to waste. The new NY State regulation takes effect on July 7, 2026. Now is the time to evaluate your assessment area options and determine the best configuration for your operation.
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