Albany, NY – June 3, 2009 – (RealEstateRama) — Governor David A. Paterson today announced legislation that would build upon a landmark subprime lending reform law enacted last year by providing additional critical protections for New York State homeowners, tenants and neighborhoods in the wake of the ongoing foreclosure crisis. The bill would help homeowners currently at risk of foreclosure and minimize the negative impact that foreclosures can have on a community.
“While we have made great strides in assisting distressed homeowners and in reforming lending laws to prevent predatory lenders from taking advantage of consumers, it is clear that more must be done to protect the hard-working men and women of New York,” said Governor Paterson. “We cannot allow homeowners who are simply seeking help to lose their homes to loan modification scams and we cannot allow tenants who live in foreclosed properties to find their leases terminated without reasonable notice.”
“This legislation strengthens protections for homeowners, tenants and neighborhoods by expanding previous laws and establishing safeguards against foreclosure rescue scams,” added Governor Paterson. “It has been shown that New Yorkers could lose up to $64 billion in equity by the end of the year due to foreclosed properties. We are working to protect New York neighborhoods from decay due to foreclosure, not only by reducing the erosion of area property values but by also preventing these vacant homes from becoming a site for criminal activity and drug use.”
Current Statutory Protections
Last year’s law, enacted as Chapter 472 of the Laws of 2008, established myriad protections to address the mortgage crisis in New York State. Those protections, among other things:
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- Required lenders to send a pre-foreclosure notice to borrowers with subprime loans at least 90 days before initiating foreclosure proceedings to allow lenders and homeowners the opportunity to reach resolution before the initiation of a foreclosure action;
- Required lenders to list in the pre-foreclosure notice the name and telephone numbers of government-approved housing counselors serving the borrower’s area to help homeowners effectively connect with counselors;
- Established an early mandatory settlement conference in court for those homeowners with subprime loans against whom foreclosure proceedings are commenced;
- Established strict underwriting standards for lenders who make subprime loans;
- Established a statutory framework to protect homeowners from falling prey to rescue scams;
- Required mortgage brokers to act in the borrower’s interest by presenting loans most appropriate for the borrower;
- Required all mortgage servicers servicing loans on residential property in New York to register with the Banking Department; and
- Established the crime of mortgage fraud.
This approach represented a vital first step in addressing the foreclosure crisis. As of the first quarter of 2009, there were 11,017 foreclosure filings in New York State, representing a 23 percent decrease compared to the first quarter of 2008. The 23 percent decrease year over year, compared to the national 24 percent increase over the same period, demonstrates the success of New York’s multi-faceted foreclosure prevention policies to-date. Additionally, according to RealtyTrac®, New York State currently ranks 37th for foreclosure filing rates in the U.S., which is an improvement over the previous quarter when the State ranked 35th. However, the 32 percent increase in foreclosure filings over the fourth quarter of 2008 is evidence that further prevention efforts are necessary.
Building upon Last Year’s Success
The Governor’s current legislation would expand the protections of reforms achieved in last year’s law. These latest reforms would:
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- Require the 90-day pre-foreclosure notice currently sent for subprime loans to be expanded to include all home loans closed before Sept. 1, 2008. This measure would allow additional time for many more homeowners to work with their lender to find an affordable solution to prevent unnecessary foreclosures;
- Require those lenders who serve a 90-day notice on a homeowner to within three days of that service make a regulatory filing with the Banking Department with specified information. This regulatory filing will allow the Banking Department and the Division of Housing and Community Renewal (“DHCR”) to provide targeted assistance to distressed homeowners during the critical pre-foreclosure timeframe and closely monitor foreclosure statistics;
- Expand the scope of the early mandatory settlement conference to include borrowers of all home loans and not just those borrowers with subprime loans;
- Establish protections for tenants in foreclosed properties by requiring that they receive written notification of the change in ownership of the property and be permitted to remain in their home for the remainder of their lease term or 90 days, whichever is longer;
- Require plaintiffs in a foreclosure action who obtain a judgment of foreclosure and sale to maintain the foreclosed property;
- Prevent brokers who perform distressed property consulting services from accepting upfront fees; and
- Expand the scope of counseling and legal services established through the $25 million fund created in the budget, to allow more homeowners to benefit from such services.
Expanding Foreclosure Prevention Efforts
In addition to finding legislative solutions, Governor Paterson has also taken key administrative steps to help stem the foreclosure crisis. In particular, in 2008, DHCR funded 64 foreclosure prevention programs across the State. As a result, each county is served by at least one provider that offers outreach/education, counseling and legal services to homeowners facing default or foreclosure. The 2009-2010 State Budget included an additional $25 million to support the foreclosure prevention measures.
Building on the efforts of 2008 and in support of the Governor’s new 2009 Foreclosure Prevention Bill, DHCR is in the process of structuring the parameters of the use of the 2009 funds. Generally, these funds will be used to increase the effectiveness of the mandatory settlement conferences, raise public awareness of the resources available to homeowners facing default or foreclosure, and to reduce the rate of foreclosure in the State.
Superintendent of Banks Richard H. Neiman said: “While New York’s overall rank among other states continues to improve, there are still pockets where foreclosure levels continue to rise at alarming rates. It is imperative that we continue our efforts to help homeowners and restore stability to these communities.”
Commissioner of the Division of Housing and Community Renewal (DHCR) Deborah VanAmerongen said: “Thanks to the leadership of Governor Paterson and the State Legislature, New York has been a national leader in providing counseling and legal services to homeowners threatened by foreclosure. This new measure would expand those services and also protect homeowners from those seeking to take advantage of the foreclosure crisis. Additionally, the bill would help tenants who through no fault of their own have the misfortune of living in a foreclosed building.”
President and Chief Executive Officer of “NYHomes” Priscilla Almodovar said: “This legislation will provide added protections for homeowners who are behind on their mortgages and crack down on scams that prey on vulnerable homeowners. It will also offer greater opportunity to offer counseling to homeowners to help them stay in their homes. These proposals are consistent with our efforts to promote sustainable homeownership in New York State.”
Chairperson and Executive Director of the New York State Consumer Protection Board and Member of the Governor’s HALT Task Force Mindy A. Bockstein said: “As the Consumer Protection Board continues to warn consumers about predatory loans and scams, enacting Governor Paterson’s new and leading reforms to require loan modification consumer representatives to register as mortgage brokers and prevent the payment of upfront fees will give New Yorkers greater protections, and reduce the likelihood of their falling victim to foreclosure scam artists.”
Under Governor Paterson’s leadership New York has brought together the diverse stakeholders and service providers that are needed to develop lasting solutions, including bank regulators, housing finance agencies, community groups and the lending industry. The Governor’s HALT Task Force is the primary umbrella for uniting the work of all State agencies that relate to the mortgage market. New York’s extensive response to the mortgage crisis includes the funding and administration of grant programs for counseling and legal services; outreach and loan modification events that bring homeowners face-to-face with lenders and servicers; refinancing and mortgage programs such as the introduction of the forty-year fixed rate mortgage through the State of New York Mortgage Agency; neighborhood stabilization initiatives to return foreclosed properties to productive use; and enforcement actions through the creation of a Mortgage Fraud Unit within the Banking Department.
Enactment of the Governor’s proposed legislation would augment what is already one of the most comprehensive and dynamic foreclosure prevention efforts being undertaken in the nation.
