New York – December 7, 2007 – Across the nation, and here in New York, homeowners need relief from the uncertainties that have plagued the lending market. While the plan proposed by the Federal Government yesterday is a constructive first step, it does nothing to help thousands of homeowners in New York who are already more than 30 days in default, close to foreclosure, or who have entered the foreclosure process. Those homeowners will not benefit from this proposal and I urge the industry to collaborate with the states to develop proposals that will more completely avert this crisis.
It is unclear how many borrowers would qualify for the rate freeze under the proposed program, but it is clear the criteria are too restrictive to help the majority of those in a vulnerable situation. It would immediately disqualify many who are struggling with mortgages that have already reset, or others who are using alternative products other than adjustable rate mortgages. Some have estimated the proposal will only help between 15 percent to 20 percent of subprime borrowers. The streamlined modification option only covers borrowers with low credit scores and penalizes those borrowers who have maintained good credit.
While I applaud the administration’s call for an increase in the ceiling on tax-exempt bonding, I am concerned that increased bonding authority alone will not have a real impact unless the Treasury Department works closely with issuers in establishing clear guidelines for refinance transactions and by increasing maximum income and loan limits. I urge the administration to work with Congress to implement these changes.
The subprime crisis is a complex issue that requires a comprehensive response on both the federal and state levels. States play a critical role in protecting consumers and can bolster federal efforts to develop effective solutions. My administration has established a HALT Task Force to address the crisis in the subprime mortgage market. Efforts include the launch of the SONYMA $100 Million Keep the Dream program, a series of day-long HALT Summits, the introduction of new regulations for mortgage bankers and brokers, as well as a $2 million matching grant program for counseling services.
We are working together with the New York State Banking Department and Attorney General on a multi-state effort focused on identifying a more systemic approach to assist homeowners in trouble. This group of New York and other state officials has already met with 90 percent of the servicers of subprime loans.
As further details of the federal plan emerge over the coming days, I want to remind New Yorkers at risk of defaulting, or those already in default, to contact their lenders or a not-for-profit counselor at 1-888-995-HOPE immediately.
Additional information on the HALT Task Force can be found at http://www.banking.state.ny.us/cshalt.htm
