November 18, 2010 – (RealEstateRama) — Good morning and thank you Chairman Lopez, Chairman Weinstein, Chairman Towns and members of the committees for inviting me here today to discuss New York’s response to the foreclosure crisis.
I am Brian E. Lawlor, Commissioner/CEO of NYS Homes and Community Renewal – or HCR – which consists of all the state’s newly-integrated housing and community renewal agencies. This includes the State of New York Mortgage Agency, Housing Finance Agency, Division of Housing and Community Renewal, Affordable Housing Corporation, Housing Trust Fund Corporation and other agencies.
Reorganizing our agencies under a single management structure has allowed us to align similar and complementary programs and better target and coordinate our resources.
Thanks to the integration of our agencies, more than 30 programs administered by the state have been organized in the most efficient, logical and effective way, enabling our staff to work together as one organization with a common goal and mission.
Reorganization has allowed HCR to more efficiently address the critical issues facing New York State, including the foreclosure crisis.
It is interesting to note that in addition to assisting the development and rehabilitation of affordable housing and helping to revitalize Main Streets and downtown business districts, HCR also helps New Yorkers achieve the dream of homeownership.
Since the 1970s, SONYMA, one of the agencies that make up HCR, has provided 153,000 safe, below-market interest rate mortgages to low- and middle-income homebuyers-primarily first-time purchasers.
More importantly, due to our flexible but prudent underwriting standards, the delinquency rate on our 39,000 active SONYMA mortgages is just 2.4%–substantially lower than the national average of 10.5%.
Here in New York, as the committee members are well aware, too many homeowners remain at risk of losing their home. From February through August of this year, approximately 134,000 90-day pre-foreclosure notices were mailed to New York homeowners, according to a report issued last month by the state Banking Department. Half of those notices went to homes in just five counties: Nassau, Suffolk, Queens, Brooklyn and Westchester.
Low-income, minority families and communities have been especially vulnerable to foreclosure and its negative effects due to the disproportionate share of subprime loans made in these communities.
New York State has been addressing the foreclosure crisis in a number of ways, with the State Banking Department and the Judiciary playing important roles.
HCR’s efforts are focused on two fronts — first, we award funding to not-for-profit agencies across the state who in turn help the state’s most vulnerable homeowners — those with Subprime Mortgages — receive the counseling and legal services they need to avoid foreclosure.
We also administer two programs designed to help local governments and nonprofit agencies address excessive foreclosures in their communities.
Funding for Counseling and Legal Services
The Subprime Foreclosure Prevention Program
I’d like to first discuss the assistance we provide to housing agencies, counselors, mediators and other advocates who have had difficulty meeting the growing demand for their services.
Expanding the capacity of these nonprofit agencies has become a top priority for HCR, and the Legislature has provided significant resources for this mission with the appropriation of $25 million in the 2008-2009 budget for the creation of the Subprime Foreclosure Prevention Program. The 2009-2010 budget provided another $21.87 million in funding for this program.
The first appropriation to the Subprime Foreclosure Prevention program allowed the Housing Trust Fund Corporation to award 64 contracts to counseling agencies that cover every county in the state. These contracts, which were 24 months in length and run through December of this year, provided funding to more than 120 nonprofit organizations.
These nonprofits also entered into countless collaborations with other organizations with whom they are sharing resources and services to leverage their ability to help homeowners in their neighborhoods.
The Housing Trust Fund has also entered into two-year contracts with NeighborWorks America to provide training to housing counselors and with Empire Justice Center to provide training to attorneys.
To date, NeighborWorks has trained 440 counselors from 160 different agencies. Neighborworks offers regional place-based training, e-learning classes, and week-long workshops that cover issues such as foreclosure intervention and counseling techniques, choosing loss mitigation options, and foreclosure intervention plan development.
The Empire Justice Center has provided training to 1,600 attorneys and 216 advocates and paralegals. This training covers a variety of topics including foreclosure basics, representing homeowners at mandatory settlement conferences and litigation issues and updates.
In addition to providing training to counselors, attorneys and advocates, the first round of Subprime Foreclosure Prevention awards have helped nearly 43,000 at-risk homeowners receive counseling.
The contracts for the second round of funding, included in the 2009-2010 budget, were awarded this past spring and summer and are subject to the ARRA funding timeline, which requires all funds to be expended by December 2011.
This funding round is helping us to build on our initial counseling support efforts and also support the Foreclosure Prevention Bill passed by the Legislature and signed by the Governor in 2009. Fifty-four contracts were signed with nonprofit counseling providers for up to 18 months and we expect all the resources to be spent by the end of next year.
We designed the RFP for the second round of funding to increase the effectiveness of, and participation in, mandatory settlement.
The funding provided through the Subprime Foreclosure Prevention Program was just a part of the State’s aggressive response to the foreclosure crisis, much of which was enacted pursuant to the Mortgage Foreclosure Law of 2009, which Governor Paterson signed in December.
This law builds on the 2008 Subprime Lending Reform Law, and targets the mortgage crisis by providing assistance to homeowners at risk of losing their homes and assisting tenants in foreclosed properties. Among other provisions, the law:
- Requires the 90-day pre-foreclosure notice be expanded to include all home loans, rather than just subprime loans, allowing additional time for many more homeowners to work with their lenders to find an affordable solution to prevent unnecessary foreclosures;
- Establishes protections for tenants in foreclosed properties by requiring that they receive written notification of the change in ownership and be permitted to remain in their home for the remainder of their lease term or 90 days, whichever is longer;
- Expands the scope of the early mandatory settlement conference to include borrowers of all home loans and not just borrowers with subprime loans; and
- Enhances consumer protections to prevent homeowners from falling prey to rescue scams, and prevent brokers who perform distressed property consulting services from accepting upfront fees.
National Foreclosure Mitigation Counseling Program
Our agency, together with Neighborworks, also administers the National Foreclosure Mitigation Counseling Program – or NFMC.
Over the last three years, SONYMA has distributed $4 million to more than 20 foreclosure counseling agencies across the state, including more than $550,000 of SONYMA’s own resources.
NFMC program funds are used by nonprofit agencies to negotiate on the homeowner’s behalf with lenders and servicers to modify the terms of their mortgage and also to provide counseling to homeowners on debt management and other strategies to try to preserve homeownership. More than 10,000 New Yorkers have received assistance through this federal program.
The counseling agencies that deliver these services are critical to our mission and we work closely with them in order to respond to new problems when they arise.
For example, when the agencies were being inundated with inquiries regarding the state’s new mandatory settlement conference requirement, our agency applied for a Federal Legal Assistance Reallocation Award. This program provides funding to help counseling agencies prepare homeowners for their settlement conferences. We were awarded $300,000 in supplementary legal assistance counseling funds, which enabled our agencies to serve 485 additional clients.
SONYMA has received funding for all four rounds of the NFMC program and is now preparing to apply in January for the fifth round of funding.
Helping Local Communities
The foreclosure crisis also has a drastic impact on local governments, eroding their property tax base, increasing administrative and property maintenance costs, and increasing the demand for services by displaced individuals and families.
Our agencies provide significant support to local governments and nonprofit agencies that are trying to address excessive foreclosures within their communities.
Governor Paterson announced the Sustainable Neighborhoods Demonstration Program in his State of the State message in January, and Governor -elect Cuomo has included the innovative program as part of his urban agenda.
Sustainable Neighborhoods helps local governments, municipal housing authorities and not-for-profits rehabilitate vacant or blighted residential properties and redevelop vacant land.
By utilizing Smart Growth principles and coordinating existing program resources from several agencies in innovative ways, the Sustainable Neighborhoods program is designed to turn vacant and abandoned buildings, blight, and distressed properties into quality affordable homes and green space.
The City of Buffalo, with more than 23,000 vacant housing units, was the starting point for the Sustainable Neighborhoods project. The program is expanding across the State, using existing program resources in innovative ways to turn vacant and abandoned buildings, blight, and distressed properties into quality affordable homes for owners and renters.
HCR awarded $500,000 in June to PUSH Buffalo to create a “vacancy free” neighborhood on Buffalo’s West Side. The award will revitalize a 20-block area west of Richmond Avenue and south of West Ferry Street – once home to 115 vacant structures.
In September, HCR approved a $495,000 in Sustainable Neighborhoods Demonstration Program award to the Greater Rochester Housing Partnership to acquire, rehabilitate and build single family homes in the Marketview Heights neighborhood of Rochester. This project enjoyed strong support from the local government and community and was identified as a priority in the City of Rochester’s Focused Investment Strategy initiative.
HCR also administers the Neighborhood Stabilization Program, a federal program which we have supported with additional state resources. The NSP offers subsidies to local municipalities and nonprofit housing providers to buy and redevelop foreclosed and abandoned homes and vacant properties. The program targets communities most severely affected by the foreclosure and subprime crisis.
The homes are then sold or rented to low-, moderate-, and middle-income households, with mandated long-term affordability. NSP funds are also available for local land banking initiatives focused on foreclosed residential properties, and selected demolition of blighted properties in targeted neighborhoods.
To date we have awarded $54 million in Federal NSP funds and $11 million in HCR resources to 17 local governments and 13 nonprofits to develop more than 600 affordable homes from acquired and renovated foreclosures or from new construction of vacant properties.
Helping homeowners in need is one of the critical roles for New York State Homes and Community Renewal. With your support, our integrated agency remains committed to helping foreclosure counseling agencies meet the challenge of helping vulnerable homeowners and protecting communities across our state.
I would like once again to thank Chairman Lopez, Chairman Weinstein and Chairman Towns for inviting me to testify today. I am appreciative of the work you and your committees have done to address the foreclosure crisis and for the support you have given to HCR in our mission to help prevent foreclosure.
