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Just Thoughts is the blog of the Empire Justice Center, New York’s statewide, multi-issue, multi-strategy public interest law firm focused on changing the “systems” within which poor and low income families live. Here staff and guest authors will share stories, announcements and perspectives on timely issues related to our work.    

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Giving Tuesday is November 29!


Looking for ways to take ACTION?
On Tuesday, November 29, 2016, come together with other people, charities, families, businesses, community centers, and students around the world for one common purpose: to support organizations that DO GOOD.
The day has many names—internationally known as #GivingTuesday, we also have the stateside  'New York Gives' , and #ROCtheDay in Rochester.
Often lumped together with Black Friday during the holiday season, #GivingTuesday encourages people to invest in their community by donating to organizations that defend the values that they believe in. There's no rules for participation, just go to the website for the nonprofit(s) that you'd like to support and make a donation.
It's a chance for everyone to take part in supporting the values and ideals that you care about most. For us here at Empire Justice, it's laws and policies that make sense, community empowerment, and fairness for all in the justice system.
And that's what you get when you invest in Empire Justice - together with your help, we make the law work for all New Yorkers on a systemic level through policy advocacy, class actions, on-the-ground advocacy for individuals, and capacity building through training and support to other organizations around New York State.
So whatever way you choose to participate, #GivingTuesday, #ROCtheDay, or through New York Gives, choose fairness for all and help us make the law work for all New Yorkers.

Tags: civil rights | Giving Tuesday | Rochester | Albany | social justice | legal services | legal aid

CFPB Publishes Complaint Narratives - What it Means for New Yorkers

Issue Area: Consumer

On June 25, 2015, the Consumer Financial Protection Bureau (CFPB) published over 7,700 consumer complaint narratives about financial companies.  Since first making the complaints database public in 2013, CFPB has been improving access to and search capabilities for the data collected.  The ability to view consumer complaint narratives may be the most significant change in this access yet.

The CFPB began accepting complaints as soon as it opened its doors in July 2011.  Three years later, in July 2014, the CFPB announced that they would begin making narratives associated with those complaints public.  They faced stiff opposition from the lending industry.  To address opposition, CFPB Director Richard Cordray responded to industry concerns stating “By publicly voicing their complaint, consumers can stand up for themselves and others who have experienced the same problem.  There is power in their stories, and that power can be put in service to strengthen the foundation for consumers, responsible providers, and our economy as a whole.”

I have done a review of a subset of complaint narratives, specifically those that were filed in New York and were related to servicing mortgages in default.  In just three months, 44 of the complaint narratives that were submitted by New York homeowners trying to save their homes from foreclosure were published publicly.  These public narratives for NY homeowners reveal interesting, although unsurprising, trends. 

First, mortgage servicers repeatedly transfer servicing from one servicer to another.  This makes it nearly impossible for homeowners to keep track of where to send their mortgage payments.  Second, servicers make repeated requests for documents they have already received from the homeowner.  Third, servicers regularly fail to notify homeowners within five days upon receiving a modification application as required by CFPB’s mortgage servicing guidelines.  For a more in depth look at the CFPB complaints database, check out USPIRG’s analysis (US Public Interst Research Group).
I commend the CFPB for moving forward with making these consumer complaint narratives public and searchable.  Those who are in the business of providing consumer finance products should be held to the highest standard.  These companies have access to resources not within the reach of most consumers.  Publishing complaint narratives is another step toward leveling the playing field for all consumers. 

Consumers can now file a complaint with the CFPB at and utilize a critical tool to educate and empower themselves in the financial marketplace.

Tags: Consumer Complaints | CFPB | mortgage servicers | foreclosure prevention

US Supreme Court Upholds Disparate Impact Standard under the Fair Housing Act

Issue Area: Housing, Consumer

One of the more notable, though less noted decisions coming out of the U.S. Supreme Court in the past week was its ruling on June 25, 2015, to uphold the long-standing tenet that the Fair Housing Act prohibits policies that have a discriminatory impact, even if the discrimination was not intentional. 

Texas Department of Housing and Community Affairs v. Inclusive Communities Project was brought by a Texas group who challenged the state’s housing agency’s issuance of tax credits for the development of affordable housing.  The group contested that the housing built through these credits was being concentrated in racially segregated, African-American and Latino neighborhoods in Dallas.  The effect of the policy, they argued, has a “disparate impact” on minorities and thus violates the Fair Housing Act (FHA). 

The FHA makes it illegal to refuse to sell, rent, “or otherwise make unavailable” housing to anyone because of race, national origin, gender, familial status, and disability.  The 5-4 decision authored by Justice Kennedy emphasizes that a broad-reading of the statute is necessary to combat discriminatory conduct.  For as the court noted, “Recognition of disparate-impact liability under the FHA also plays a role in uncovering discriminatory intent: It permits plaintiffs to counteract unconscious prejudices and disguised animus that escape easy classification as disparate treatment.  In this way disparate-impact liability may prevent segregated housing patterns that might otherwise result from covert and illicit stereotyping.” (Texas Dept. of Hsg.  v. Inclusive Communities, at 17-18).

Fair housing and anti-discrimination advocates are cheering the decision because strong and effective fair housing laws are vital to ensuring equal opportunity in housing.  Governmental policies such as zoning laws or enforcement of housing codes may seem benign on their face, but have detrimental discriminatory impacts.  The same holds true for private corporations such as developers, real estate professionals, and lenders – programs that seem neutral on paper may in fact further disenfranchise people. 

This decision is a tremendous victory not only for those communities, but for all of us.  Equal opportunity and freedom from discrimination benefits everyone.

Sleeping Bags on Sidewalks

Issue Area: Consumer

I live around the corner from St. Joseph’s Neighborhood Center in Rochester, New York, which provides free breakfasts to people that need one in my neighborhood.  So many mornings, there are so many people waiting for breakfast, that I literally walk around them sleeping on the sidewalk, waiting for the doors to open.  This time of year, these folks are more often than not lying directly on the sidewalk or in the doorway with a blanket or sleeping bag over them, trying to find some kind of warmth.

This morning, there was a woman younger than me with four small children under one sleeping bag on the sidewalk.  One of the children woke as I walked by, and in her tiny voice asked me if breakfast was ready.  It made me pause and wonder how this family had come to be on this sidewalk on this morning.

At Empire Justice Center, I work in the Consumer Finance and Housing Unit, helping local families avoid foreclosure.  My work day is full of bank statements, paystubs, legal motions, court filings and endless bank applications - doing everything I can to keep people in their homes.  I spend an inordinate amount of time complaining about principal reductions, mortgage servicing violations, urban blight and opposing counsel. 

This morning, along with the bank statements and paystubs, I will be thinking about sleeping bags on sidewalks.

Of course I have no idea if that little girl and her family once had a house that was lost to foreclosure - there are countless paths that could have led them to that sidewalk on South Avenue.  In our busy jobs, it’s easy to become immune to the numbers and to the stories behind the problems that we’re trying to solve. 

Sometimes it’s just too easy to pass by the sleeping bags on the sidewalks, and the tiny voices and puffy eyes of small children.  But I think in the days ahead, I might do my job better if I keep this morning’s walk to work in mind.

Summer 2014: A Great Experience for our Diversity Fellow, Tianna Bethune!

Issue Area: Consumer

Written by Tianna Bethune, Empire Justice Center 2014 Diversity Fellow

This summer, I had the opportunity to move back to my hometown of Rochester, New York and work with an extraordinary group of attorneys at Empire Justice Center.  With great pleasure, I accepted the position as the first Diversity Fellow and I am very glad that I did!  This summer has been full of fulfilling learning experiences.  I was given the opportunity to work directly with clients, attend a mediation session, help prepare a case to be filed in federal court and more!  I am especially appreciative of my supervisors Peter Dellinger, Reyna Ramolete and Bryan Hetherington.  They afforded me the privilege to work in an environment free from micromanagement where I was able to put my research, writing and time management skills to the test.

I was introduced to three new areas of law: consumer law, real estate law and employment law.  In consumer law, I worked on a case that required me to gain experience in contracts, specifically the nuances associated with exculpatory clauses.  In the area of real estate, I assisted a client by researching transactions, fraud, misrepresentation and warranties.  In the employment law context, I calculated damages, wrote a complaint and prepared the documents to file a Fair Labor Standards Act case in federal court.  The diversity in my work load allowed me to narrow my focus on what I would like to do after graduation.  This is invaluable in that every student fears making the mistake of accepting a position that they dread being in after law school. 

In addition, I was given the opportunity to write a policy memorandum for Bryan Hetherington, Chief Counsel in the Rochester office.  As a student, it was priceless to receive direct mentorship from a leader in the legal community.  Mr. Hetherington actually took the time to read each of my drafts, while patiently guiding me through the writing process.  This was a tremendous learning experience because my law school courses had not prepared me to simultaneously advocate to both members and non-members of the legal community.

I decided to apply for a position with Empire Justice Center because their commitment to serving the community and giving back is aligned with my interests.  I would definitely recommend other law students who are interested in public interest law to apply for a position with this organization.  The environment cultivated by the individuals in this office is very relaxed, welcoming and inspiring.  I am truly grateful for the experience.

Tags: Diversity Fellowship

New York State Legislature Extends Settlement Conferences for Five Years

Issue Area: Consumer

The New York State Legislature last week passed crucial legislation that serves to assist homeowners facing foreclosure.  One piece of the legislation is that mandatory foreclosure settlement conferences, set to expire in early 2015, have been extended for five more years.

A settlement conference occurs in court, where the homeowner or an advocate on their behalf meets with the lawyer representing the mortgage servicer.  The statutory purpose of the conferences is to see if a mutually agreeable resolution can be reached, with both sides being obligated to negotiate in good faith, in order to avoid loss of the home.  In most cases, avoiding foreclosure entails some form of modification of the original mortgage.  In practical terms, the homeowner needs to show that they can afford the modified mortgage payments.  The servicer, in turn, is obligated to review the homeowner’s application to determine if they qualify for any modification or repayment options.  While a homeowner is in the settlement conference process, the servicer is not allowed to move forward with the foreclosure.

In the application process, the homeowner’s financial situation is established largely by submitting documents to the servicer or their representative.  While this may sound very simple, in fact the process is often very confusing and frustrating.  Before the establishment of the mandatory settlement conferences in New York’s judicial foreclosure process in 2010, the homeowner dealt directly with the servicer with no intervening “umpire,” so to speak.  There were lots of problems, including homeowners submitting documents that were often lost or not reviewed in a timely manner, the same documents being requested multiple times, or requests were made for documents that did not exist.  The homeowner had little or no recourse to counter the demands of the servicer.  Once the settlement conference was introduced, judicial oversight was added to the mix.  Now the mortgage servicer had an entity to answer to, and there exists the possibility of real world negative consequences if the homeowner is not being treated fairly.  The servicer can be fined, or the foreclosure suit can be dismissed.  At the same time, if the homeowner does not meet their obligations, the servicer is allowed to move ahead with the foreclosure process.

While the loan modification application process in the settlement conference era is far from perfect, it is undeniably more efficient and fair than the pre-conference process, which has been likened to the "Wild Wild West."  Here at Empire Justice Center, we have contact with many homeowners in foreclosure, and their experiences are very consistent.  The settlement conference mitigates the fear, confusion and frustration of the application process.  In the words of one of our clients, “Before appearing in front of the judge, dealing with the bank was like yelling at a brick wall.”

The establishment of the settlement conference has led to thousands of New Yorkers saving their homes.  In addition, they have instilled fairness into the system by establishing a consumer-friendly model for homeowners to defend themselves against foreclosure.  Prior to the conferences, the Office of Court Administration (OCA) estimated that over ninety percent of foreclosure cases ended in a default judgment against the homeowner – meaning the vast majority of homeowners had no meaningful way to either work with their servicer or to defend themselves in the legal proceeding.  In the first full year of the conferences, OCA reported that homeowners appeared in over ninety percent of the first conferences scheduled.  About one-third of New York’s civil docket is foreclosure cases, and the data available tells us that the mortgage crisis in New York is far from over, with record numbers of foreclosures still to come.  The mandatory foreclosure settlement conference will be a critical factor in helping as many New Yorkers save their homes as possible.

Tags: foreclosure | settlement conference | mortgage

Principal Reductions in Mortgage Workouts are Essential to Reducing the Discriminatory Impact of Foreclosures

“Preserving an affordable home, in a stable neighborhood, for all Americans”—this phrase summarizes three key aspects of housing opportunity and the realization of the American dream.  The foreclosure crisis and the resulting recession, however, have undercut every aspect of this vision. 

Access to an affordable home with sustainable payments is out of reach for many more people today than before the crisis.  Millions of homeowners have already lost their home through foreclosure, are still at risk of foreclosure, or are stuck underwater with unaffordable mortgages as a result of the decline in housing values or lost income.  New York State alone currently has 122,544 mortgages in some stage of foreclosure, and another 197,507 that are seriously delinquent. [1] 

Moreover, due to stricter underwriting guidelines and other changes in the mortgage industry, the lower-income minority borrowers who are the potential purchasers most likely to help stabilize neighborhoods of color now have less access to affordable mortgages.

Our neighborhoods are at risk of instability and blight.  Worse yet, the neighborhoods that have seen the highest concentrations of foreclosures, resulting in higher numbers of vacant properties, are now seeing the steepest declines in housing values, putting many of these neighborhoods into a spiral of increasing instability and blight.

Rust-belt cities, like Rochester, Buffalo and Syracuse, which already had high numbers of vacant properties before the foreclosure crisis, are experiencing sharp declines in their tax bases, and may soon have to adopt triage strategies to stop the spread of blight.

The foreclosure crisis has had a disparate impact on African American and Latino homeowners and communities.   Foreclosures have not affected all homeowners and communities equally.  Since foreclosures are disproportionately concentrated in minority neighborhoods, and since all of homeowners living in those neighborhoods are impacted by foreclosures, African American and Latino homeowners are suffering disproportionately.  That’s because we live today with patterns of segregation that were established decades ago.  Because we live in segregated communities, African American and Latino homeowners are several times more likely than White, non-Latino homeowners to live in the areas most impacted by foreclosures. 

Minority homeowners either in foreclosure, or living in neighborhoods impacted by foreclosures, are suffering disproportionately from declines in housing values and neighborhood instability.

To get neighborhoods of color back on track, so they can share in the economic and housing recovery, we need to keep as many homeowners as possible in their homes.  This is especially true for the homeowners in the neighborhoods most impacted by foreclosures.

Principal reductions based on true value assessments are fair.

Requiring mortgage servicers to do principal reductions – based on the true (i.e., reduced) value of homes in impacted areas – will help us get back on track by keeping more owners in their homes, reducing  foreclosure-associated vacancies, stabilizing impacted neighborhoods, and thus reducing  the disproportionate impact of foreclosures and foreclosure-related vacancies on African American and Latino homeowners and neighborhoods.  Banks and servicers wouldn’t be losing anything, they’d just be recognizing the lost value of their assets that had already occurred.

Principal reductions must factor in the effect that HIGHER CONCENTRATIONS of foreclosures have on property values.  

True value assessments done in conjunction with principal reductions would result in a greater number of successful loan modifications and keep more owners from losing their homes.  But to do true value assessments, the impact of higher concentrations of foreclosures must be taken into account.  Neighborhoods with high concentrations of foreclosures [2] can be readily identified [3] and property valuations can be adjusted fairly.  If we fail or refuse to do principal reductions that take into account the greater drops in home values created by concentrations of foreclosures, it will be African American and Latino homeowners and minority neighborhoods as a whole who suffer. [4]

We can address the problem of concentrated foreclosures by urging federal policy makers to act.  The Federal Housing Finance Agency, the agency that oversees Fannie Mae and Freddie Mac, needs to begin to not only allow, but to require mortgage servicers to do principal reductions.  Congress needs to pass legislation requiring principal reductions and true value assessment.

Let’s make minority homeowners and communities of color equal participants in the nation’s housing recovery.

End Notes:
 [1] Empire Justice Center estimate using data from the CoreLogic, “National Foreclosure Report,” December 2013, as found at
 [2] Note, however, that zip code foreclosure totals alone are not sufficiently accurate for this purpose. For example, a suburban zip code with 350 foreclosures is not impacted as severely as an urban zip code with the same number of foreclosures, but which is 1/43 the size. (This is an actual example based on zip codes 14619 and 14580 in Monroe County, NY). Instead, the rate of foreclosures and geographic density should be taken into account. That can readily be done at the census tract level.
 [3] Empire Justice Center did this on Long Island. See our report.
 [4] These findings are based upon a data analysis conducted by the Empire Justice Center in New York State which included an evaluation of all foreclosures initiated in Rochester NY since January 1, 2009, mapping the foreclosures and linking the court records for each property to the city’s property information database, as well as census demographics for minority homeowners, in order to evaluate the characteristics of properties in foreclosure including location, concentration, case status, vacancy status and changes in ownership. 

Tags: foreclosure | minority homeowners | African American | Latino | neighborhoods of color | principal reductions | housing opportunity | FHFA

Empire Justice Center Plays an active role in training advocates across New York on foreclosure prevention

On May 30, 2013, the U.S. Department of the Treasury and the U.S. Department of Housing and Urban Development announced an extension of the Home Affordable Modification Program (HAMP), which was set to expire on December 31, 2013.The program has now been extended through December 31, 2015. In doing so, the hope is that the millions of homeowners who are still struggling and hoping to avoid foreclosure will be able to take advantage of the benefits afforded by HAMP.


In March 2009, the Treasury Department and Obama Administration announced the launch of its Making Home Affordable (MHA) Program.  HAMP, part of the MHA Program, was, designed to enable homeowners to modify their mortgages in order to prevent foreclosure.  HAMP also created standards for the mortgage servicing industry, which before that time varied widely amongst mortgage servicers.  Homeowners whose loans are owned or guaranteed by Fannie Mae or Freddie Mac are eligible.  Additionally, many servicers of loans not owned by Fannie Mae or Freddie Mac also participate in HAMP. 


Although MHA, and specifically HAMP, have helped many homeowners in the loan modification process, the process itself can be an intimidating and daunting one.  As part of Empire Justice Center’s mission in educating both the public and fellow advocates in matters of assisting the disenfranchised, we have taken an active role in educating both attorneys and housing counselors on the MHA Programs, including HAMP.  Empire Justice Center conducted two day trainings in foreclosure prevention for both attorneys and housing counselors in April in Syracuse and earlier this month on Long Island.  A good portion of these trainings involved navigating the HAMP process.  In addition, Empire Justice Center continues to provide two webinars a month related to relevant foreclosure issues, including several that relate directly to MHA and HAMP.  Among the Empire Justice Center attorneys presenting at these trainings and webinars are Kevin Purcell, Maria DeGennaro, and Rebecca Case Caico.


The MHA Program and HAMP continue to help homeowners stay out of foreclosure, and Empire Justice Center will continue to educate people across New York State on how to best utilize these programs.


To learn more about the programs, homeowners can visit   To learn more Empire Justice Center’s trainings and webinars, and who is eligible, attorneys and housing counselors can email

Tags: Frannie Mae | Freddie Mac | Foreclosure | Loan Modification | Training

C.A.S.H. Volunteers Claim $25 Million for Working Families in Monroe County

Issue Area: Consumer

Last week, I had the privilege of celebrating another successful tax season with C.A.S.H. [1] volunteers.  This was our 11th year of providing free tax prep services to working families in Monroe County. 

From January through April, nearly 500 volunteers helped complete more than 13,000 federal and NYS tax returns, claiming more than $25 million in tax refunds and credits.  In addition to having tax returns prepared, people who came to C.A.S.H. learned about community resources that can improve their families’ economic security and financial future - programs for saving, home buying, credit repair, affordable health care, banking and more!

People who come to C.A.S.H. for help at tax time save on average $250 – the fee that typical paid preparers charge.  That means more than $3 million stayed in the pockets of hard working families – money they can use to put food on the table, pay rent, and take care of their kids. 

About half of the families who come to C.A.S.H. are eligible for the Earned Income Tax Credit (EITC).  This is a special tax benefit offered by the Federal government and New York State for working people who earn low or moderate incomes that helps lift them out of poverty.  Hard working families use this money to meet basic needs like rent, medical bills, transportation to get to work, and clothes for their kids.  Only families who work can claim these credits.

Every year, our volunteers tell me how much satisfaction they get from working at C.A.S.H.  Many have said it’s the best thing they’ve ever done, but not every volunteer prepares taxes.  Some work at the front desk, welcoming people as they arrive and helping them with paperwork.  Others share information about the many resources our community has for helping people make the most of their money.  C.A.S.H. provides all the training volunteers need to have a rewarding experience helping others in our community.

To learn more about C.A.S.H., go to

End Notes

 [1] C.A.S.H. (Creating Assets, Savings and Hope) is a community coalition led by Empire Justice Center and United Way of Greater Rochester.  Our mission is creating opportunities for low income workers in Monroe County to “get, keep, and grow” their money.

Tags: EITC | earned income tax credit | free tax prep | C.A.S.H. | United Way of Greater Rocester

It Looks Like Payday Lending Bill Is Off the Table in New York; Consumers Can Breathe a Sigh of Relief…For Now

Issue Area: Consumer

Last week I drafted a piece on the mounting evidence that payday lending is bad for consumers.  I am happy to say that I had to throw that piece in the recycle bin.

On Monday, Superintendent Ben Lawsky sent a letter to NYS Assembly Speaker Sheldon Silver saying that the NYS Department of Financial Services opposes the “short-term financial services loan act” (A.1113-A/S.3999-A), legislation that would permit licensed check cashers in New York to make small dollar loans. 

Lawsky’s letter states, “The bill creates an exception to New York's criminal usury law for licensed check cashers.  By setting a 25 percent cap on interest rates, the bill obscures the true impact of these loans.  In fact, when taking into account all of the fees permitted by the bill, the actual annualized interest rates consumers would pay balloon into the triple digits.  The payday loans envisioned by the bill are the types of loans that the current 25% criminal usury cap was designed to keep out of New York.”

The Albany Times Union and the New York Daily News suggest that this strong stance taken by the Cuomo administration has essentially killed the legislation.

This comes on top of actions taken last week by federal regulators in proposing stronger guidance around deposit advance products.  The standards proposed by the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) would, among other things, require the banks they regulate to take into account the borrower’s ability to repay the loan and to limit the number of loans made to a borrower to six per year.

Also last week, the Consumer Financial Protection Bureau (CFPB) released a study showing that payday or deposit advance loans trap consumers into a cycle of debt, leading to ruined credit for the borrower and billions of dollars in wealth being stripped from low and moderate income communities and neighborhoods of color.

According to the CFPB, “Lenders often do not take a borrower’s ability to repay into consideration when making a loan.  Instead, they may rely on ensuring they are one of the first in line to be repaid from a borrower’s income.  For the consumer, this means there may not be sufficient funds after paying off the loan for expenses such as for their rent or groceries – leading them to return to the bank or payday lender for more money.”

This likely defeat of New York’s Short Term Financial Services Loan Act is a huge victory for consumers in New York.  Nevertheless, as noted in a NY Daily News editorial, we need to continue to be vigilant in keeping usurious payday lending and deposit advance products out of New York.

To see the most recent news and articles on payday lending, click here.

Tags: payday lending | check cashers | usury | CFPB | deposit advance loans | DFS | small dollar loans | OCC | FDIC

Volunteer to Help Hardworking Families!!

Issue Area: Consumer

The holiday season brings out the volunteer spirit in all of us. But for most of us it’s also an extremely busy time of year. So why not make a commitment today to volunteer during tax season after the holidays!


C.A.S.H. [Creating Assets, Savings and Hope] is a community coalition that helps working families in Monroe County, GET, KEEP, and GROW their money.  One of the ways we are able to do this is by offering free income tax preparation to income eligible households and connecting them to community resources.  In 2012, over 500 volunteers helped 13,000 families resulting in tax refunds of $24 million going back into their pockets and this community.


We are about more than just preparing tax returns, so there is an opportunity for everyone!!  Click HERE for a list of volunteer opportunities that are available.


Top Reasons to become a C.A.S.H. Volunteer:

  • Ability to help hundreds of low income families
  • No experience necessary, flexible training schedule provided for all roles
  • Great resume builder
  • Opportunity to network with hundreds of volunteers
  • Flexible enough for any schedule - volunteer days, nights or weekends for 3-4 hours per week at a site of your choice.


Bring a coworker, family member, or friend with you to a Volunteer Information Meeting* to learn more about how you can get involved.  Join us on Sat Dec 15 11am-1pm or Mon, Dec 17, 5–7pm or Sat Jan 5, 9–11am. Contact me to reserve your spot at 585-295-5733 or


* Meetings are held at the United Way of Greater Rochester on 75 College Avenue, 14607.

Tags: Income Tax Prepration | Volunteer | VITA | Coalition | CASH

When it Comes to Foreclosures, the FHFA Should Lay Blame Where it Belongs - On Mortgage Servicers, Not State Consumer Protection Laws

Issue Area: Consumer

The Federal Housing Finance Agency (FHFA), Fannie Mae and Freddie Mac’s overseer, wrongly, and egregiously is attacking state consumer protection laws.  The Agency published a proposal [] in September with a comment period that ended this past Monday (Nov. 26th), in which Acting Director Edward DeMarco blames consumer protections for long delays in the foreclosure process in five states:  New York, New Jersey, Connecticut, Illinois and Florida.  The penalty?  A substantial charge to future borrowers in those states. In NY, that fee would be $2,520 on a $200,000 loan.  


The proposal is no veiled attack on states’ rights.  FHFA boldly claims, "If those states were to adjust their laws and requirements sufficiently to move their foreclosure timelines and costs more in line with the national average, the state-level, risk-based fees imposed under the planned approach would be lowered or eliminated." And a threat to states which may be thinking about implementing consumer protections:  “The agency may include the impact of newly-enacted laws if they clearly affect foreclosure timelines or costs, where such costs may be reasonably estimated based on relevant experience.” 


Americans for Financial Reform (AFR) submitted a comment in strong opposition to the proposal and has collected at least 16 letters on its website from others including the New York, Connecticut and Illinois Attorneys General, 18 US Senators and House members from NY, a Connecticut congressional delegation, NYS Assemblywomen Helene Weinstein and Annette Robinson, New Yorkers for Responsible Lending (NYRL), the Brennan Center, three professors and more.  The letters can be found here. [].].


What are the consumer protections at issue?  In NY, they include a notice sent 90 days prior to a filing with referrals to reputable non-profit housing counseling agencies in the borrower’s area, mandatory settlement conferences to see if the home can be saved, and a requirement that lawyers affirm that their foreclosure pleadings are accurate.  It would be tough to argue that any of these protections are over the top.  Actually, they set a pretty basic standard which should exist in all states. 


As simple as these requirements are, however, mortgage servicers just can’t comply with them – that is what is causing the long delays.  First is their failure to file the required paperwork and attorney affirmation with the court to move the case into the settlement conference process.  Thousands of foreclosure cases have been initiated and are just sitting in what has become known as our “shadow docket” with no forward movement, some for upwards of two years. 


The delays do not end there.  Once a case reaches the settlement conference process, it is the norm for the servicer’s representative to appear without authority to settle the case, or with any real knowledge of the status of the loss mitigation application made by the homeowner.  This ill-preparedness, on top of the general failure of servicers to adhere to HAMP (the Home Affordable Modification Program) or other guidelines for making determinations, typically means that 4 to 8 conferences have to be held until a breaking point is reached and the servicer has to make a determination.  And even in cases which have moved out of the settlement conference process and are supposed to go forward with litigation, advocates across the state report that the big servicers are not seeking judgments in too many cases. 


FHFA misses the boat in their cost calculation of defaults in states with longer timelines, as well.  First, there is no consideration for the number of foreclosures.  A state with a lower foreclosure rate but a longer time frame, such as NY, is costlier according to FHFA than a state such as Arizona or Nevada which have huge volumes but shorter timelines.  More so, though, the equation completely fails to factor in costs saved as a result of consumer protections.  There is no question that the settlement conferences in NY mean more people are getting loan modifications and staying in their homes.  While estimates vary regarding the “cost” of a foreclosure (I’ve seen estimates from $40,000 to over $100,000), preserving homeownership is generally a cost-saving measure for investors in many respects.   


At the very least, FHFA’s imposition of new costs on future borrowers is unfair to prospective borrowers who had nothing to do with driving the reckless lending frenzy of the subprime era, nor the resulting financial crisis.  The proposal also will likely slow the already too-slow U.S. housing recovery by increasing the cost of lending in a state like Florida, which, frankly, needs all the help it can get.  Not that coastal communities in New York, New Jersey and Connecticut are faring too well lately.  If enacted, this proposal would be the proverbial, “kicking someone when they’re down.”  The comments collected by AFR urge the FHFA to abandon the proposal.  

Tags: FHFA | Foreclosure | Edward DeMarco | Mortgage Services

Bravo to AG Schneiderman

Issue Area: Consumer

There has been much discussion about the lawsuit recently filed by New York’s Attorney General, Eric Schneiderman, against JP Morgan for fraudulent activities committed by Bear Stearns before JP Morgan acquired it in March 2008.  For the record, Empire Justice Center is very supportive of these efforts and appreciative of the leadership role Attorney General Schneiderman has taken in pursuing accountability in the face of opposition.  It’s a matter of justice – those that do wrong should be held accountable for the harms they caused to both investors and homeowners.

It is absolutely critical that as a society we ensure that the predatory practices of the last decade are never repeated again.  Today, many of the failed predatory lenders have been acquired by the “Too Big to Fail Banks,” like Bank of America.  The price paid by the acquiring banks factored in the need to provide justice to those harmed by the predatory lenders and the litigation risks involved with the purchase. 

These failed companies were not bought by mom and pop banks.  Acquiring institutions bought them at fire sale prices.  The 52 week high for Bear Stearns’ stock before the crisis occurred was $133 a share.  JP Morgan ultimately purchased Bear Stearns for only $10 a share.  Having paid the fire sale rate, the acquiring banks must live by the rules of the free market.  Armies of well-paid lawyers and investment bankers reviewed the bank mergers.  Therefore, it is completely disingenuous for the banks to complain about being held accountable for the very bad practices that drove down the price they paid for the predatory lenders.  The litigation they now face was entirely predictable and was precisely why the predatory lenders were sold at the dramatically lower prices.  Again, the cost of losing litigation and having to make whole those harmed by the illegal conduct of the predatory lenders was factored into the sale price.

Many of those who now advocate giving the acquiring banks a free pass, have in the past actually opposed the need to provide financial relief to the victims of predatory lending.  They cited the risk of “moral hazard.”  While we don’t see any moral hazard in making the victims of predatory lending whole, we are a bit surprised by the inconsistency of those who fail to see the moral hazard in letting the acquiring backs off the hook.  To the contrary, there is a clear moral hazard in not holding predatory lenders and their acquiring institutions responsible for illegal acts that were wide-spread in the industry.  Litigation such as the NY Attorney General’s against these predatory practices will play an important role in ensuring these practices are not repeated in the future because those in the industry will know that a lender's sins will not be washed away with a sale.

Furthermore, the after effects of the financial crisis these perpetrators caused have directly resulted in hundreds of thousands of New Yorkers facing the loss of their homes.  Millions of families have seen a lifetime of savings wiped out.  Entire neighborhoods have seen price declines of 20- 40%.  Millions of homeowners have had to help bear the cost of the financial meltdown – shouldn't those harmed by illegal conduct be provided with compensation?

Despite the real suffering families are experiencing, our analysis of foreclosure data shows that the worst may still be ahead of us.  Foreclosures are still making their way through the courts.  The full impact of completed foreclosures and the consequences on hundreds of neighborhoods is still to be experienced.  Tens of thousands families who are unable to receive significant loan modifications will start facing eviction and potential homelessness.  Many minority communities will be impacted more than others.

Homeowners and their advocates have long been pushing State and Federal regulators to take legal action against these abusive practices.  We are proud of the New York Attorney General’s long history of protecting the rights of consumers and we applaud our Attorney General Eric Schneiderman for his leadership and for continuing with the tradition.

Tags: foreclosure | predatory lending | Bear Sterns | too big to fail | JP Morgan

Still working on that sunlight

In my last post, I talked about the need for better data to increase transparency and accountability in the mortgage lending market.  This week I have a great opportunity to make my case.  I am one of several consumer advocates from across the country who will be talking with staff at the Consumer Financial Protection Bureau (CFPB) about what information would be most useful to the public, regulators and policy makers, and how this information can be efficiently collected from mortgage lenders and servicers.

We will be talking with the CFPB about data-related issues, all of which are part of Dodd-Frank [1] and are critical to shedding more light on mortgage lending and servicing in this country:

(1) data enhancements to the Home Mortgage Disclosure Act (HMDA) dataset,
(2) the establishment of a default and foreclosure database and
(3) the public availability of the Home Affordable Modification Program (HAMP) loan modification data.

Maybe I’m just really curious, but when homeowners default on their mortgage loans, I want to understand what led these homeowners to default while other homeowners continue to pay and stay current on their loans.  Specifically, were borrowers with certain loan terms more likely to default than other borrowers?  And were the borrowers who defaulted able to get affordable loan modifications?  Using data from these databases, we should be able to point to the answers.

However, these datasets are three separate entities, collected at different points in time and often from two or more different reporting entities.  So we need a way to easily connect the data from one database to the other. This is why during our meeting with the CFPB this week I am going to be the champion of the “universal loan identifier,” or universal loan ID.  Are you still with me?  I hope so, because this is important.

The universal loan ID would first be used by the lender when it reports the loan under HMDA.  The ID would then follow the loan to the servicer and, if needed, be used when reporting any defaults, foreclosures or modifications related to that loan.  This relieves the servicer from collecting and reporting a variety of borrower and loan-related data pieces, including borrower income, race/ethnicity, gender, age and credit score, loan amount, term, APR and mortgage channel.  Regulators, policy makers and the public would already have access to this information in the HMDA data via the universal loan ID.

I believe the universal loan ID is the key to increased transparency and accountability, without sacrificing efficiency.

End Note:
 [1] See Sections 1094, 1447 and 1483 of the Dodd-Frank Wall Street Reform and Consumer Protection Act for the language pertaining to these datasets.

Tags: HMDA | Consumer Financial Protection Bureau | CFPB | mortgage lending | defaults | foreclosures | loan modifications

Free Legal Help for Monroe County Homeowners in Foreclosure

Did you know that if homeowners are struggling with their mortgage and facing foreclosure, there are professional and FREE services available from local attorneys to help them understand the foreclosure process? 


The possibility of losing a home can be incredibly frightening, and at times overwhelming.  The legal foreclosure process is a game with its own set of rules and regulations.  If a homeowner doesn’t know the rules of the game, it is much less likely she will keep her home in the end.  But there is help. Empire Justice Center offers two free legal clinics every month for anyone who wants to better understand the foreclosure process.  The clinics are developed to teach homeowners the rules and to enable them to take some control over a very stressful and confusing process. 


Under New York State law, most homeowners in foreclosure are entitled to a “Settlement Conference.”  This will occur early in the foreclosure process (once a homeowner has been served with a Summons and Complaint), and will involve the homeowner and an attorney for the bank appearing before a judge or judge’s law clerk.  The goal of the Settlement Conference is simple: to attempt to come to some alternative to foreclosure. 


The Settlement Conference is a relatively new process, having been created by the New York State Assembly three years ago.  It was created at the urging of housing counselors and legal advocates around the State, including Empire Justice, who saw that homeowners were not being treated fairly by their banks when they fell behind on their mortgages.  Paperwork was getting “lost,” questions were not being answered, and homeowners were growing increasingly frustrated.  The Settlement Conference is there to protect the homeowner and ensure that someone is watching out to make sure the banks are doing what they are required to do under New York and federal law.


There are several alternatives to foreclosure that may be possible for homeowners: entering some form of a loan modification (which would allow the owner to keep her home and have a revised mortgage payment), agreeing to a repayment plan (which would allow the owner to keep her home by paying back all missed payments to the Bank over a short period of time), or entering a “short sale” or “deed in lieu of foreclosure” (which would NOT allow the owner to keep her home, but would limit the negative consequences to her credit). 


We understand that it can be incredibly frightening for homeowners to receive the letter telling them have to attend the Settlement Conference.  And that makes sense – most of us try to avoid the courthouse if we can!  In this case, however, attending a Settlement Conference represents the best chance a homeowner has to save her home.  So if a homeowner wants to save her home (or even to just limit the impact of losing her home), it is vital that every homeowner attend their Settlement Conference.  


To learn more about the details of the foreclosure process, and what homeowners should be doing at any given stage of that process, we encourage struggling homeowners to attend the FREE clinics put on by Empire Justice Center.  Dates and times for upcoming clinics are listed below (for additional dates, see our calendar).





545 Hall of Justice, Room 25

99 Exchange Blvd.

Rochester, NY  14604


 12:30 - 1:30 pm Oct, 31, Nov, 28, Dec, 19

United Way Building

1st Floor Confrence Room

75 College Ave.

Rochester, NY  14607

 6:00 to 7:00 pm Oct, 11, Nov, 8, Dec, 13

Tags: foreclosure | mortgage | homeowner | legal clinic | settlement conference | loan modification