Legislative Memorandum 

Empire Justice Memo of Support for Critical Legislation to Help Stop Foreclosures

Act Immediately on Critical Legislation to Help Avert Foreclosures in our State

Governor’s Program Bill #46

This Governor’s Program Bill would increase the number of homeowners who will benefit from the settlement conference procedures and 90-day notice provisions of the foreclosure law;  clarify and strengthen aspects of the settlement conference process; strengthen protections for tenants in foreclosed properties; establish requirements for foreclosure plaintiffs to maintain the subject property following a foreclosure judgment; and close loopholes in the current law to better protect homeowners from “foreclosure rescue” scams. 

The Empire Justice Center strongly supports the Governor’s Program Bill #46.  New York has done an excellent job in stemming the foreclosure crisis, in great part because of the increased resources our state has allocated to provide assistance to homeowners, and because of the protections put into place through the Foreclosure Prevention and Responsible Lending Act of 2008.  New York homeowners, cities, and our economy have all benefited greatly because of the State’s ability to act swiftly and nimbly to protect homeowners.

Foreclosure rates continue to rise; we are not yet at the peak of the problem.  Time is of the essence as new foreclosure filings occur daily and it is absolutely critical that the State continue to react with protections for homeowners. The Governor’s Program Bill #46 responds by strengthening  and extending to more homeowners critical protections that have been proven to ward off the unnecessary loss of homeownership. Additionally, the proposed legislation provides much needed protections for tenants, and addresses the blight that is being caused by foreclosed and abandoned properties in our neighborhoods. 

The legislation will provide protections for homeowners – targeted at homeowners in default but also protecting stable homeowners in an effort to ensure that their housing values and property tax bases will not further plummet – through a number of protections:

• The legislation extends the 90 day notice of intention to foreclose - including contact information for non-profit counseling assistance – to all residential homeowners; currently only homeowners with subprime and unconventional home loans are entitled to this notice.  The Division and Housing and Community Renewal reports that nearly 80% of the foreclosures reported to them involve homeowners with non-subprime, conventional loans.  This notice is critical to driving homeowners to reputable, state-funded agencies for direct assistance rather than leaving them prey to foreclosure scams.  The 90 day notice has absolutely no impact on the courts, as it is sent well before an action can be filed, and in fact, reduces the number of filings as many cases are resolved once a homeowner is directed to a housing counseling agency and can apply for a loan modification through the federal Home Affordable Modification Program. 
• Similarly, settlement conferences will be extended to all homeowners on their primary residences.  The settlement conferences have proven to be a useful tool to bring mortgage servicers to the table to negotiate with homeowners and to prevent many homeowners from ultimately losing their homes.  The legislation also strengthens the settlement process by requiring the parties to negotiate in good faith and will promote efficiency by making sure parties appear with the necessary documents.  The Office of Court Administration will be empowered to promulgate much-needed guidance for the courts regarding the conferences.
• Regarding tenant protections, the law ensures that new federal protections enacted through the Protecting Tenants at Foreclosure Act comport with New York law and procedures.  By ensuring that tenants have no less than 90 days notice from the sale of a property – a reasonable time frame for all parties to follow - to find alternative shelter, the legislation addresses a rapidly increasing problem of tenants being displaced with little notice or time – at a time when rental units are becoming more and more of a premium.
• To address the deterioration of cities and communities as the result of foreclosures, no place more harmed perhaps than Buffalo, the legislation requires that once a plaintiff files a foreclosure and moves for judgment, that the judgment holder be responsible for maintaining the property should it be abandoned.  The hope is that lenders will be deterred from blindly filing foreclosures on properties they do not intend to bring to sale because only after they receive judgment do they determine the marketability and value of the property.  Concerns that this would chill the housing market are disingenuous; it would actually enhance the housing market by not adding to neighborhood blight and deflating the values of the surrounding homes.
• Finally, the law closes a crude loophole regarding “distressed property consultants,” (a.k.a. foreclosure consultant scammers) who hide behind the names of law firms.  Lawyers are currently exempted from these important protections which have kept scammers at bay in New York.  The legislation exempts only those lawyers who are regularly assisting homeowners in the regular course of their practice.  It also prohibits mortgage brokers from accepting any upfront fees from homeowners for foreclosure assistance.

For the above reasons Empire Justice Center strongly supports this legislation and the need to provide greater protections and assistance to New York homeowners who are in jeopardy of losing their homes.

11/16/09