Last month, New York passed legislation that affords homeowners facing foreclosure greater protections. Though New York already has some of the most proactive consumer protection laws in the nation, the housing crisis in New York City and throughout the state inspired the expanded protections and continues to inspire even further-reaching protections that are still being debated by the legislature and consumer advocacy groups. The protections are not only aimed at homeowners currently facing foreclosure, but are also intended to help prevent similar housing crises from occurring in the future.
The Crisis
The Center for Responsible Lending reports that more than 5 million homes experienced devaluation in New York in 2009. While the average home devaluation has been just over $12,000, many homes have devalued at a far greater rate.
Partly as a result of such drastic devaluation, over 50,000 new foreclosure filings occurred in New York in 2008 alone, which is a 30 percent increase from the previous year. 2009 did not fare well either as, for example, 58,000 outstanding New York mortgage loans entered various forms of delinquency in September. With so many New York homeowners feeling the crunch of the housing crisis, the legislature aimed to enact protections in relation to a wide variety of concerns.
New Protections
Last year, New York enacted a law which granted subprime mortgage borrowers protections against foreclosure. The new law extends similar protections to prime borrowers and will thus impact thousands of residents. The new protections include:
- A requirement that lenders and mortgage servicers provide notice of foreclosure to borrowers at least 90 days before legal action is taken, so that borrowers may take advantage of counseling that may aid in preventing foreclosure
- The ability for all homeowners to meet face to face with a lending representative in a foreclosure settlement conference, so that the parties may explore the possibility of avoiding foreclosure
- A requirement that mortgage lenders and borrowers make good faith efforts to reach a mutually agreeable solution during eligible foreclosure settlement conference discussions, so that fewer borrowers will ultimately be compelled to foreclose
- A requirement that upon notice of an impending foreclosure, New York State must send the names of the concerned borrower to a counseling agency so that the agency can counsel the borrower regarding foreclosure avoidance strategies
- A requirement that plaintiffs involved in a foreclosure action must maintain their foreclosed property, so that neighborhood property values may be better preserved
- A requirement that all tenants residing in foreclosed property be allowed to remain in their residence for 90 days or the remainder of their lease, whichever is longer, so that tenants have adequate time to seek other housing arrangements
- A ban on up-front fee charges by distressed property consultants, so that owners facing foreclosure can avoid rescue scams
Still Under Consideration
While the new protections will certainly aid many homeowners in either avoiding foreclosure or dealing with foreclosure in a less stressful way, even more protections are being contemplated by the New York legislature. Protections being further considered include:
- Providing for a one-year moratorium on foreclosures
- Requiring mandated counseling for borrowers before settlement conferences
- Allowing the redemption of tax foreclosed real property minus fees or penalties for certain recently deployed military members
Making Lemonade
The New York legislature has embraced the foreclosure crisis as an opportunity to enact some of the most stringent consumer protection laws in the nation. Other New York organizations have similarly mobilized to turn the foreclosure crisis into an opportunity to creatively and responsibly address the subject of foreclosure. On January 15, 2010, New York City’s mayor Bloomberg announced that the U.S. Department of Housing and Urban Development (HUD) had awarded over $20 million in Recovery Act funding to the City’s Department of Housing Preservation and Development (NYC HPD) under HUD’s Neighborhood Stabilization Program.
The NYC HPD had competed with numerous organizations for the money, which was awarded based on identifying innovative ideas to address the foreclosure crisis in local communities. New York plans on using the funds to purchase, renovate and resell foreclosed properties in the hardest-hit neighborhoods to low- and moderate-income families. Rafael E. Cestero, the NYC HPD Commissioner, hopes that the project will strengthen and stabilize the community by bringing families back into the rehabilitated neighborhoods. He has stated that the project “compliments New York City’s efforts in foreclosure prevention.”
New York’s Community Builders and Habitat for Humanity New York were also awarded substantial grants to address the effects of the foreclosure crisis. The advocacy of community and governmental organizations in New York combined with ongoing legislative attention promise that New York’s foreclosure crisis will be constantly assessed and actively addressed.
Consult With an Attorney
Facing foreclosure can be a stressful and confusing process. If you are facing foreclosure, or if you have any questions about how the new New York legislative protections will affect you, please contact an attorney experienced in foreclosures in your area.
