State Must Step in Before Anti-Foreclosure Money Runs Out

Brad Hoylman and Christie Peale

February 20, 2019

Originally published in Crain's New York Business on February 20, 2019.

Nonprofits laying off staff as settlement funds dwindle

Every year thousands of New Yorkers purchase a home, dreaming of a place to call their own and build a life. It is the biggest purchase most will ever make. It is also becoming a big risk.

New York families are under siege from homeowner scams, foreclosure and mortgage distress, often through no fault of their own. Many home buyers in distress—unable to afford costly legal services or financial counseling—have turned to regional nonprofits for guidance. But dozens of these nonprofits are at risk of going under themselves.

In the decade following the 2008 financial crisis, settlements from the big banks behind the Great Recession, secured by the state attorney general’s office, have been funding nonprofit legal and housing counseling services. These services are provided by a network of 89 nonprofits across the state.

Known as Communities First, the network has made an incredible difference across the state, from my district in Manhattan to Western New York. Low-income New Yorkers, who are frequently targeted by housing scams and bad actors, receive support from trusted and established providers as they navigate complex and life-changing challenges that can leave them in debt or even foreclosed on and without a home.

But the bank settlement funds will run out April 1, with no other outside revenue available to take their place. The only way to ensure these legal and housing-counseling services remain accessible is to include the necessary funding in the state budget. Without it, many organizations in the network will be forced to reduce staff, cut services and in some cases close down.

We are already seeing the effects of these potential cuts. Many nonprofits are already turning away foreclosure victims and laying off staff. Continued inaction will lead to a loss of desperately needed services designed to prevent displacement, uplift communities and allow families to stay in the homes and neighborhoods they love.

Without funding, an estimated 18,000 New York households won’t receive needed assistance in 2019, according to a survey conducted by housing advocates last year. Across the state, 28 programs will be forced to close entirely. And nearly two-thirds of the state’s foreclosure-prevention program capacity will disappear overnight.

The loss of services couldn’t happen at a worse time. Tens of thousands of New York homeowners and their communities are grappling with unmanageable mortgages. Foreclosure rates remain at levels reminiscent of 2008, with more than 20,000 new cases filed by New Yorkers in 2017. This year, the number of 90-day pre-foreclosure notices is projected to rise.

Without experts to help them, homeowners will be at a huge disadvantage as they seek to modify mortgages or deal with the horrors of displacement and fraud. These complicated, bureaucratic processes can be nearly impossible to go through without a nonprofit counselor.

If we don’t stand up for our families and dedicate funding to Communities First, New York’s vibrant nonprofit community will be decimated, leading to significant job losses and placing thousands of New Yorkers at risk of losing their homes. Neighborhoods facing their greatest risk since the financial crisis are counting on our state to save them.