KEEPING NEW YORKERS HOME FOR THE HOLIDAYS

Senator Klein Joins Governor Paterson in Signing into Law Landmark Foreclosure Legislation

NEW YORK- Today, State Senator and Deputy Majority lead Jeff Klein (D-Bronx/Westchester) joined Governor David Paterson, legislative leaders, families in foreclosure, advocates, seniors, legal experts and Changer, Neighborhood Initiatives Development Corporation, Brooklyn Housing and Family Services, Neighboring Housing Services of NYC and United Communities Alliance in a formal bill signing ceremony making new landmark foreclosure legislation that will help thousands of New Yorkers stay in their homes now a NYS law.

In November’s Special Session, the New York State Senate and Assembly passed bill S66007/A40007. The legislation specifically helps middle class homeowners keep their homes and get back on their feet.

“Since I first saw signs of the foreclosure crisis crippling communities and devastating families more than two years ago, I've made homeowner and tenant protection a top priority. This Mortgage Foreclosure bill is landmark legislation that is long overdue - it holds banks more responsible, protects thousands of New York homeowners and renters and insures our neighborhoods remain safe. I applaud the Governor for signing a bill we've worked hard to make a model for other state's battling foreclosures nationwide," said Senator Klein.

A recent RealtyTrac U.S. Foreclosure Market Report found 332,292 foreclosure filings across the U.S. in October, 2009. That’s nearly a 19 percent increase from October, 2008. The report also stated one in every 385 U.S. housing units received a foreclosure filing in October. The Mortgage Bankers Association recently reported delinquencies and foreclosures have hit an all time high with 1 in 7 U.S. home loans past due or in foreclosure as of September 30, 2009. While the foreclosure crisis used to mostly affect homeowners with sub-prime loans, statistics show it has now spread to prime loans as well. According to the Center for Responsible Lending (CRL), Goldman Sachs estimates 13 million foreclosures nationwide on all types of loans through 2014. In 2009 alone, CRL predicts foreclosures will cause 69.5 million neighboring homes to experience a devaluation of $501.9 billion in total across the country. That means homeowners living near foreclosed properties will see their property values decrease about $7,200 in average. Over the next four years, CRL predicts foreclosures will affect 91.5 million nearby homes, reducing property values $1.86 trillion in total or $20,300 per household.

CRL reports in NYS, more than 5-million neighboring homes are experiencing devaluation in 2009, decreasing house values by more than $65,000. The average decline in a home is $12,339. According to Realtytrac.com, in 2009, from January to October, NYS reported 58,237 foreclosures. The top ten counties include Queens (10,521), Suffolk (7,965), Kings (7,872), Nassau (6,781), Monroe (4,009), Bronx (3,071), Westchester (3,070), Erie (2,685), Richmond (2,506), Orange County (1,469). New York County reports 1,238 foreclosures.

The Mortgage Foreclosure bill has five main components—maintaining foreclosed properties to preserve neighboring property values, notifying tenants of foreclosure and extending the length of time they can stay in their homes, expanding court protection to all homeowners who face foreclosure, preventing foreclosures by bringing down the principal of a loan when a shared appreciation agreement is signed and ensuring protection from rescue scams.

To protect neighboring property values and prevent health hazards that surround an unkempt, foreclosed home, the bill requires lending institutions to maintain the property and make it safe and habitable when occupied by tenants. To protect the tenant, the lending institution that acquires the foreclosed property must notify the tenant at least 90 days before taking legal action. The bill also mandates that lending institutions allow tenants to stay in the home for the remainder of their lease or 90 days after notification, depending on which amount of time is greater.

NYS already has a court-based settlement conference where homeowners sit down with a court official and bank representative to discuss possibilities of getting out of foreclosure. However, this conference is currently only offered to homeowners with sub-prime, high cost and non-traditional home loans. The Mortgage Foreclosure bill expands the conference to include all homeowners and all types of loans so that any homeowner going into foreclosure is given the opportunity to meet face to face with a bank representative.

The bill protects families from foreclosure by requiring mortgage loan distributors to regularly report information with the Superintendent of Banks that pertains to tenants or homeowners who face a 90 day notice. The provision helps prevent foreclosures because it helps identify distressed homeowners as soon as possible so that they can receive effective counseling. The bill also prevents foreclosures by allowing banks to decrease the principal of a loan for homes where the value has dropped below the original purchase price and in return, when a homeowner sells his/her home, he/she would owe the bank a percentage of the sale price.

The latest foreclosure crisis has unfortunately led to fraudulent and predatory rescue scams. Last year’s legislation enacted some safeguards for distressed homeowners such as prohibiting distressed property consultants from accepting upfront fees but it exempted mortgage bankers and brokers regulated by the Banking Department. The Mortgage Foreclosure bill prohibits all consultants from accepting upfront fees and it mandates that mortgage brokers must disclose the exact amount of total compensation and why the broker will receive that amount in the transaction.

“Our community is sick with massive foreclosure and loan modification scams. This foreclosure bill sponsored by Senator Klein will be the medication that will heal us,” said Antoinette Coffi-Ahibo, a victim of a loan modification scam.

“This bill protects homeowners at risk of foreclosure and will prevent similar crises from occurring in the future. With foreclosure filings increasing at alarming rates, and 32% of all foreclosures taking place in New York City alone, it is imperative that distressed homeowners are safeguarded.” Said Senate President Pro Tempore Malcolm A. Smith.

“Empire Justice Center appreciates the dedication and leadership provided by bill sponsors Senator Klein and Assemblywoman Weinstein on this landmark legislation. Now that the Governor has signed this bill, New York State will have the strongest law in the nation aimed at diverting the loss of homeownership as a result of the foreclosure crisis. This is due in large part to our state law makers being willing to act swiftly and cohesively to craft practical solutions for homeowners that actually work,” said Kirsten Keefe, Senior Staff Attorney in the Albany office of Empire Justice Center. “This new law will provide critical assistance to homeowners in foreclosure, and will ensure vital protections for tenants in foreclosed properties. We are very pleased.”

"This important legislation, championed by Senator Klein and Assembly Member Weinstein, will protect homeowners, renters and communities across New York from the devastating consequences of predatory lending," said Tracy Shelton, NYPIRG Consumer Attorney. "The legislation will reduce foreclosures in New York by expanding the 90-day notice and settlement conference provisions to cover all owner-occupied home loans. This means that more New Yorkers at risk of losing their homes will get non-profit assistance early in the process, before a foreclosure is filed, and more New Yorkers will be able to modify their loans, including through the federal Home Affordable Modification Program."

“We strongly support Senator Klein and Assemblywoman Weinstein’s efforts on behalf of homeowners in distress. The bill’s expansion of settlement conference eligibility is of great benefit to our clients as it provides a valuable opportunity to negotiate a solution in a structured, court environment. Also, prohibiting scam artists from collecting upfront fees will bolster current law enforcement efforts,” said Frengiz Surty, Home Retention Counselor for the Housing Action Council.

“PACC’s mission embraces a vision in which people strive together to build an equitable, diverse and flourishing community in Brooklyn. Foreclosure filings in the communities of Bedford, Stuyvesant and Fort Green/Brooklyn Heights for the past three quarters of 2009 amounted to 809 households. PACC fully supports this bill, particularly the provision that gives all homeowners a 90 day moratorium. Additionally, this bill will also benefit tenants residing in these properties,” said Bonita Dowling, Homeowner Counselor at Pratt Area Community Council.

“This legislation comes not a moment too soon. Even though we are well into the foreclosure crisis, we are still seeing record numbers of foreclosure filings in our neighborhood in the Bronx. This bill is broad reaching and will help keep more homeowners in their homes while providing protections for tenants. Our neighborhoods will also benefit from the requirements on the plaintiff to keep the property in good condition,” said Gregory Jost, Deputy Director of the University Neighborhood Housing Program.

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