Foreclosure Defense: New York State Homeowners get SOME Help

It is a step in the right direction

June 19, 2008

Court Offers Homeowners Help Avoiding Foreclosure

Homeowners in New York who face foreclosures would be offered help by the courts to save their homes or at least make the overall process easier under a new program announced on Wednesday by the state’s chief judge.

The program calls for the creation of a new section of the court charged with helping borrowers and lenders reach speedy settlements. Homeowners would be notified almost immediately that they face a foreclosure proceeding; they would receive a list of legal and foreclosure counselors who can help them; and they would be invited to court for a settlement conference.

Parts of the program would be voluntary. The court would encourage, but not require, a settlement conference, and lenders would still be able to foreclose.

The chief judge, Judith S. Kaye, however, said that she hoped that getting the courts involved in the process early would allow them to be more than the final arbiters who order people removed from their homes.

“New Yorkers are losing their homes in record numbers,” Judge Kaye said on Wednesday during a news conference in Lower Manhattan. “Some neighborhoods are being ravaged by foreclosures. Can we be part of an influence for the good?”

A pilot version of the program is scheduled to start in Queens this summer.

According to court data, foreclosure filings across the state have increased by 150 percent since January 2005, Judge Kaye said. In Queens, she said, that figure is 223 percent. She said an additional increase of 40 percent was expected by the end of 2008.

United States Senator Charles E. Schumer said Judge Kaye’s plan was “just what the doctor ordered.”

He said more than half of the people facing foreclosure who received adequate professional counseling could save their homes.

“There are some who can’t afford to stay in their homes,” Mr. Schumer said. “There are many who can easily afford to stay in their home and were just given a terrible deal. A refinancing by a counselor can work.”

Congress is considering legislation that would refinance mortgages with federally insured loans. The legislation would authorize the Federal Housing Administration to insure an additional $300 billion in mortgages. Only homeowners whose primary residences were in danger of foreclosure could apply, and their lenders would first have to voluntarily reduce the principal balance of the original loan so that the new loan was more affordable.

Sponsors hope to send the bill, which has been approved by the House and is awaiting Senate action, to President Bush before the July 4 break.

Congress has already appropriated $180 million toward nonprofit foreclosure counselors, and another $180 million is proposed in a pending bill.

In Albany, there are different proposals before the Legislature. Under a plan favored by Gov. David A. Paterson, lenders would have to take steps to ensure that the people they lend money to have the ability to pay, and banks foreclosing on a house would have to give the homeowner 60 days notice before they begin foreclosure proceedings. A plan that passed the Assembly last month would go a step further by declaring a one-year moratorium on home foreclosures throughout the state.

Under the current state statute, lenders have 120 days to notify a borrower that they have filed for a foreclosure proceeding, which is usually done at the county clerk’s office. The lender then has an unspecified amount of time to file a request for the court’s assistance. That starts a series of motions and hearings that could take up to 18 months, said Ann T. Pfau, the chief administrative judge.

But under the court’s plan, the lender would be required to send the borrower a notification of complaint as soon as the foreclosure papers are filed with the county clerk. And once the lender asks for judicial help, the court will send the homeowner a letter with referrals to legal advisors and mortgage counselors who can help them for free, Judge Pfau said.

Mike Thompson, a mortgage counselor and the executive director of Iowa Mediation Service, said organizing conferences between borrowers and lenders could be complicated for several reasons. For one, the people who service loans for lenders can be anywhere in the country, which would make an in-person conference difficult. Also, borrowers are often reluctant to be upfront with pertinent information needed for negotiations, such as pay stubs and account information.

But the mere attempt to get the parties to sit down and talk before going through the full legal proceedings could represent a positive step, Mr. Thompson said.

“They’re setting up a new time frame,” he said. “What deadlines do in negotiations is it makes people be more realistic.”

David M. Herszenhorn and Jeremy W. Peters contributed reporting.

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