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New York Governor Wants Stronger Mortgage Protections

""New York Gov. David A. Paterson"":http://www.state.ny.us/governor/index.html has proposed legislation that would build upon the state's subprime lending reform law enacted last year. The measure centers on providing additional protections for homeowners and tenants, establishing safeguards against foreclosure rescue scams, and preventing urban blight caused by foreclosed homes.
According to Paterson, more needs to be done to prevent predatory lenders from taking advantage of New Yorkers. He also says lawmakers can no longer allow tenants who live in foreclosed properties to find their leases terminated without reasonable notice, nor can they let struggling homeowners who are looking for help lose their homes to loan modification scams.
Paterson also said, ""It has been shown that New Yorkers could lose up to $64 billion in equity by the end of the year due to foreclosed properties. We are working to protect New York neighborhoods from decay due to foreclosure, not only by reducing the erosion of area property values, but by also preventing these vacant homes from becoming a site for criminal activity and drug use.""
The governor's proposal would expand the 90-day pre-foreclosure notice mandated for subprime loans last year to apply to all mortgages closed before September 1, 2008. The 90-day reprieve is intended to allow additional time for defaulted homeowners to work with their lenders to reach resolution before the initiation of a foreclosure action.
Lenders that serve a borrower with this 90-day notice would have three days from notification to file a report with ""New York's banking department"":http://www.banking.state.ny.us/. According to the governor's office, this regulatory filing will allow the banking department and the ""Division of Housing and Community Renewal"":http://www.dhcr.state.ny.us/ (DHCR) to provide targeted assistance to distressed homeowners during the pre-foreclosure timeframe, as well as give the agencies the data they need to monitor the state's foreclosure numbers.
Last year's law established an early, mandatory settlement conference in court for subprime borrowers facing foreclosure. Paterson wants to expand the scope of these mediation meetings to include borrowers of all home loans, not just subprime.
Tenants received some federal protections under the ""Helping Families Save Their Homes Act"":http://www.whitehouse.gov/the_press_office/reforms-for-american-homeowners-and-consumers-president-obama-signs-the-helping-families-save-their-homes-act-and-the-fraud-enforcement-and-recovery-act/, which requires that in the event of foreclosure, existing leases for renters are honored, except in the case of month-to-month leases or owner occupants foreclosing, in which cases a minimum of 90 days notice is required. Paterson's proposal would require that tenants in New York receive written notification of any change in ownership of the property, and be permitted to remain in their home for the remainder of their lease term or 90 days, whichever is longer.
New York's mortgage reform law enacted in 2008 made mortgage fraud a criminal offense and established a statutory framework to protect homeowners from fallacious foreclosure rescue schemes. Under Paterson's suggested legislation, brokers who perform distressed property consulting services would be prohibited from accepting upfront fees.
The governor's proposal would also require plaintiffs in a foreclosure action who obtain a judgment of foreclosure and sale to maintain the foreclosed property.
Paterson also wants to expand the scope of counseling and legal services established through the $25 million foreclosure prevention fund created in the state's budget. In 2008, DHCR funded 64 foreclosure prevention programs across New York. As a result, each county now has at least one provider that offers outreach/education, counseling, and legal services to homeowners facing default or foreclosure. In addition, last year's mortgage reform law required lenders to list in the pre-foreclosure notice the name and telephone numbers of government-approved housing counselors serving the borrower’s area.
The 2009-2010 state budget includes an additional $25 million to support home retention measures, and DHCR is in the process of structuring the parameters for the use of these funds to increase the effectiveness of the mandatory settlement conferences, raise public awareness of the resources available to homeowners, and further reduce the rate of foreclosure in New York.
As of the first quarter of 2009, the governor's office said, there were 11,017 foreclosure filings in New York state, representing a 23 percent decrease compared to the first quarter of 2008. Paterson commented that the 23 percent decrease year over year, compared to the national 24 percent increase over the same period, demonstrates the success of New York’s multi-faceted foreclosure prevention policies to-date.
Superintendent of Banks Richard H. Neiman said, ""While New York’s overall rank among other states continues to improve, there are still pockets where foreclosure levels continue to rise at alarming rates. It is imperative that we continue our efforts to help homeowners and restore stability to these communities.""

About Author: Carrie Bay

Carrie Bay is a freelance writer for DS News and its sister publication MReport. She served as online editor for DSNews.com from 2008 through 2011. Prior to joining DS News and the Five Star organization, she managed public relations, marketing, and media relations initiatives for several B2B companies in the financial services, technology, and telecommunications industries. She also wrote for retail and nonprofit organizations upon graduating from Texas A&M University with degrees in journalism and English.
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