Foreclosure Protections for All - The New York Times - By BOB TEDESCHI

Dear Readers:  This is such a good summary of what is happening right now - including some terrific weblinks, that I am respectfully posting here Mr. Tedeschi's article from the Times, published November 29, 2009, in its entirety.  As you know, I am a foreclosure mediator for New Jersey and I encourage the use of foreclosure mediators in New York BUT we need some "teeth" put into the process to achieve results.  I lobbied to extend the protection to cooperative home owners and the new legislation incorporates these home owners who were left out previously - Bravo!

 

Last year, a new law was put into place in New York to help protect subprime mortgage borrowers from foreclosure. Now the state is on the verge of extending similar protections to prime borrowers, too.
A bill passed by the State Legislature this month would require, among other things, that lenders give all borrowers 90 days’ warning before starting foreclosure proceedings and that they take part in settlement conferences with borrowers before proceeding with a foreclosure action. The bill also covers co-op owners.
Gov. David A. Paterson is expected to sign the legislation; most of the measures would then take effect within two months.

Richard J. Biondi, the immediate past president of the New York Association of Mortgage Brokers, said the new legislation was welcome, if a bit overdue. “It’s terrific that they finally opened the door to prime borrowers and made these protections available,” he said.

Richard H. Neiman, the superintendent of the New York State Banking Department, said that given the recent deadlock in the Legislature, he was pleased by the speed with which the bill was passed.
Of the nearly 20 measures in the legislation, mandatory mediation could provide the most relief for struggling borrowers, some of whom have been unable to get their lenders to consider loan modifications. Because of the high volume of mortgage defaults, many lenders have been unable to keep pace with such inquiries from borrowers.

The foreclosure mediation, free for homeowners, would require lenders to provide a representative at a certain date and place. Lenders may be subject to sanctions if they fail to come with financial documents and other information required by mediators.

New York’s mediation program for subprime borrowers has had only limited success, its administrators say, in large part because borrowers often do not attend the sessions.

Under the new legislation, when lenders notify the state of an impending foreclosure action, the state must send the borrower’s name to housing counseling agencies, which can then inform the borrower about foreclosure avoidance strategies like the mediation program.

The new measures relating to co-ops, meanwhile, highlight the difficulties faced by those who fail to make their monthly maintenance payments, which go toward building expenses and the building’s underlying mortgage.
Co-op units do not fit the legal definition of real property, and therefore do not qualify for the protections of traditional foreclosure processes. As a result, Mr. Neiman said, co-op owners can often be forced to evacuate a unit within two months of the time their building’s board takes formal action against a nonpaying resident. Now that the new law gives occupants 90 days before they lose their ownership shares, he said, owners will have more time to seek help.

The legislation also includes protections for tenants of multifamily housing units that go into foreclosure.
Jane Azia, the director of nondepository institutions and consumer protection for the State Banking Department, says that because New York’s housing market includes a heavy mix of multifamily units, the protections for tenants are especially meaningful. By law, she said, a lender can evict tenants only after a foreclosure judgment, which typically takes about 15 months in the state.

“There are tenants out there who are harassed into leaving after the foreclosure process begins,” Ms. Azia said, “and they aren’t aware of their rights.”

The new law would give tenants more time to get out, but Mr. Biondi of the New York Mortgage Brokers Association said this measure could further damage the financial health of lenders.

“Tenants will probably just stop making payments,” he said. “And for lenders, getting any sort of legal enforcement against that will probably be difficult in the current environment.”

Can I prevent a foreclosure on my home?

The best defense in a foreclosure is to prevent it. Whatever the reason – be it lack of employment, medical bills - thousands of people are discovering that they can no longer make their loan / mortgage payments.

This is not the time to fall into a daze of denial. You must remain in a pro-active position. Act while you are still in the bank’s good graces!

You can stop a foreclosure.

First:

• Contact your lender – ask for the loss mitigation department. You will need your loan number. Tell them your situation and what steps you are taking.
• Do not ignore any notices.
• Keep all records of your contacts with the lender – who you spoke to, what day and time, what was the result of your conversation. Even if no one will speak with you – record that note.
• If you need to send anything in writing, send it by certified mail return receipt.
  

A foreclosure defense attorney can intercede on your behalf. I have found that too many people are in such denial that they ignore the proceedings until the auction is scheduled and then that week they call my office for help – and there are few options at that point!

Remain pro-active – many laws have been passed to protect homeowners and you can benefit from them.

In today’s Wall Street Journal, http://online.wsj.com/home-page there is a superb article by Nick Timiraos titled, “Mortgage-Assistance Program Offers Disparate Treatment Depending on Goals and Circumstances”.

With respect to the full article, I am excerpting a small section of it because it details important components of the program. Mr. Timiraos writes:
….
The program has two main components. One provision will allow diligent borrowers who are current on their mortgage payments but have little or no equity in their homes to refinance their first mortgage to take advantage of current interest rates, which have fallen to near record lows. That is designed to allow responsible borrowers -- mainly those who have been hurt by falling home prices -- to benefit from the current climate. Lenders won't refinance borrowers who don't have equity in their homes.

The second component involves modifying mortgage loans to lower monthly payments to 31% of the borrowers' gross monthly income, mainly by reducing the interest rate on the loan. This effort would target borrowers who are falling behind on their mortgage payments or who are in danger of falling behind. The government will provide financial incentives to lenders and mortgage servicing companies to encourage them to offer the reduced payment plans, which last for five years.

But as with any broad effort, homeowners are treated unevenly in the programs. The refinance provision is open only to borrowers who have loans that are owned by Fannie Mae or Freddie Mac. That excludes large numbers of borrowers with subprime and other exotic mortgages sold to investors; and borrowers with so-called "jumbo" loans that are too large for government backing. Those groups will be eligible for the modification part of the plan, but only for loans up to $729,750.

Borrowers who owe more than 105% of the current value of their home also won't be eligible for refinancing. That means that fewer borrowers in the nation's most over-heated housing markets, including California and Florida, and in some of the most depressed market in the Midwest can take advantage of the program. "Most of the people we serve are too far underwater to take advantage of this," says Dan Elsea, a mortgage broker in Detroit.

Nationally, 25% of mortgage holders have conforming loans that are within the 80% to 105% loan-to-value ratio needed to qualify for the program, according to real estate Web site Zillow.com. But that number falls in certain high-cost housing markets that have seen big price declines. In Los Angeles, for example, just 9% of mortgage holders are eligible to refinance, while 8% of conforming borrowers are too far underwater, according to Zillow.com.
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