New law to help owners facing foreclosure

The following article was released by Crains New York Business.


By Amanda Fung

Published: December 16, 2009 - 2:39 pm

A landmark foreclosure law designed to help thousands of middle class New Yorkers keep their homes was signed into law Tuesday by Gov. David Paterson.

It is designed to protect property values by requiring lending institutions to maintain foreclosed homes and make them safe and habitable for tenants. The law also expands protections to homeowners with all types of loans. Previously, court-based settlement conferences—where homeowners, court officials and banks sit down to discuss foreclosure proceedings—were only offered to homeowners with sub-prime loans.

In addition, under the new law banks are required to notify tenants at least 90 days before foreclosing on properties to give tenants time to find a new home.

“We still need to do a little more, but overall this is going to go a long way in keeping dreams of homeowners alive,” said state Sen. Jeff Klein (D, Bronx-Westchester), who sponsored the legislation and has been working on it for more than two years.

Before this law was passed, local governments and community groups spent money and time to maintain foreclosed properties to prevent these properties from becoming blighted neighborhood eyesores, Mr. Klein said. Now lending institutions are responsible for maintaining these properties.

The law also aims to prevent foreclosure by allowing banks to decrease the principal of a loan for homes where the home's value has fallen below the original loan amount. In return, when the homeowner sells the property, the banks will get a percentage of that sale price.

“The laws we have passed in New York have stood as a national model for foreclosure mitigation,” Mr. Paterson said, in a statement. “This effort is about keeping New Yorkers in their homes and protecting them during this economic crisis.”

“We commend the government for passing this important legislation,” said Michael Minott, program manager of external education at Neighborhood Housing Services of NYC.

For the first 10 months of 2009, New York state reported more than 58,200 foreclosures, according to Realtytrac.com. Among the top foreclosure counties in the state are Queens with 10,521, Bronx with 3,071 and Manhattan with 1,238. Mr. Minott predicts that the problem will continue to increase as adjustable rate mortgage cause homeowners to experience higher payments. “That will trigger a new wave of default,” he said.

The new law is also expected to crack down on foreclosure and loan modification scams that have arisen due to the market conditions. The law bans any firm from collecting upfront fees from homeowners for loan modifications. Many of these independent loan modification companies charge an unnecessary $2,500 upfront fee, Mr. Klein said.

“Homeowners don't need to hire these companies,” he said. “They can get their lending institution or a U.S. Department of Housing and Urban Development-approved counselor to do it for free.
Noting that many of these opportunistic businesses take the fees and just disappear, Mr. Minott said, “It will hopefully put them out of business.

Only 5% of loan modifications go through!

As an attorney working to help homeowners, reports of these stats make me scream!  I thank the Wall Street Journal for their reporting which appeared in today's paper.  I respectfully copy here the story authored by
Ruth Simon (at ruth.simon@wsj.com).

Foreclosure Rescue Still Bogged Down

By RUTH SIMON

Fewer than 5% of borrowers participating in the Obama administration's foreclosure-prevention program, about 31,000 in all, have received permanent loan modifications, the Treasury Department said Thursday.

The new numbers were the latest sign of trouble in the $75 billion foreclosure-rescue plan launched in February. The program provides financial incentives for mortgage companies and investors to reduce loan payments to affordable levels for struggling borrowers. But it has proved difficult to move borrowers from a trial phase to permanent mortgage fixes.

"We agree that servicer performance in converting trial modifications to permanent ones has been unsatisfactory," a Treasury Department spokeswoman said. The department last week said it was stepping up pressure on mortgage companies to complete more loan modifications.

Waiting for a Permanent Fix

See more data on loan modifications, and sort by servicer, the number of loans eligible and the number modified.

More

• See the administration's "Making Home Affordable Program" report

Through November, more than 728,000 borrowers had begun making trial payments under the plan, up from 651,000 in October, with modifications saving borrowers an average of more than $550 a month, the Treasury Department said.

Bank of America Corp. had 156,864 borrowers in the trial program and 98 other borrowers had received permanent fixes. Citigroup Inc. had completed 271 permanent modifications and had 100,124 active trial modifications.

A Bank of America spokesman said the company had "the highest number of...active trial modifications" and expected to gain momentum in converting borrowers to permanent fixes in December.

A spokesman for Citigroup's mortgage unit said the bank was beginning to see "greater success" thanks to "recent improvements in documentation requirements and increased borrower awareness."

The program calls for borrowers to make three trial payments to qualify for a permanent modification. They must also provide a hardship affidavit and other documents.

The administration has been successful in getting borrowers into trial modifications, said Thomas Lawler, an independent housing economist. But its results on permanent modifications has been "discouraging," he said. Officials "clearly didn't think enough about what would happen on the back end," he said.

The administration had set a goal of 500,000 trial modifications by November 1. Many mortgage-servicing companies began the trial process based on verbal information provided by borrowers. But getting borrowers to turn in required documents has been challenging. Many borrowers, meanwhile, complain they are asked repeatedly for forms they have already filed.

Some companies have required borrowers to provide most or all of the needed paperwork before they begin the trial process. Two such firms, Ocwen Financial Corp. and GMAC Mortgage Inc., account for more than 11,000 permanent modifications -- more than 36% of the total.

"Deciding to get the documentation up front has been key," a GMAC spokeswoman said. Despite financial pressures, GMAC has boosted staffing in loss mitigation by 35%, she said.

J.P. Morgan Chase & Co. has 136,686 active trial modifications and 4,302 permanent modifications. In testimony before Congress this week, Chase said that 29% of borrowers who entered the program between April and September didn't make the required payments; 20% hadn't provided all of the required documents. "Our focus has been on getting the documents we need from customers," a Chase spokesman said.

At Wells Fargo & Co., 96,137 borrowers were in the trial plan and 3,537 had received permanent fixes. About 14,000 additional borrowers had provided all required documents and most should receive permanent modifications in the next month or so, said Cara Heiden, co-president of Wells Fargo Home Mortgage.
More than half of Wells Fargo customers in the program hadn't yet made all their trial payments because they hadn't been participating long enough, she said.

Write to Ruth Simon at ruth.simon@wsj.com

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.

Open Letter to our Legislators

As my elected official, you should know that I strongly support President Obama's initiatives to help millions of American homeowners and reduce the massive wave of home foreclosures that are fueling today's national economic crisis. I urge you to adopt the President's plan to prevent home foreclosures that do not need to happen. A key part of the Obama plan would permit distressed homeowners to seek home loan modifications in bankruptcy court.

I do not think that what has been tried so far to stop the foreclosure crisis is working. If families are going to stay in their homes and avoid foreclosure, it seems clear that court-supervised mortgage modifications are necessary. We have wasted too much time already on half measures and other dead-end efforts that have done nothing to slow down the runaway foreclosure crisis.

I particularly like the judicial modification approach because it can prevent hundreds of thousands of foreclosures without spending one penny of taxpayer money. Is it too much to ask that you take this no-cost action for homeowners? After all, you have seen fit to spend billions of dollars on bailing out banks, car companies, brokerage firms and other corporate giants. It's time that we face facts: We can't end the financial crisis without ending the rising tide of foreclosures.

At a time when an estimated 6,600 families are losing their home to foreclosure each and every day, there is no time for delay. I urge you in the strongest possible terms to support this urgently needed legislation.

American families are reeling under the weight of the recession today. At a point where you can help lighten that load and save the homes of many Americans, I am asking you to support judicial modification of mortgages. This nation needs to put the housing crisis behind it.

As my elected official, you can be assured that I will be watching with great interest to see how you come down on this issue of great importance to my family, my neighborhood and my community.

Please keep me informed about how you vote on this important issue.

Sincerely,

Michele A. Peters, Esq.