The subprime bill will help save thousands of New Yorkers from losing their homes. Data from the New York State Banking Department shows that approximately one in 200 New York homes is in the foreclosure process. Some areas of New York – such as Queens, Brooklyn and Long Island – are being disproportionately impacted.

The immediate focus of the bill is on existing homeowners facing foreclosure:

The bill requires lenders to send a pre-foreclosure notice to borrowers at least 90 days before foreclosure proceedings may be initiated. This will encourage homeowners to seek help prior to the initiation of foreclosure proceedings. The bill would also require lenders to list in the notice government approved housing counselors serving the borrower’s area.
The bill establishes a mandatory settlement conference for foreclosure proceedings involving homeowners with certain subprime loans. For homeowners who cannot afford an attorney, the court under certain circumstances, may appoint one.

Though this sounds good I have a couple of thoughts and concerns:

1st: Not only are subprime loans being foreclosed on; but, prime loan foreclosures are increasing steadily as seen in the following previous post:
Permanent Link- Foreclosures On Long Island Increase

2nd: I will find it very interesting to see what power the judicial system has in renegotiating the note so the borrower can afford to stay in the home. Since many of these loans were fraudulent to begin with, do to the fact that they were “stated loans” which allowed the borrower to provide inaccurate income to the lender and not have to prove it. Now I can see the bank renegotiating the rate and terms; however, I don’t see them reducing the principal amount. Also, I wonder if their original application will be reviewed and questioned in the renegotiation process. For this reason I believe that many borrowers may just “Plead the fifth” and not participate in this conference.

The bill requires plaintiffs in an action against a homeowner to make an affirmative allegation that they have standing to bring the foreclosure action and have complied with certain applicable laws. Ownership of the mortgage and the note is sometimes uncertain, which has lead to questionable foreclosure practices.

I don’t see how making it harder for the lender to foreclose will benefit anyone, it is just going to  prolong the process. Let’s be realistic no lender wants to foreclose in this current real estate market! I am sure that a lender or the holder of the note is not going to incur the legal expense of the foreclosure if the borrower was not delinquent and the lender was not owed money.

The bill includes provisions to address foreclosure rescue scams intended to take advantage of borrowers when they are most vulnerable. This bill will prohibit upfront fees and require a written contract from so-called “distressed property consultants.”

Avoid Another Crisis In The Future

There are additional elements in the bill that are designed to prevent future crises:

The bill enacts a new provision in the Banking Law to establish strong consumer protections for subprime loans and minimum underwriting standards that protect borrowers.

Though I am not for big brother (government) regulating business, I believe this was long over due.

Ascertaining the borrower’s ability to pay is a basic tenet of prudent lending. The bill establishes an ability to pay standard requiring lenders to make a reasonable and good faith determination of the borrower’s ability to repay the loan, including the principal, interest, taxes, insurance, assessments, points and fees.

In the past Fannie Mae, Freddie Mac and FHA have in the past always set there lending practices on the primary goal, which is, to make sure that the loan can be paid based on good leading practices. Recently these organizations have been pressured to lower their standards to promote homeownership over the primary goal of making sure, to the best of their ability, the loan can be paid back without disastrous results.

The duty of care feature of the bill requires brokers to act in the borrower’s interest by presenting loans most appropriate for the borrower.

Excellent Idea!  Anyone with a heart would have done this already!
Mortgage Consultants are now required to be licensed in the state of New York; but, unlike Realtors, to my knowledge, they don’t have a set standard or code of ethics that they have to adhere to as an industry. No continuing education is mandatory and no mandatory ethics training is required as of yet. Realtors have been held to this higher standard for years and are not only governed by the state and federal governments, but also by their peers.

All can say is “It is about time!”

All mortgage servicers servicing loans on residential property in New York would be required to register with the Banking Department.
Mortgage fraud would be classified as a crime under the Penal Law, making it easier for prosecutors to pursue cases. As the magnitude of the fraud increases, so would the criminal penalty.

Source:
http://www.state.ny.us/governor/press/press_0619083.html

Bookmark It

Hide Sites