Hannon Announces Passage Of Bill To Address Mortgage Foreclosure Crisis

Senator Kemp Hannon (R-Garden City) announced the Senate and Assembly have passed comprehensive legislation (S8143-A) to address the mortgage foreclosure crisis in New York by immediately assisting homeowners who are facing foreclosure and implementing critical reforms designed to help prevent them from losing their homes in the future.

According to statistics compiled by the New York State Banking Department, approximately one in 200 New York homes is currently in the foreclosure process. Some areas of New York - such as Long Island - are being disproportionately impacted.

Senator Hannon said, "This bill protects homeowners while still permitting banks to issue loans to those who can afford it. This legislation is designed to help end the foreclosure crisis in New York. It is a step we are taking to put our economy back on track."

The immediate focus of the bill will assist existing homeowners facing foreclosure:

- Requiring lenders to send a pre-foreclosure notice to borrowers at least 90 days before foreclosure proceedings. This will encourage homeowners to seek help. The bill would also require lenders to list in the notice government approved housing counselors serving the borrower's area.

-Establishing a mandatory settlement conference for foreclosure proceedings involving homeowners with certain loans.

-Requiring 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.

-The bill includes provisions to address foreclosure rescue scams. This bill will prohibit upfront fees and require a written contract from so-called "distressed property consultants."

There are additional reforms in the bill which are designed to prevent future crises:

-Establishing strong consumer protections for loans and minimum underwriting standards.

-Ascertaining the borrower's ability to pay is a basic tenet of prudent lending.

-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.

-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.

A number of new programs to fund homeowner counseling have already been established in New York State, including the Subprime Foreclosure Prevention Services Program, a $25 million statewide program approved by the Legislature. This program includes grants and aid to non-profits to provide financial counseling, mediation, legal representation, negotiation, and other support services to borrowers who are facing default or foreclosure.

A free seminar, "Operation Protect Your Home," which brings borrowers and servicers together face-to-face to discuss possible alternatives to foreclosure, was recently held on Long Island.