The state Assembly passed legislation Wednesday to impose a one-year delay on foreclosures when New York homeowners default on mortgage payments, while the Senate was poised to consider a related measure backed by Gov. David Paterson.
Both are meant to limit the impact here of the national crisis in subprime lending. Lawmakers and staff said they expect some version of the legislation to pass in the next several weeks. The Senate Banks Committee will hold a hearing Monday on Paterson’s proposal to delay foreclosure for 60 days after lenders get an owner’s offer to renegotiate.
“There’s nothing wrong with the governor’s proposal. It’s a welcome proposal and would do a lot of good, I’m sure,” said Assemblyman James Brennan. But the Brooklyn Democrat said his bill for a year-long delay, which passed the Assembly 118-10, is also aimed at stopping predatory lenders trying to foreclose while giving homeowners respite to refinance as other national, state and commercial relief measures get off the ground.
Brennan pointed to data showing 14,000 foreclosure filings in New York during the first three months of this year, with 6,700 in March, a trend projected to total 80,000 in 2008 and roughly quadruple the number in 2004. The subprime lending problems resulted from variations on low adjustable-rate mortgages that rise sharply for borrowers marginally qualified to meet payments.
“The mortgage industry aggressively marketed mortgages with low ‘teaser’ interest rates. . . . Other questionable loans include interest-only mortgages and mortgages made with little or no income verification,” said Assemblyman Darryl Towns, another Brooklyn Democrat who chairs the Assembly Banks Committee. “These schemes have also placed millions of Americans, particularly in low-income communities and communities of color, at risk of foreclosure.”
Testimony to the Senate Banks Committee indicated 98 to 99 percent of mortgages in New York were being paid on time last year, but with pockets of problems and higher foreclosure rates in the Bronx, Queens and more recently Brooklyn. Subprime loans account for a fraction of total lending.
“Most of the statistics seem to show New York is sort of in the middle of the country,” said Peter Edman, staff director of the Senate Banks Committee, adding the reliability of some data is in dispute. “But we have seen significant increases in the number of foreclosures compared to a year ago, two years ago, three years ago.”
New York already requires a judicial process for foreclosure that can take an additional year once a second or third missed mortgage payment starts the process.
Michael Smith, president of the New York Bankers Association, said New York already has the longest foreclosure process of any state, which can average 445 days. Prolonging it “benefits neither the borrower nor the lender,” he said.
Senate Banks Committee Chairman Hugh Farley, a Niskayuna Republican, said Paterson’s measure will likely be the vehicle for state lawmakers to deal with the issue, which will require three-way agreement. “What we’re trying to do is address the problem,” he said, “and not dry up the credit market.”
Paterson’s proposal would also require lenders to notify delinquent homeowners at least 60 days before starting foreclosure actions, as well as a court-supervised conference with the lender and homeowner in an attempt to work out a compromise.
Both Paterson’s and an Assembly measure would establish new requirements for lenders verifying borrowers’ ability to repay loans.
Another measure passed by the Assembly would authorize temporary financial assistance to homeowners facing foreclosure, with up to three months’ mortgage payments. However, the budget approved earlier this year only authorizes $25 million for legal services and counseling for those in default or foreclosure.
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Categories: Schenectady County