New York is creating a 90-day safety period for homeowners snared in the national subprime mortgage crisis so they will be able to more fully understand their options.
The new law will also criminalize some of the loan practices that contributed to the loss of more than 50,000 homes in New York so far.
Gov. David Paterson and legislative leaders agreed Thursday to create the 90-day period to allow homeowners to have conferences with lenders and receive other information about how to best cope with their debt. The waiting period will be added to what is typically a 440-day foreclosure process in New York, the longest in the nation. The legislation aims to help homeowners who, because of poor credit or other circumstances, sought the less conventional borrowing.
But the legislation won’t include a moratorium on foreclosures to allow New Yorkers to remain in their homes longer while trying to modify their mortgages. A moratorium was sought by advocates for homeowners and by the Assembly’s Democratic majority.
Paterson said a moratorium wouldn’t be as helpful as some advocates believed. The Democrat said it simply would allow owners a longer stay in the homes they would eventually lose.
Especially hard-hit areas include Queens, but lawmakers say the whole state will benefit. They said even one foreclosure can lead to a decline in neighboring homes’ values, erosion of the tax base and increased crime.
The state estimates another 38,000 homes in New York could face foreclosure this year.
“This is really, really a devastating problem,” Paterson said.
“Homeownership,” said Assembly Speaker Sheldon Silver, “is the cornerstone of the American dream … this is clearly one of the biggest issues facing New Yorkers this year.”
The negotiations, which continued to within an hour of the midday announcement Thursday, brought together complex and disparate proposals in the Assembly and Senate. Advocates for lower-income homeowners say massive foreclosures are devastating to a community and unfair to families, many of whom didn’t fully understand the debt they signed up for. Mortgage banks and other lenders said too much government interference would further hurt the housing market, reduce credit and pass costs for defaulted mortgages to new homebuyers.
“This took some real perseverance,” said Senate Majority Leader Joseph Bruno, R-Brunswick. “Most lenders are diligent and do it all right.”
The lending industry’s HOPE NOW alliance has helped more than 34,000 owners in New York retain their homes during the subprime crisis, according to Sara Tinsely Demarest of the Mortgage Bankers Association.
The legislation will also make crimes of practices by a minority of lenders who preyed on families that clearly weren’t able to afford ballooning payments or other lenders who sought to “rescue” the homeowners in default by offering them refinancing that ultimately wasn’t any better for the consumer, Paterson said.
The agreement was one of the most significant pieces of legislation in the 2008 legislative session, which is scheduled to end Monday.
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