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What you need to know for 01/21/2017

New York not out of woods on foreclosures

New York not out of woods on foreclosures

When the housing boom went bust and the bottom dropped out of the economy five years ago, state lawm

When the housing boom went bust and the bottom dropped out of the economy five years ago, state lawmakers became alarmed by the sharp rise in residential foreclosures in New York.

First targeting subprime mortgages and later traditional loans, the Legislature made changes to state laws governing foreclosure that put the judiciary in charge of scheduling settlement conferences aimed at keeping borrowers in their homes and getting lenders repaid.

The changes also required an annual report to the Legislature by the state’s chief administrative judge, who oversees the operation of New York’s trial courts. To date, four such reports have been issued, providing a peek into New York’s struggle with the foreclosure crisis.

The bottom line of the 2013 report, issued last month: We’re not out of the woods yet.

The first report, presented in late 2010, details what then-Chief Administrative Judge Ann Pfau called “an unprecedented shift” in the civil caseload in Supreme Courts statewide, where lenders initiate lawsuits to recover their mortgage loans. New York is a so-called judicial foreclosure state — meaning lenders can’t enforce their rights under the loans without court approval.

Because of the time required for the newly mandated settlement conferences — and because of rising volume in the Great Recession — foreclosures began to account for close to 50 percent of the pending civil caseload in some Supreme Courts, Pfau wrote.

“To keep pace, court resources have to be drawn from other areas,” she said, indicating a scramble to shift personnel to foreclosures.

The following year, though, saw a sharp drop in new cases, which later was attributed to an affirmation, added in late 2010, that lenders were asked to make to certify the accuracy of their documents and their right to bring suit.

That requirement came in response to the national “robo-signing” scandal, which revealed widespread rubber-stamping of foreclosure documents by lenders who may or may not have owned the loan.

The chief administrative judge’s 2012 report, delivered by Pfau successor A. Gail Prudenti, quantified the statewide drop-off in new foreclosure filings: 16,600 in 2011 vs. 46,500 in 2010.

But the report revealed a wrinkle connected to the lender affirmations: a growing “shadow docket” of foreclosure suits pending but lacking the paperwork to move forward. While lenders filed summonses and complaints, “they are not thereafter initiating a court proceeding by filing a request for judicial intervention,” Prudenti wrote. “The best explanation for this trend is that these plaintiffs are unable to comply with the affirmation requirement.” Thousands of cases thus were technically commenced, she said, “but are not before the court,” leaving homeowners in limbo.

To smooth that wrinkle, Supreme Court justices were authorized last year to move the shadow docket cases to settlement conferences.

This year, another change came: The lender affirmation was supplanted with a certificate of merit, which must accompany the summons and complaint or the lawsuit cannot be filed. The certificate indicates the lawyer representing the lender has reviewed all documents related to the foreclosure; actual documents, such as the mortgage, must be attached to the certificate when it’s filed.

The change should prevent additions to the shadow docket, Prudenti wrote in her 2013 report.

She also indicated the judiciary was girding for some 44,000 new foreclosures this year — a filing pace close to Great Recession levels. And, Prudenti wrote, the number of settlement conferences is expected to reach 100,000 this year, again stretching resources “to their limits in the courts.”

Marlene Kennedy is a freelance columnist. Opinions expressed in her column are her own and not necessarily the newspaper’s. Reach her at marlenejkennedy@gmail.com.

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