| Subprime Reform Act |
GOVERNOR PATERSON SIGNS COMPREHENSIVE REFORMS
TO ADDRESS FORECLOSURE CRISIS
Law Will Help Save Thousands of New Yorkers from Losing
Their Homes to Foreclosure; Reforms Will Help to Prevent a
Similar Crisis in the Future
Governor Paterson Commends Federal Government for
Following New York’s Lead and Taking Additional Action
Governor David A. Paterson today signed into law a critical
subprime lending reform bill which directly addresses the
mortgage crisis in New York State. The Governor signed the bill
in Queens, one of the areas in New York that has been hit
hardest by the foreclosure crisis. The new law will immediately
help protect people from losing their homes and mandates
reforms to help avoid a similar crisis in the future. The bill also
takes into consideration the importance of striking the right
balance between consumer protection and the availability of
affordable credit.
This bill – a Governor’s Program Bill (S.8143-A/A.10817-A)
passed by the state Legislature in June – works in two ways:
immediately helping to prevent New Yorkers from losing their
homes by assisting those who are currently facing foreclosure,
and by attacking flaws in New York’s banking regulations to
prevent such a crisis from happening again. It also served as a
model for recent federal action as well.
“We have still seen thousands of our families lose their homes,
and no state has been hit harder by the broader effects of the
lending crisis. Wall Street’s woes have helped to drive New
York into recession,” said Governor Paterson. “We have the
responsibility to protect New York’s families who are facing
foreclosure, and we need to reform banking regulations to
ensure this does not happen again. This law does both, and
spurred the federal government to do the same.”
New York’s Congressional Delegation pushed the issue in
Washington, and late last month, President Bush signed the
Housing and Economic Recovery Act of 2008 to help at-risk
borrowers keep their homes by refinancing their mortgages into
safe and more affordable government-insured mortgages. The
measure also provides funds for New York State and its
localities to purchase and renovate foreclosed properties in our
most impacted areas. This initiative will help New York stabilize
at-risk communities endangered by abandoned, foreclosed
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, and in Upstate New York, Monroe and Albany
counties – are being disproportionately impacted.
Assist People Currently Facing Foreclosure
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.
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.
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.
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.
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.
Senate Majority Leader Dean G. Skelos said: “This legislation
successfully balances the need to help families who are facing
foreclosure of their mortgages and the loss of their homes, with
concerns raised by the banking industry about protecting the
ability of lenders to provide mortgages to future homeowners. I
applaud my colleagues, particularly Senator Frank Padavan
and Senator Hugh Farley who worked tirelessly to resolve this
complicated issue. I also want to thank Governor Paterson for
his leadership in this matter, and for signing this bill into law.”
Assembly Speaker Sheldon Silver said: “By signing this
legislation, Governor Paterson and New York State take crucial
action to address the national nightmare caused by the
unethical practices of the mortgage industry. Through direct
financial assistance and counseling and legal services, our
state will take the lead in preserving our communities and
providing meaningful relief to thousands of New Yorkers
struggling to keep their homes. We must remain committed to
assisting those affected by subprime lending while preventing
further abuses of homeowners.”
Senate Minority Leader Malcolm Smith said: “The subprime
lending crisis has affected all New Yorkers in some way or
another. We, the Senate Democrats, have held forums
throughout the state pairing lenders with homeowners to help
save homes. In signing this legislation, Governor Paterson
ensures that all New Yorkers will have a second chance at
saving their homes. The Governor's action will provide
immediate help by stopping foreclosures and closing loopholes
so this will never happen again.”
The foreclosure numbers in New York State are indicative of a
serious situation; the second quarter of 2008 was the eighth
consecutive quarter in which foreclosure activity in New York
has increased. In the second quarter approximately 77 percent
of the total foreclosure actions in New York were concentrated
in ten counties. Queens and Brooklyn accounted for
approximately 29 percent and Long Island accounted for
approximately 21 percent.
Approximately 70 percent of foreclosure filings in the second
quarter were Lis Pendens, which is the legal term for the initial
filing that notifies a barrower that the foreclosure process has
been initiated. Lis Pendens often represent the number of
borrowers who are at the start of a process that takes an
estimated 13 months in New York. Counties hardest hit by Lis
Pendens filings are Queens, Brooklyn, Suffolk, Nassau,
Monroe, Westchester, Staten Island, Bronx, Dutchess and
Albany.
Under Governor Paterson's leadership New York has brought
together the diverse stakeholders and service providers that
are needed to develop lasting solutions, including bank
regulators, housing finance agencies, community and church
groups, and the lending industry. The Governor’s HALT Task
Force to Halt Abusive Lending Transactions is the primary
umbrella for uniting the work of all state agencies that relate to
the mortgage market. In addition to the legislation signed
today, New York's response to the mortgage crisis includes the
funding and administration of grant programs for counseling
and legal services; outreach and loan modification events that
bring homeowners face to face with lenders and servicers;
refinancing and mortgage programs such as the introduction of
the forty-year fixed rate mortgage through the State of New
York Mortgage Agency; neighborhood stabilization initiatives to
return foreclosed properties to productive use; and
enforcement actions through the creation of a Mortgage Fraud
Unit within the Banking Department.
The following statements were provided in support of the
subprime lending reform bill:
Senator Hugh Farley, Senate sponsor of the bill, said: “As we
face difficult economic times, Governor Paterson's approval of
this legislation is important for all New Yorkers. The bill
strengthens mortgage lending rules, helping homeowners and
legitimate lenders, and can lead to more stable neighborhoods.
It is an excellent example of the good results which come from
the Governor and the Legislature working together. Just as I
enjoyed working closely with Governor Paterson in developing
this law, I know that this type of cooperation will enable us to
solve the many problems facing our State.”
Assemblyman Daryl C. Towns, Chair of the Assembly Banking
Committee, said: “Subprime lending schemes have wrought
havoc in communities throughout New York as hardworking
residents have lost or are at risk of losing their homes. By
signing this legislation, Governor Paterson takes an important
step in addressing the crisis by providing assistance to
homeowners affected by unscrupulous lending while putting in
place safeguards to prevent against future abuses. Today New
York leads the way in tackling this urgent national crisis.”
Senator Frank Padavan said: “This comprehensive new law will
provide vital relief and assistance for at-risk homeowners
throughout New York to help overcome an impending
foreclosure on their home. The enactment of this new law today
once again reflects the strong commitment at all levels of state
government to provide the legislative initiatives and tools to
help halt the rise of home foreclosure in all reaches of our
state. I applaud Governor Paterson for working with the State
Legislature in advancing this important new law that will help
protect and strengthen the dream of homeownership in New
York.”
Richard Neiman, New York State Banking Superintendent, said:
“This is a broad, comprehensive piece of legislation that both
helps existing borrowers facing foreclosure and establishes
strong underwriting standards and duties of care going forward
to assure that this type of mortgage crisis doesn’t happen
again, protecting borrowers, lenders and investors. This
legislation, which is one of the strongest in the nation, builds on
and complements our existing wide-ranging efforts on multiple
fronts – including homeownership counseling, enhanced
enforcement, and bringing borrowers and lenders face-to-face
in an effort to avoid unnecessary foreclosures.”
Lois Aronstein, AARP NY State Director, said: “This new law will
undoubtedly help the tens of thousands of New Yorkers who
face losing their home to foreclosure and contains measures to
help make sure this crisis does not happen again. The
Governor and the Legislature should be commended for their
work on this issue and for making sure that one of the most
valuable financial assets most people have - their home - is
protected now and in the future.”
Sarah Gerecke, CEO of Neighborhood Housing Services of
NYC, said: “Neighborhood Housing Services of NYC commends
Governor Paterson and the legislature for this important step
forward to address abusive lending practices and to provide
help to homeowners who desperately need sound advice to
save their homes.”
Cathy Mickens, Senior Executive Officer of NHS of Jamaica,
said: “As a resident of this community, I see first-hand the
devastation caused by foreclosures on people's lives and on
the neighborhoods. NHS of Jamaica is working hard to stop the
problem from growing, and the State legislation has
strengthened our ability to advocate for homeowners and for
homeownership.”
TO ADDRESS FORECLOSURE CRISIS
Law Will Help Save Thousands of New Yorkers from Losing
Their Homes to Foreclosure; Reforms Will Help to Prevent a
Similar Crisis in the Future
Governor Paterson Commends Federal Government for
Following New York’s Lead and Taking Additional Action
Governor David A. Paterson today signed into law a critical
subprime lending reform bill which directly addresses the
mortgage crisis in New York State. The Governor signed the bill
in Queens, one of the areas in New York that has been hit
hardest by the foreclosure crisis. The new law will immediately
help protect people from losing their homes and mandates
reforms to help avoid a similar crisis in the future. The bill also
takes into consideration the importance of striking the right
balance between consumer protection and the availability of
affordable credit.
This bill – a Governor’s Program Bill (S.8143-A/A.10817-A)
passed by the state Legislature in June – works in two ways:
immediately helping to prevent New Yorkers from losing their
homes by assisting those who are currently facing foreclosure,
and by attacking flaws in New York’s banking regulations to
prevent such a crisis from happening again. It also served as a
model for recent federal action as well.
“We have still seen thousands of our families lose their homes,
and no state has been hit harder by the broader effects of the
lending crisis. Wall Street’s woes have helped to drive New
York into recession,” said Governor Paterson. “We have the
responsibility to protect New York’s families who are facing
foreclosure, and we need to reform banking regulations to
ensure this does not happen again. This law does both, and
spurred the federal government to do the same.”
New York’s Congressional Delegation pushed the issue in
Washington, and late last month, President Bush signed the
Housing and Economic Recovery Act of 2008 to help at-risk
borrowers keep their homes by refinancing their mortgages into
safe and more affordable government-insured mortgages. The
measure also provides funds for New York State and its
localities to purchase and renovate foreclosed properties in our
most impacted areas. This initiative will help New York stabilize
at-risk communities endangered by abandoned, foreclosed
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, and in Upstate New York, Monroe and Albany
counties – are being disproportionately impacted.
Assist People Currently Facing Foreclosure
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.
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.
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.
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.
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.
Senate Majority Leader Dean G. Skelos said: “This legislation
successfully balances the need to help families who are facing
foreclosure of their mortgages and the loss of their homes, with
concerns raised by the banking industry about protecting the
ability of lenders to provide mortgages to future homeowners. I
applaud my colleagues, particularly Senator Frank Padavan
and Senator Hugh Farley who worked tirelessly to resolve this
complicated issue. I also want to thank Governor Paterson for
his leadership in this matter, and for signing this bill into law.”
Assembly Speaker Sheldon Silver said: “By signing this
legislation, Governor Paterson and New York State take crucial
action to address the national nightmare caused by the
unethical practices of the mortgage industry. Through direct
financial assistance and counseling and legal services, our
state will take the lead in preserving our communities and
providing meaningful relief to thousands of New Yorkers
struggling to keep their homes. We must remain committed to
assisting those affected by subprime lending while preventing
further abuses of homeowners.”
Senate Minority Leader Malcolm Smith said: “The subprime
lending crisis has affected all New Yorkers in some way or
another. We, the Senate Democrats, have held forums
throughout the state pairing lenders with homeowners to help
save homes. In signing this legislation, Governor Paterson
ensures that all New Yorkers will have a second chance at
saving their homes. The Governor's action will provide
immediate help by stopping foreclosures and closing loopholes
so this will never happen again.”
The foreclosure numbers in New York State are indicative of a
serious situation; the second quarter of 2008 was the eighth
consecutive quarter in which foreclosure activity in New York
has increased. In the second quarter approximately 77 percent
of the total foreclosure actions in New York were concentrated
in ten counties. Queens and Brooklyn accounted for
approximately 29 percent and Long Island accounted for
approximately 21 percent.
Approximately 70 percent of foreclosure filings in the second
quarter were Lis Pendens, which is the legal term for the initial
filing that notifies a barrower that the foreclosure process has
been initiated. Lis Pendens often represent the number of
borrowers who are at the start of a process that takes an
estimated 13 months in New York. Counties hardest hit by Lis
Pendens filings are Queens, Brooklyn, Suffolk, Nassau,
Monroe, Westchester, Staten Island, Bronx, Dutchess and
Albany.
Under Governor Paterson's leadership New York has brought
together the diverse stakeholders and service providers that
are needed to develop lasting solutions, including bank
regulators, housing finance agencies, community and church
groups, and the lending industry. The Governor’s HALT Task
Force to Halt Abusive Lending Transactions is the primary
umbrella for uniting the work of all state agencies that relate to
the mortgage market. In addition to the legislation signed
today, New York's response to the mortgage crisis includes the
funding and administration of grant programs for counseling
and legal services; outreach and loan modification events that
bring homeowners face to face with lenders and servicers;
refinancing and mortgage programs such as the introduction of
the forty-year fixed rate mortgage through the State of New
York Mortgage Agency; neighborhood stabilization initiatives to
return foreclosed properties to productive use; and
enforcement actions through the creation of a Mortgage Fraud
Unit within the Banking Department.
The following statements were provided in support of the
subprime lending reform bill:
Senator Hugh Farley, Senate sponsor of the bill, said: “As we
face difficult economic times, Governor Paterson's approval of
this legislation is important for all New Yorkers. The bill
strengthens mortgage lending rules, helping homeowners and
legitimate lenders, and can lead to more stable neighborhoods.
It is an excellent example of the good results which come from
the Governor and the Legislature working together. Just as I
enjoyed working closely with Governor Paterson in developing
this law, I know that this type of cooperation will enable us to
solve the many problems facing our State.”
Assemblyman Daryl C. Towns, Chair of the Assembly Banking
Committee, said: “Subprime lending schemes have wrought
havoc in communities throughout New York as hardworking
residents have lost or are at risk of losing their homes. By
signing this legislation, Governor Paterson takes an important
step in addressing the crisis by providing assistance to
homeowners affected by unscrupulous lending while putting in
place safeguards to prevent against future abuses. Today New
York leads the way in tackling this urgent national crisis.”
Senator Frank Padavan said: “This comprehensive new law will
provide vital relief and assistance for at-risk homeowners
throughout New York to help overcome an impending
foreclosure on their home. The enactment of this new law today
once again reflects the strong commitment at all levels of state
government to provide the legislative initiatives and tools to
help halt the rise of home foreclosure in all reaches of our
state. I applaud Governor Paterson for working with the State
Legislature in advancing this important new law that will help
protect and strengthen the dream of homeownership in New
York.”
Richard Neiman, New York State Banking Superintendent, said:
“This is a broad, comprehensive piece of legislation that both
helps existing borrowers facing foreclosure and establishes
strong underwriting standards and duties of care going forward
to assure that this type of mortgage crisis doesn’t happen
again, protecting borrowers, lenders and investors. This
legislation, which is one of the strongest in the nation, builds on
and complements our existing wide-ranging efforts on multiple
fronts – including homeownership counseling, enhanced
enforcement, and bringing borrowers and lenders face-to-face
in an effort to avoid unnecessary foreclosures.”
Lois Aronstein, AARP NY State Director, said: “This new law will
undoubtedly help the tens of thousands of New Yorkers who
face losing their home to foreclosure and contains measures to
help make sure this crisis does not happen again. The
Governor and the Legislature should be commended for their
work on this issue and for making sure that one of the most
valuable financial assets most people have - their home - is
protected now and in the future.”
Sarah Gerecke, CEO of Neighborhood Housing Services of
NYC, said: “Neighborhood Housing Services of NYC commends
Governor Paterson and the legislature for this important step
forward to address abusive lending practices and to provide
help to homeowners who desperately need sound advice to
save their homes.”
Cathy Mickens, Senior Executive Officer of NHS of Jamaica,
said: “As a resident of this community, I see first-hand the
devastation caused by foreclosures on people's lives and on
the neighborhoods. NHS of Jamaica is working hard to stop the
problem from growing, and the State legislation has
strengthened our ability to advocate for homeowners and for
homeownership.”
| Subprime Reform Act |