Protects Homeowners Stuck In Cases
Attorney General Eric T. Schneiderman praised the Assembly for passing two pieces of legislation aimed at protecting homeowners in New York.
The “Certificate of Merit” bill (A.5582) would help more New York families avoid foreclosure by enacting common sense reforms to bring greater integrity to the foreclosure process and expedite homeowners’ participation in court-supervised mediation sessions where they can negotiate workable alternatives to foreclosure with their lender.
This joint program bill was proposed by the Office of the Attorney General and the Office of Court Administration.
Additionally, the Foreclosure Fraud Prevention Act (A.10629) is a program bill proposed by Schneiderman that would impose criminal penalties on residential mortgage lenders, servicers and their agents who intentionally engage in fraudulent or deceptive conduct in the preparation, execution or filing of false foreclosure documents. It would also impose criminal penalties on those who, as “high managerial agents” of these businesses, are aware of such conduct by their employees below and fail to stop it.
Both bills are sponsored in the Assembly by Judiciary Committee Chair, Helene Weinstein, and in the Senate by Senate Co-Leader and Independent Conference Leader, Jeff Klein.
New York Chief Judge Jonathan Lippman said, “The new legislative package will ensure the accuracy of court documents in residential foreclosure filings at the outset of these cases, thereby enabling homeowners to modify their loans before it is too late. I commend the State Assembly for passing this vital legislation, which will bring much-needed relief to thousands of New Yorkers struggling to remain in their homes. I also wish to extend my gratitude to Attorney General Eric T. Schneiderman for his strong commitment to this issue and tremendous efforts to help restore the integrity of New York’s judicial foreclosure process.”
The legislative package is a top priority for Schneiderman, who has advocateed for homeowners who bore the brunt of the financial crisis caused by the collapse of the housing bubble. Many homeowners in New York are still fighting to stay in their homes, and these bills would ensure that families are protected from careless, or irresponsible or even criminal lender behavior.
Homeowners’ foreclosure cases regularly languish for months-and often years-when mortgage lenders delay in filing critical paperwork that affirms the basis for the foreclosing bank’s right to foreclose on the property and ultimately triggers a settlement conference-the mandatory process under New York law that provides borrowers and their lenders an opportunity to mutually negotiate alternatives to foreclosure, such as loan modifications or short sales.
The delays and subsequent backlogs, often referred to as the “shadow docket,” have become a major burden on both homeowners and the judicial system. This legislative fix will require banks to file the necessary paperwork, which ultimately triggers the settlement conference, simultaneously with the filing of any foreclosure action, thus avoiding future delays.
The Office of Court Administration issued a report in July 2012 which found that 25,000 families are trapped in this legal foreclosure limbo.
The Foreclosure Fraud Prevention Act would impose both misdemeanor and felony-level penalties for lenders and servicers who knowingly engage in fraudulent residential mortgage foreclosure practices. These fraudulent activities include falsifying mortgage foreclosure documents- a practice that came to be known as “robo-signing,” which was rampant in New York and across the country during the early part of the foreclosure crisis.
An investigation of robo-signing conducted by the Office of the Attorney General with 48 State Attorneys General, the Department of Justice and the U.S. Department of Housing and Urban Development, led to the signing of the National Mortgage Settlement, a $25 billion agreement with the nation’s five largest mortgage servicers and provides for billions in mandated consumer relief including mortgage refinancing and principal reductions.
The bill will create a legal definition for residential mortgage foreclosure fraud, which will apply to mortgage lenders and servicers, and extend both to their lower level employees and “high managerial agents.” This aspect of the bill is particularly significant because it carries the potential to bring criminal charges against law firms and servicers that specialize in high-volume residential foreclosure cases and knowingly engage in fraud on behalf of the mortgage lender.
In June 2012, Schneiderman announced the Homeowner Protection Program (HOPP), a three-year, $60 million initiative to fund housing counselors and legal services across New York State. The program strives to ensure that every family facing foreclosure has access to a knowledgeable and qualified professional advocate.
Throughout New York State, 34 legal services organizations and 59 housing counseling agencies will receive over $16.1 million this year to provide free foreclosure prevention services. An additional $3.9 million has been allocated for training, technical assistance, and other support services to assist homeowners in foreclosure.
In part because of the advocacy of HOPP funded housing counselors and legal services providers, over 4,300 New York homeowners have completed, or have active trial modifications for approximately $540 million worth of first mortgage principal reduction.
For more information on Attorney General Schneiderman’s efforts to support New York families caught in the foreclosure crisis, visit www.AGHomeHelp.com.
