Do We Really Need More Homeowner Protections?
New York’s foreclosure law is one of the most complicated and time consuming in the country. Not only was the state one of the first in the nation to impose 90 day pre-foreclosure requirements and judicially imposed settlement conferences that provided a model for the CFPB but, as the housing crisis worsened, some courts became more and more aggressive in interpreting these and other laws for the benefit of delinquent borrowers.
To supporters of New York’s laws these protections are necessary to insure that homeowners have the legal protections necessary to keep their homes. To critics, a group whose ranks I have become an increasingly fervent member, state and federal protections are, when judged in the aggregate, not so much good faith borrower protections as they are procedural trip wires which slow down the foreclosure process to such an extent that they make owning a home in New York more expensive and contribute to urban blight.
The latest example of New York’s approach to housing policy is a bill drafted by the Attorney General to deal with the proper maintenance of abandoned “Zombie” property that has not yet been foreclosed on but has been abandoned by the homeowner. I have written other blogs about the proposal before, but I recently took another look at the legislation after it was officially introduced (A.6932\S.4781) on April 10th.
First, the good news is that the bill may make it easier to more quickly foreclose on abandoned property by making vacancy a ground for foreclosure and establishing courts specifically for such foreclosures. If you are going to make lenders maintain property than it makes sense to give them legal title as quickly as possible. It’s clear that supporters of this bill have listened to the critics. Its much more reasonable than it could have been.
Now for the bad news. It would mandate the establishment of a statewide abandoned property registry. Lenders may still find themselves on the hook for maintaining property they don’t own.
In addition, a provision in the bill demonstrates that legislators and regulators continue to have an absolute fetish when it comes to imposing notice requirements on lenders dealing with delinquent homeowners. The law would require lenders to send a notice to a delinquent borrower that “You are allowed by New York state law to continue living in your home regardless of any collection methods we pursue or oral or written statements made during the collections process, including the foreclosure process, until such time as you are ordered by a court to leave your property.”
This notice shall be sent within 15 days of property becoming 90 days delinquent that means that the homeowner not only is entitled to a 90 day pre foreclosure notice but now will receive this additional notice. This is, of course, in addition to the erstwhile summons and complaint that for hundreds of years has put people on notice that they are being sued.
In addition to these state specific mandates CFPB imposed regulations now require mortgage servicers to make a good faith effort to establish contact by 36 days after a homeowner misses a payment and provide written notice no later than 45 days after delinquency providing information about loss mitigation and counseling options. And of course federal regulations now prohibit a foreclosure action from being filed until the borrower is more than 120 days delinquent.
What astounds me is that anyone can look at these protections and conclude that homeowners need more notices or that greater legal burdens need to be imposed on borrowers.
Let’s not forget that the primary problem is people purchased homes they can no longer afford.
I’m off my soapbox, Have a good day,