The New York state Legislature ended its 2008 session by acting “hopefully” to help some homeowners avert foreclosure as the still-roiling subprime mortgage crisis threatens tens of thousands of New Yorkers with loss of their homes. But the governor and the Legislature again failed to reach agreement on the property tax problem, another issue that is increasingly threatening the ability of people to stay in their homes. (See separate story.)
It was a tumultuous and at times a chaotic legislative session as Gov. David Paterson replaced Eliot Spitzer after the call girl scandal that erupted this winter, only weeks before the state budget was legally due for adoption.
But in the wake of the changes in Albany, the leadership reverted to three-men-in-a-room style politics again, with the governor, the retiring Senate Majority Leader Joseph Bruno and Assembly Speaker Sheldon Silver reaching agreement on some 18 bills in the final hours of the session, leading to criticism by some who said Albany is reverting to its closed-door ways at a time when the public is demanding inclusion.
But from those negotiations important measures emerged, including agreement on brownfields cleanup and tax breaks, and agreement to expand net metering programs that may produce additional alternative energy for New York.
Also agreed upon was a modest measure to try to forestall foreclosure action, a bid that even a key supporter expressed modest expectations for. “This agreement will hopefully help families who are at risk of losing their homes because of the subprime mortgage crisis,” said state Sen. Hugh Farley, chairman of the Senate Banking Committee. He said the compromise, which provides no money for direct relief to families at risk, has the advantage of being backed by banks and lenders and strikes a balance between consumer protection and the availability of affordable credit. “We are trying to ensure that future home buyers will continue to have access to the mortgage market,” said Farley.
Data from the New York State Banking Department show 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 ”“ are being disproportionately impacted. In upstate New York, Monroe and Albany counties are among the hardest hit. But homeowners throughout the state are impacted because foreclosures drive down property values throughout New York.
Paterson, while extolling the state legislation, said national legislation is imperative. “I continue to wait for action from the federal government to address this crisis,” he said. “We cannot solve the problem alone. We have done our part on the state level, and now we need comprehensive legislation from Washington, as well.”
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However, though a so-called comprehensive bill is making its way through the U.S. Senate and is expected to complete its passage and signing by President George Bush some time this month, many analysts say it is not nearly enough to meet the need. The Congressional Budget Office says that at least 3 million home loans are already in distress nationally, with millions of additional loans expected to be threatened if home prices continue falling and the economy further weakens. Yet, according to the CBO analysis, less than half a million loans would benefit from the current federal legislation.
Though it has no funding for direct assistance, the state legislation has an immediate focus on existing homeowners facing foreclosure. The bill requires lenders to send a pre-foreclosure notice to borrowers at least 90 days before any foreclosure proceedings are initiated. This could encourage homeowners to seek help prior to the initiation of foreclosure proceedings. The bill would also require lenders to provide a list in the notice of 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.
Substantial new programs to fund homeowner counseling have already been established in New York state, including the subprime foreclosure prevention services program, a $25 million statewide program that includes grants and aid to nonprofits to provide financial counseling, mediation, legal representation, negotiation and other support services to borrowers who are facing default or foreclosure. The legislation also includes a number of measures to tighten up loan practices and oversight to prevent a recurrence of the loan crisis.
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