Mark Winston Griffith

Paterson breathes new life into proposal to address mortgage crisis

Proving once again that public policies can endure when policy makers fail us, Governor Paterson formally announced that he was championing the legislative response to the mortgage crisis that Governor Spitzer initiated literally days before he fell from grace in March. In a press statement released yesterday, Governor Paterson committed himself to following through on the package of reforms that offer New York State's best hope for foreclosure relief and stricter state-based, anti-predatory lending regulation. He also asserted that the Senate and Assembly would begin negotiations on the bill this week.

The proposed legislation would include:

- An expansion of New York State’s Anti-Predatory Lending Law to protect a greater number of borrowers.

- A Requirement that brokers and lenders establish the borrower's ability to repay the mortgage and act in borrowers interest

- A Requirement that New York mortgage servicers be registered with the Banking Department.

- A clarification of mortgage fraud as a crime.

- A Mandate that lenders must "send pre-foreclosure notices to homeowners at least 60 days before initiating foreclosure proceedings. If the borrower engages a housing counselor or reaches out to the lender to negotiate a resolution, the lender will be precluded from initiating a foreclosure action against the borrower for 60 days. "

- A requirement that borrowers and lenders "participate in settlement conferences at the beginning of the foreclosure process, and gives the court the ability to assign counsel to negotiate in the conference on behalf of the borrower."

- A strengthening of the requirement the plaintiff in a foreclosure actually prove that they hold the mortgage note,

- A measure designed to prevent scammers from stealing property from homeowners through foreclosure rescue schemes.

In addition to re-unveiling Spitzer's proposals, the press announcement referenced foreclosure data and a recent New York State Banking study confirming that the foreclosure crisis is deepening; borrowers with subprime loans continue to fall behind on their payments even before their rates re-set; and that efforts to save homeowners from foreclosure - or lessen their losses - are outmatched by the pace of foreclosures.

Of course, because of laws stating that federally chartered banks are not subject to state banking regulations, the impact that this legislation will have on homeowners will be somewhat limited, but it is important nonetheless. If only Congress could get its act together, homeowners facing foreclosure across the country could have a real fighting chance.

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Posted at 6:00 AM, May 02, 2008 in Economic Opportunity
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