Legislation that would give some New Yorkers facing foreclosure a one-year reprieve has passed the state assembly as part of a package of four bills aimed at stemming foreclosures.
Assembly Bill 9695 would allow courts to impose a one-year moratorium on foreclosures in cases where borrowers can establish they live in the home subject to foreclosure, own no other property, have a subprime mortgage, and can continue to make reduced payments designed to preserve the lender’s financial position while they negotiate for a loan modification.
The bill defines a subprime loan as one that carries an annual rate of three or more percentage points above the yield of Treasury securities of comparable maturity.
AB 9695, which must still be debated by the more conservative New York state senate, is part of a package of bills that would also provide up to three months of assistance payments to homeowners currently in default or foreclosure, and impose new restrictions on lenders.
The bills include the so-called Responsible Lending Act, AB 8972, which would require lenders to verify a borrower’s income and ability to repay, and establish an "agency relationship" between the mortgage broker and borrower, and ban balloon payments, negative amortization and prepayment penalties.
According to a recent report by the Pew Charitable Trusts, New York is among the 10 states hardest hit by the housing downturn. At the end of 2007, California led the nation with 14 percent of all foreclosures, the survey found, followed by Florida (12 percent), Michigan (6 percent), Ohio (6 percent), Texas (6 percent), New York (4 percent), Georgia (4 percent), Illinois (4 percent), Indiana (3 percent) and Pennsylvania (3 percent).
According to the report — Defaulting on the Dream: States Respond to America’s Foreclosure Crisis — those states have also been among the most aggressive in attempting to tackle problems associated with falling home prices and rising delinquencies.
Ohio Gov. Ted Strickland in April reached an agreement with nine mortgage servicers to modify the terms of adjustable-rate subprime mortgages. Michigan has created two loan funds that help homeowners facing foreclosure and is requiring greater disclosure of terms and conditions for high-risk loans. California has issued a notice to loan servicers asking them to agree to wholesale loan adjustments.
States that have moved or are moving to slow down the foreclosure process include Maryland, which extended the foreclosure process from 15 to 150 days, and Massachusetts, Minnesota and New Jersey, which have proposed six-month deferments of foreclosures, the survey said.
But Pew researchers concluded that, "given the scale of the crisis and the complexity of today’s mortgage markets, states cannot go it alone, and it makes little sense to have 50 separate and specific responses."
The report recommended that Congress and the states consider ways to collect, maintain and share reliable and uniform information to more accurately describe current conditions and better assess the effectiveness of policy interventions.
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