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Is New York State Foreclosure Legislation working?

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By : John Smith    99 or more times read
Tough new laws in New York State are helping curb the worst foreclosure excesses and here’s hoping it takes a good long time before crafty lenders pick holes in them. These days lenders have to give at least 90 days notice before proceeding to foreclosure, and are mandated to hold a settlement conference with their trouble client as well.

In March 2010 (just one month after these new regulations took effect) foreclosures were 7% down year-on-year despite a national trend in the other direction. In April things went even better for New York legislators – foreclosures were down by 21% compared to a median 2% lowering countrywide.

But what will happen after the 90 day period of grace? Will the trend continue, or will the banks pick up again where they left off?

Ellie Pepper, Assistant Director at Better Neighborhoods Incorporated (a nonprofit housing group based in Schenectady) sides with the latter option. “We anticipate that foreclosure filings are going to pick back up in May and June,” he told me.

New York’s foreclosure laws were already consumer friendly before the current crisis in sub-prime loans kicked in, with an average one year processing cycle already an impediment to over-hasty lender action. In 2009 the State Legislature took steps specifically aimed at protecting this class of borrower further, especially those with lower incomes and troubled credit. Then, in December 2009, the State applied their new measures across the spread of mortgage lending.

“Now, every borrower (facing foreclosure) is entitled to a settlement conference,” Pepper of Better Neighborhoods added. “Everyone is getting the opportunity to work something out in front of a judge. More people are hearing about the assistance that’s available, more people are getting help before it’s too late.”

Further legislative teeth require lenders who foreclose to maintain the outward appearance of their new assets (this should go some way to prevent dilapidation of struggling neighborhoods) and bans upfront fees for foreclosure consulting services too.

All this puts New York State ahead in the game to our-maneuver greedily foreclosing banks and put back some balance into the borrower-lender relationships. Not surprisingly, the New York Bankers Association opposed these ideas in December last year, claiming that lenders would become less keen to lend, even to exemplary borrowers.

Will pigs fly, or banks stop lending money? Personally, I think neither. This is not all that different from the way in which all other sectors of the American economy squeal about consumer legislation. We’re still selling cigarettes in the States, aren’t we?

We’ll have to wait and see what happens after 90 days has passed.
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