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New Lending Reform Law Cuts Down Foreclosures in 3rd Quarter

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By : Cassiano Travareli    99 or more times read
Because of the 90-day grace period provision of the new lending reform law in New York, foreclosure fillings in the state shot down to 10 percent quashing a yearlong trend.

In a period of just one month, the NY reform law enacted Sept.1 caused a difference of 1548 foreclosure fillings prior to the last quarter ending Sept.30. The grace period of 90-days served as the catalyst for such telling figure.

This law affirms that lenders wait 90 days before starting foreclosure proceedings, thus giving borrowers more time to find ways on how to pay their debts. The state thinks that this is a good way to cut down the increasing number of foreclosed properties. In California for instance, before filing a default notice, lenders should contact the borrowers 30 days while it takes 45 days in North Carolina.

In contrast to the prospected result of trimming down the number of foreclosures, analysts are skeptical about this new law as they see it as just postponing the inevitable. They believe that after the grace period, majority of homeowners will still end up to foreclosure.

This is based on the results from other states that adopted a similar law. In Massachusetts, case in point, foreclosure rate shot up by 465 percent immediately after the 90-day waiting period. It defeats the purpose of the waiting period if that is the case.

However, it is almost impossible to tell yet if the new law is effective in New York. The end of the fourth quarter, December, will be more significant according to analysts because it will comprise the whole 90-day waiting period starting off at September.

On the other hand, Rick Sharga, Senior Vice President of Marketing at foreclosure listing service RealtyTrac Inc., which compiled the figures released Thursday by the State Banking Department said that states should instead think of other regulations to restructure loans because they are missing the mechanism to really solve the problem.
Cassiano Travareli has been educated in the finer points of the foreclosures market over 5 years.

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