Lisa Simpson
Jul 13,2010
In: Foreclosure

Laws to Prevent Residential Foreclosures

Laws to prevent residential foreclosures.

New York Governor, David Paterson inked stronger laws for preventing residential mortgages. More stringent rules have been laid down requiring notification of homeowners at threat from foreclosure. Settlement hearings with the banks have been made mandatory. The measure expands a parcel of regulations that had been made in 2008 dealing mostly with the borrowers trapped in the sub-prime mortgage crisis. The new law stipulates a 90 day period of pre-foreclosure notice to be given by the banks for all residential mortgages and not only for the sub-prime holders.

Paterson explained that the goal of the state legislators was to give extra grace period for the house owners so that they could work out talks with the lenders to stop foreclosures. Another rule would reach out to all the homeowners involving compulsory talks with the lenders and not only the borrowers holding sub-prime mortgages. Paterson said that the new law ensured protection to all homeowners irrespective of the fact whether they held risky loans or not.

He said that the economic collapse had affected “people who had stable jobs and took out regular mortgages but because of the deep recession are put in the same position” as those with exotic mortgages.

Senator Jeff Kelin (Democrat/Bronx) sponsoring the law said, “What we are doing here today by signing this bill is keeping the American dream of home ownership alive not only for this generation but future generations.”

From January to September this year there have been 39,923 foreclosure postings in New York showing an 11% spike compared to the first three quarters of 2008.

The co-director of Neighborhood Economic Development Advocacy Project of Manhattan, Josh Zinner observed that New York is the first state to make settlement conferences mandatory for all types of pending foreclosures. He explained, “The foreclosure process for so many years has been stacked against borrowers and this really opens up the courts to give borrowers a fair shake.”

The new law requires lenders to serve 90 days foreclosure notice on the homeowner as well as simultaneously inform the Banking Department of the state within 3 days of serving the notice. This would enable the latter to offer assistance to the troubled borrowers.

Protection for the tenants has to be established by serving them also with a written notice regarding the ownership change. Tenants would now have the right to continue staying on their rented premises till the expiry of the lease or 90 days grace period – whichever was longer.

Protection to consumers against scams was also expanded.

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