New York Attorney General Eric T. Schneiderman and New York State Senate Majority Coalition Leader Jeff Klein highlighted the "Certificate of Merit" bill (A. 5582) and the Foreclosure Fraud Prevention Act (A.7395), two important pieces of legislation to protect New York homeowners facing foreclosure. Both bills passed the New York State Assembly last week, and will be soon be decided on by the New York State Senate. Many homeowners in New York are still fighting to stay in their homes, and these bills would ensure that families are protected from careless, or irresponsible, or even criminal behavior.
The "Certificate of Merit" bill would ensure homeowners have a chance to participate in court-supervised mediation sessions that could help them keep their homes. The Foreclosure Fraud Prevention Act would impose criminal penalties on residential mortgage lenders, servicers and their agents who intentionally engage in fraudulent or deceptive conduct in the preparation, execution or filing of false foreclosure documents. This legislation was proposed by Attorney General Schneiderman and are being sponsored in the Senate by Senator Klein.
“On Long Island and all across New York State, wrongful foreclosure and the growing ‘shadow docket’ are preventing thousands of families from even getting a chance to keep their homes,” said Attorney General Schneiderman. “Both the ‘Certificate of Merit’ bill and the Foreclosure Fraud Prevention Act address these critical problems by proposing common-sense reforms to keep homeowners out of the legal limbo and ensure their rights are honored. The Assembly has already acted to empower hardworking New Yorkers fighting against foreclosure. It is now time for the Senate to do the same.”
Senate Majority Coalition Leader Jeff Klein said, "Any family that is facing the loss of their home deserves a fair day in court. But right now, unnecessary delays and incomplete paperwork are denying thousands of families this opportunity every day. These reforms can help change all of that, by ending the stalemate and bringing these homeowners the peace of mind that they deserve. That’s why I’m proud to support these measures and look forward to ushering them through the Senate."
Homeowners' foreclosure cases regularly languish for months, or even years, when financial institutions delay in filing critical paperwork that affirms the basis for the foreclosing bank's right to foreclose on the property and ultimately triggers a settlement conference – the mandatory process under New York law that provides borrowers an opportunity to negotiate alternatives to foreclosure, such as loan modifications or short sales.
Village of Hempstead Mayor Wayne Hall said, “The law gives homeowners in foreclosure the right to a settlement conference with their bank to try to save their home, and the sooner they can schedule a conference, the more likely they are to be successful. Attorney General Schneiderman’s legislation will ensure that homeowners can exercise their rights, and give them a fighting chance to keep their home.”
The delays and subsequent backlogs, often referred to as the “shadow docket,” have become a major burden on both homeowners and the judicial system. This legislative fix will require banks to file the necessary paperwork, which ultimately triggers the settlement conference, simultaneously with the filing of any foreclosure action, thus avoiding future delays. The Office of Court Administration issued a report in July of 2012 which found that 25,000 families are trapped in this legal foreclosure limbo.
In 2009, Senator Klein authored landmark foreclosure legislation aimed at protecting homeowners and preserving property values in communities stricken with high rates of foreclosure. Senator Klein's legislation, which was signed into law by Governor Paterson, requires banks to maintain foreclosed properties, creates new ways for homeowners to stay in their homes after foreclosure proceedings, and guarantees every homeowner the right to a settlement conference prior to any court proceeding.
The Foreclosure Fraud Prevention Act would impose both misdemeanor and felony-level penalties for lenders and servicers who knowingly engage in fraudulent residential mortgage foreclosure practices. These fraudulent activities include falsifying mortgage foreclosure documents--a practice that came to be known as “robo-signing,” which was rampant in New York and across the country during the early part of the foreclosure crisis.
An investigation of robo-signing conducted by the Office of the Attorney General with 48 State Attorneys General, the Department of Justice and the U.S. Department of Housing and Urban Development, led to the signing of the National Mortgage Settlement, a $25 billion agreement with the nation’s five largest mortgage servicers and provides for billions in mandated consumer relief including mortgage refinancing and principal reductions.
The bill will create a legal definition for residential mortgage foreclosure fraud, which will apply to mortgage lenders and servicers, and extend both to their lower level employees and "high managerial agents." This aspect of the bill is particularly significant because it carries the potential to bring criminal charges against law firms and servicers that specialize in high-volume residential foreclosure cases and knowingly engage in fraud.
Attorney General Schneiderman has made protecting homeowners struggling to avoid foreclosure a top priority. In June 2012, he announced the Homeowner Protection Program (HOPP), a three-year, $60 million initiative to fund housing counselors and legal services across New York State. The program strives to ensure that every family facing foreclosure has access to a knowledgeable and qualified professional advocate.
Throughout New York State, 34 legal services organizations and 59 housing counseling agencies will receive over $16.1 million this year to provide free foreclosure prevention services. An additional $3.9 million has been allocated for training, technical assistance, and other support services to assist homeowners in foreclosure. In part because of the advocacy of HOPP funded housing counselors and legal services providers, over 4,300 New York homeowners have completed, or have active trial modifications for approximately $540 million worth of first mortgage principal reduction.