Monday, August 15, 2016

New Foreclosure Law in NY Boosts Consumer Protection

ALBANY -- A new law in New York will require that foreclosed-on properties not be allowed to lie vacant for long and that more protections be built into the foreclosure process for consumers.

The changes were approved in the last hours of the state Legislature's regular 2016 session and represent, sponsors say, the latest attempt to protect consumers against losing their homes due to nonpayment of mortgages and to neighborhoods and to whole communities hit by the approximately 1 million foreclosure filings in New York state since the recession of the late 2000s.

Provisions of the legislation (A10741/S8159) provide for:

• Creation of a Consumer Bill of Rights to state homeowners' rights in the foreclosure process. Specifically, the declaration must inform property owners that they have a right to stay in their homes during the foreclosure process until they are formally notified by a court that they must vacate the premises.

• A mandate that the crucial notifications that lenders are required to make to borrowers be in a language the borrower is proficient in.

• Creation of a Community Restoration Fund within the State of New York Mortgage Agency as a vehicle to provide for the purchase of defaulted mortgage notes, in some instances, to revise repayment terms and to allow some homeowners to hold onto dwellings.

• Authorization of a new civil penalty of up to $25,000 to be imposed by courts to punish instances where plaintiffs are not negotiating in "good faith" in preforeclosure hearings.

• Authorization for courts to award attorney fees and expenses to defendants where plaintiffs are found not to be negotiating in good faith.

• Imposition of a new preforeclosure duty on banks and lending services to maintain vacant and abandoned properties.

• Requirement that the entity obtaining a foreclosure move to auction within 90 days of receiving the judgment and to take actions to ensure that the property be reoccupied within 180 days.

The foreclosure and "zombie" property legislation was signed into law by Gov. Andrew Cuomo on June 23.

Cuomo and state Attorney General Eric Schneiderman praised the bill, in particular, for its focus on so-called zombie properties, those vacant or abandoned homes that lie dormant before, during or after foreclosure. Municipal leaders throughout the state complain that these properties have been allowed to deteriorate, thereby degrading nearby properties or even entire neighborhoods.

Paul Lewis, an assistant to Chief Administrative Judge Lawrence Marks, said court officials believe the bill could impact the courts in two ways: Through the introduction of the new penalties for plaintiffs found to be negotiating with property owners in bad faith and through more frequent court declarations, at the behest of municipal officials, that properties are abandoned.

He said court officials are studying the new statute to determine if it gives court referees and court attorneys, the authorities who now preside over the preforeclosure conferences the state has required in foreclosure cases since 2010, the power to impose civil penalties on bad-faith negotiators.

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