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Helping stem the foreclosure tide

After several months of negotiations, the State Legislature and Governor David Paterson reached a compromise over legislation that would protect borrowers from subprime legislation and further regulate an industry that has come under fire from Brooklyn housing organizations.

"The legislation was desperately needed to stem abusive lending practices that have been plaguing communities," said Sarah Ludwig, co-director of the Neighborhood Economic Development Advocacy Project. "The number of New York homeowners going into foreclosure has more than doubled in the last two years."

The subprime lending legislation, which passed both houses but has yet to be signed by the governor, would require lenders to notify homeowners in writing 90 days before the start of a foreclosure proceeding and would mandate a court-supervised settlement conference between mortgage services and borrowers facing foreclosure.

Subprime lenders will also be required to verify that borrowers can afford to repay their loans. The legislation will include a duty of care provision to require mortgage brokers to act in the borrower’s interests and offer loans best suited to the borrower's financial situation.

Foreclosure filings have skyrocketed statewide over the past few years, with 27,722 filed in 2007 and 38,807 during the first four months of this year. During the first three months of this year, more than 1,100 foreclosures were filed in Brooklyn, compared to nearly 3,300 filed in 2007. NEDAP estimates that 5,000 foreclosures could be filed by the end of this year.

Despite the high rate of foreclosure filings, the Senate and the Governor refused to pass a one-year statewide moratorium on foreclosures. Banking industry representatives have been strongly opposed to the idea while housing advocacy organizations such as the Pratt Area Community Council, CHANGER and NEDAP have been lobbying state senators unsuccessfully over the past few months.

"I am overjoyed about the new law except for the private right of action," said Bonita Dowling, a housing advocate with the Pratt Area Community Council (PACC). "PACC is one of the many groups that hoped that the law was implemented before the Senate convened for the summer. We have met with several politicians to voice our concern about the subprime crisis that has affected so many homeowners."

Lionel Ouelette, executive director of CHANGER, was disappointed that the legislation did not include the moratorium and believes that confusion will exist over how the 90-day notices and court proceedings will be enforced.

"Homeowners have to be on top of their own survival and cannot depend on the government to help keep them in their homes," said Ouelette.

Ouelette and other advocates have been closely monitoring housing auctions in Brooklyn Supreme Court over the six months. Of the 18 auctions CHANGER members have monitored, 89 percent of the properties, or 133 units, were bought by financial institutions that foreclosed on the mortgage borrower.

Homeowners currently in foreclosure will not be receiving relief through this bill. While CHANGER and PACC will be pushing for further bills that will slow the foreclosure process, Trisha Ocona, president of the East 58th Street United Block Association, urged more education for borrowers and real estate professionals concerning predatory lending practices.

Ocona, also business development director at Anglestone, a commercial real estate firm, wanted the state to require more accountability for loan officers through licensing and continuing education programs.

"The more I learn, the more I realize how much I don't know, and I get scared for the homeowners who are in this dilemma or are venturing into this American Dream unless they know to seek education, first, throughout the process, and as the life of a homeowner," Ocona said. "As for the people in foreclosure, it is never too late to learn, everyone makes mistakes, but you come out better if you learn from them."

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