Vann, City Council Pass Four New Resolutions Aimed at Lending Reform

The New York City Council’s Committee on Community Development late January passed another round of resolutions aimed at reforming lending practices, and they are hoping that Governor Andrew Cuomo finally will give it the rubber stamp.

Last year, the New York State Assembly appropriated $1.5 million for lending reform in the 2011-2012 Budget, but the funding was vetoed by Governor Cuomo.

In the December tax reform agreement reached by the Governor and State Legislature, $1 million was provided to continue the program. However, Governor Cuomo’s recently released budget for 2012-2013 again failed to include any funding to examine or deal with mortgage fraud or illegal lending practices.

The City Council once again is calling for state action to reform the process and stem the tide of foreclosures that continue to decimate New York City residents.

“The foreclosure crisis is ravaging neighborhoods like Bedford-Stuyvesant, with the foreclosure rate nearly double that of Brooklyn as a whole,” said City Council Member Al Vann, who chairs the Committee on Community Development. “Homeowners not only need the assistance, counseling and legal representation provided by local organizations that depend on this state funding, but also to be treated equitably in the foreclosure process.”

Contrary to what many think, the foreclosure crisis is not over in New York State. According to the New York City Courts, the number of homeowners in foreclosure cases who are unrepresented by attorneys grew from 63 percent in 2010 to approximately 67 percent in 2011. Furthermore, the Legal Aid Society has estimated that approximately 67,000 home loans in New York City went into default between January and August of 2011.

During his State of the Union address on January 24, President Barack Obama announced his appointment of New York Attorney General Eric Schneiderman to head a joint committee to investigate improprieties and irregularities behind the national mortgage crisis.

Federal movement on the issue may be a green light for more aggressive action by state and city governments where budget allocations have been overlooked or delayed.

On January 31, the City Council passed four new resolutions that aim to reform the process and address dubious practices, including robo-signing, the filing of false paperwork and the initiation of foreclosures without legal standing. The resolutions also call for the governor and State Legislature to provide funding for the state’s Foreclosure Prevention Services Program in the 2012-2013 State Budget.

FORECLOSURE RESOLUTIONS

Resolution 871-A – Calls on the NYS Legislature to codify the new rule enacted by the Chief Administrative Judge of New York that requires the attorney of a foreclosing party to attest to the accuracy of foreclosure filings by signing an affidavit or affirmation. Although the rule is currently enacted, a future Chief Administrative Judge could seek to amend or repeal the rule.

Resolution 872-A – Calls on the NYS Legislature and Governor to support the continuation of New York’s Foreclosure Prevention Services Program in the 2012-2013 Executive Budget.

Resolution 988 – Calls on the NYS Legislature and Governor to enact legislation that would require the foreclosing party in a mortgage foreclosure action to produce the Pooling and Service Agreement (PSA) at the beginning of the foreclosure action. The PSA is the primary contractual document between all parties involving the transfer of specific home loans from the originator to the servicer and ultimately to a trust, which then becomes the legal owner of a pool of mortgages. The proliferation of mortgage-backed securities has made it difficult for judges and lawyers to determine who actually owns underlying properties. The only way for a homeowner in a foreclosure action to assert that the party initiating foreclosure does not have a legal right to do so is by including that claim in a written answer in the proceeding. Many homeowners lack legal representation, do not file a written answer at all, and/or do not have enough information to make that assertion. Enacting such legislation would place the burden of proof for asserting standing in a foreclosure action on the foreclosing party, rather than on the homeowner to dispute.

Resolution 989 – Calls on the NYS Legislature and Governor to enact legislation to prohibit lenders from concealing mortgage assignments through the use of the Mortgage Electronic Registration System (MERS). MERS is an electronic registry system that was intended to streamline the mortgage process and track mortgage loans, but it has allowed its members to transfer mortgage loans to one another without recording the transaction, as MERS is considered the mortgagee in relevant public records.

Resolution 990 – Calls on the federal government to preserve the right of rescission for homeowners, as established in the Truth-in-Lending Act (TILA). The right of rescission is the ability of a borrower to convince a court to rescind a mortgage or home equity loan within three years of its being made on the grounds that the lender has violated the disclosure requirements set forth in TILA, relating to the loan amount, interest rate and repayment terms.