Just because a state passes a law which looks like it will help people facing foreclosure does not mean that the law will actually do that. That is what has happened in New York.
Let Me Tell You About It
In August of 2008 a law was passed in New York. This law created a mandatory Foreclosure Settlement Conference Program for subprime mortgages. The law made the court system responsible for running this program. Only subprime mortgages were covered.
Right from the start there were problems:
- No one was required to explain the law and the conference program to people with subprime mortgages who were facing foreclosure.
- Counseling was recommended but not required.
- Mortgage companies were required to send representatives to the conferences. However, the companies didn’t always give them authority to act.
It’s been a little over a year since the program started. What have the results been? Several weeks ago there was an article in The New York Daily news. The title was
No Fix for foreclosure threat
In the article Phyllis Furman, the Business Writer for the newspaper, reported that the program has been a bust so far. She mentioned the following problems:
- Only 3% of the people with subprime mortgages facing foreclosure were offered a loan modification in the 800 settlement conferences that took place during two months this summer.
- Most conferences were adjourned and the people would have another chance to reach a settlement with their mortgage company.
- 45% of the people facing foreclosure came prepared for the settlement conferences.
- Representatives from mortgage companies brought the proper documents only 3% of the time to scheduled conferences. Frequently the representatives did not have the authority to approve a loan modification.
It was felt that the court system had already been overwhelmed and could not implement the program created by the law. They were also given very little guidance in how to implement the various aspects of the law.
Studies are being done to see what changes need to be made to have the counseling program operate as it was originally intended.
Let’s Take a Closer Look
This was a mandatory Foreclosure Settlement Conference Program. Doesn’t mandatory mean that all parties have to take part?
I can understand how only 45% of the people with subprime mortgages facing foreclosure came prepared. No one was letting the people know what they had to do. They also were not encouraged to get someone to represent them.
The mortgage companies clearly violated the law. They have legal advisers who interpret laws for them; these advisers had to have told the companies the law required them to send representatives to these conferences fully prepared and with the authority to agree to loan modifications. Apparently the companies have chosen not to do this. Didn’t the law specify what penalties would be assessed if this happened?
Didn’t the state legislators know at the time that the law was passed that the court system was overwhelmed and would have problems implementing what the law required? Why weren’t additional funds made available to the courts so that they could hire the staff they needed?
Who Has Suffered Here?
Clearly the person facing foreclosure has suffered the most here; primarily those whose settlement conferences have been postponed because the representatives from their mortgage company were not adequately prepared or didn’t have the authority to act. They have to wait longer to find out if their loans can be modified and if they can save their homes. They and their families have to worry longer.
It looks like the law in New York was poorly designed. People are suffering because of it.
The sad thing is that New York is not alone. Other states have passed laws similar to New York’s. While it may look like these laws will help people facing foreclosure save their homes, they may not.
If you state has passed a law which has set up a mediation program for people facing foreclosure and their mortgage companies, check to see how well it is performing. If you are facing foreclosure, don’t assume that your rights will be protected at a mediation conference and that you don’t need someone to represent you. Get a lawyer or an expert in loan modifications to represent you. You will find their help invaluable during the mediation process.
Also remember that you should know as much as you can about the foreclosure process and the steps you can take to save your home. You can get this knowledge fairly quickly. There is much information available on the subject and it is easy to understand. In fact, I have written an EBook on saving a home from foreclosure. Check it out by clicking Stop Foreclosure.
Much Success,
Mark Elkins
