New York Courts to Intensify Efforts to Prevent Foreclosures

New York Courts to Intensify Efforts to Prevent Foreclosures

New York Courts to Intensify Efforts to Prevent Foreclosures - New York State’s courts, frustrated by delays in thousands of foreclosure cases, are planning to speed them along in a new program that would give judges added control and require banks to send officials who have the power to alter loans to keep people in their homes.“There will be no more excuses, no more delays,” the state’s chief judge, Jonathan Lippman, said in announcing the plan last week. “Real negotiations will take place.”


The move is the latest effort to stiffen court foreclosure procedures. In at least 19 states that have such court programs, efforts to settle foreclosure cases have often met with obstacles, including what some judges have found to be bad-faith negotiations by lenders.

The New York plan includes an unusual agreement by four banks to send representatives to court who can approve loan modifications. New York’s mortgage settlement conferences have often been paralyzed by repeated requests for information and the absence of anyone with authority from the banks.
“It is an important step forward” because it increases the involvement of judges with the power to punish defiant or disorganized lenders, said Geoff Walsh, an expert on foreclosure policy at the National Consumer Law Center in Boston.

The new program is to start in Queens this spring and then expand around the city and to nearby suburbs, court officials said. The officials said that under the program, judges would take over the running of some settlement conferences from court attorneys, who lack the power to impose punishments. State law requires that bank representatives “be fully authorized to dispose of the case,” but enforcement of that requirement has been sporadic.

The officials said the plan would also include court supervision of the collection of the required documents to try to avoid delays and would seek to shorten the time some foreclosure cases linger in the courts to several months from as long as two years.

In addition, courts would work to assure that homeowners who cannot afford lawyers are represented, though some lawyers who handle such cases questioned whether that goal was realistic.

If it is successful, the plan would be expanded across the state next year, said Judge Judy Harris Kluger, the chief of policy and planning for the New York courts. She said that a critical step was obtaining the agreement of the four banks, Chase, Citibank, Wells Fargo and Bank of America, to more fully participate in the settlement efforts.

“Everybody is in agreement that something has to change that gets the players to the table,” Judge Kluger said.

She said that officials believed that their plan could be expanded statewide and that it was a logical next step after aggressive steps over the last few years had not brought the desired results.

“I don’t think anybody was prepared for the volume and for the difficulty of getting the right person who was authorized” by the banks to mortgage settlement talks, Judge Kluger added.

Some lawyers for homeowners said the plan was welcome because thousands of settlement conferences had seemed nearly futile.

“We’re very encouraged by this idea, because one of the real problems at the conferences has been the lack of anyone meaningful to talk to on the lender side,” said Jacob Inwald, the director of foreclosure-prevention litigation at Legal Services NYC, which represents poor people in the city.

But other lawyers questioned the court officials’ plan to provide lawyers for homeowners. The lawyers noted that, after years in which the government provided millions of dollars for legal representation for struggling homeowners, some of New York’s legal programs are now planning to lay off lawyers and housing counselors who specialize in foreclosure prevention.

They noted that Gov. Andrew M. Cuomo’s budget did not provide financing for the programs to replace federal funding that ended. Asked about that decision, Mr. Cuomo’s office did not respond directly. But it said in a statement that “another source of funding” for lawyers could be New York’s $136 million share of the recently negotiated $26 billion mortgage settlement with big banks, which is to be controlled by the state attorney general, Eric T. Schneiderman.

Mr. Schneiderman said in a separate statement that he planned to use a significant portion of the money for homeowners’ lawyers and housing counselors. A Cuomo administration official said negotiations with the Legislature were likely to find money for the legal agencies in the meantime.

But Mr. Inwald, the foreclosure-prevention specialist, said he was baffled by the governor’s response because the mortgage-settlement money was many months from being available.

As a result, he said, the new court program could face difficulty. “It’s going to be a lot less effective,” Mr. Inwald said, “if there’s nobody to represent homeowners in the process.”