State Assemblymember Jim Brennan’s bill (A.9695b) to impose a one-year moratorium on foreclosure of a sub-prime mortgage was passed today as part of a 4-bill package to address the sub-prime mortgage crisis in New York State.
The bill, modeled after Depression-era laws in a number of States including New York, would require that a court provide for a minimum payment by the homeowner during the moratorium period. "The bill requires a payment that is both fair and equitable for the homeowner and the lender," Mr. Brennan explained. "The court shall determine a payment that the homeowner can afford while maintaining the relative financial positions of both the owner and lending institution," he added.
In 2007 there were over 51,000 foreclosure filings in New York State according to RealtyTrac. "The dramatically rising number of foreclosures has led to declining property values and threatens New York’s economy. The boroughs of Brooklyn and Queens are among the hardest hit areas in the country," added Mr. Brennan. In March, 2008 there were 6700 foreclosure actions and 14,000 in New York in the first three months of the year, nearly 50% of which occurred in Queens, Brooklyn and Long Island. Foreclosures are up 60% across the nation this winter compared to a year ago.
According to the bill, a sub-prime mortgage offered today would carry a rate of 7.4%, similar to current Federal Reserve statistics showing average sub-prime mortgages in New York at 7.5%.
Along with the moratorium bill, the Assembly passed 3 other bills to address the sub-prime loan crisis. The Foreclosure Prevention Lending Act (A.10093a) creates a fund to be administered by the Division of Housing and Community Renewal to assist homeowners who are in default or foreclosure to work out modifications in their loan and get back on their feet so that they do not lose their home. The Responsible Lending Act (A.8972c) would curb questionable loan practices in the future to prevent home buyers from unscrupulous lenders. Finally, the Mortgage Applicant’s Bill of Rights (A.10219c) ensures that mortgage applicants have all the necessary information ahead of time to make an informed decision about a home loan.
"Taken together, this package of bills will assist homeowners who are in trouble due to the unfair practices of the past and protect future home buyers in New York State," Mr. Brennan concluded.