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NYS Seal For Immediate Release:
January 3, 2008

 

Silver, Assembly Leadership Advance Legislative Package Aimed at
Addressing Subprime Lending Crisis

Comprehensive package provides $150 million in direct financial assistance to struggling homeowners, $30 million for counseling and legal services; offers mediation and legal representation for those duped by unscrupulous lenders


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Speaker Silver, at a Capitol news conference, answers a reporterís question about the new legislation to protect consumers on the subprime lending crisis. Silver was joined by (from left) Assemblyman Darryl C. Towns, Majority Leader Ron Canestrari and Assemblymembers Jeffrion L. Aubry, Janele Hyer-Spencer, Tim Gordon and Bob Reilly.

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Assembly Speaker Sheldon Silver, Assembly Banking Committee Chair Darryl C. Towns and Assembly Housing Chair Vito Lopez today announced legislation aimed at bringing relief to families and communities across New York impacted by the national subprime lending crisis.

The comprehensive measure would provide $150 million in direct financial relief to homeowners, as well as $30 million for counseling and legal services. The legislation would help New York's working families by providing direct assistance to those facing crisis and take steps to prevent similar occurrences.

"Homeownership is one of the most basic American dreams, but the pursuit of this dream has resulted in a nightmare for the many borrowers who were enticed with subprime loans that they can no longer afford," said Silver (D-Manhattan). "The proposal being advanced by the Assembly Majority today includes legislation to assist struggling homeowners, provide counseling and reform questionable industry practices. Our plan is a much-needed mix of direct financial assistance, support for counseling and legal services, and active lender participation in solving this problem."

"The mortgage industry aggressively marketed mortgages with low 'teaser' interest rates. The price for these initially low rates are rates that increase significantly after several years," said Towns (D-Brooklyn). "Other questionable loans include interest-only mortgages and mortgages made with little or no income verification. These schemes have also placed millions of Americans, particularly in low-income communities and communities of color, at risk of foreclosure."

"Owner-occupied houses form the bedrock that keeps urban communities strong and vibrant," said Lopez (D-Brooklyn). "In order to protect our communities from this crisis and prevent their collapse, we must expeditiously implement the remedial and preventative measures contained in this package."

"Enhanced funding for legal services means that many innocent homeowners duped into unaffordable subprime mortgages will have their rights protected and be able to defend against unwarranted foreclosure and eviction," said Assemblywoman Helene Weinstein, chair of the Judiciary Committee.

"Faced with voluminous mortgage documents containing page after page of dense legalese, many consumers entered into mortgage agreements that they did not fully understand," said Assemblywoman Audrey Pheffer (D-Queens), chair of the Consumer Protection Committee. "In order to ensure that consumers are able to make informed choices in the mortgage marketplace, we will significantly increase funding for housing counselors and legal service professionals who guide consumers through the mortgage process."

Specifics of the legislation include:

Providing Direct Financial Assistance to Struggling Homeowners

  • The legislation would create $150 million in grants to assist borrowers who are in default. Grants would be given to those borrowers in owner-occupied homes who are actively engaged with their lenders and/or loan servicers in developing work-out arrangements or modifying the loan. In addition, the Assembly's plan requires lenders to participate financially in alleviating the extent of the debt.

  • It also would increase funding by $30 million to counseling entities and legal services organizations to provide counseling, mediation assistance and representation in foreclosure.

Preventing Similar Crises in the Future
  • The Responsible Lending Act of 2008 addresses current predatory lending abuses in the industry such as negative amortization, prepayment penalties and lending without regard to repayment ability by increasing lenders and broker responsibilities toward borrowers.

  • The bill would require the New York State Banking Department to monitor and study the mortgage industry and report on the effectiveness of public efforts to reduce defaults and foreclosures. Mortgage loan originators would also be required to report lending activities to the Banking Department, which would then be required to issue an annual report to the Legislature and develop a database on defaults and foreclosures.

  • Other provisions of the package would require fair and accurate real estate appraisals and discourage inappropriately influencing a real estate appraiser to inflate home values.

About the subprime mortgage crisis

According to experts an estimated 50,000 New York households were in some state of foreclosure in 2006 alone. The lawmakers noted these foreclosures could significantly impact many New York communities since the incidence of delinquency tended to be geographically concentrated suggesting that pockets of the state may be impacted more severely than others.

"This crisis requires a rapid response that effectively keeps families in their home and preserves communities. As we continue to revive the state's economy, particularly upstate, New York cannot afford to ignore this crisis. The ripple effect on communities is far too great," said Silver.