Budget Cuts Imperil Legal Aid in Foreclosure Cases

A May 13th New York Times article examines the current statewide foreclosure prevention funding crisis as experienced by Queens Legal Services (a program of Legal Services NYC).

Click here to read the full article.

In the large immigrant community of Jamaica, Queens, which is ground
zero of New York City’s foreclosure crisis, a small squad of young
lawyers fans out to local courts every day to do battle with lenders,
negotiate hard-fought changes to onerous loans and provide free legal
representation to low-income homeowners about to lose their homes.

Now, however, the anti-foreclosure team itself is facing foreclosure.  

The state’s budget squeeze has put at risk more than 120 legal aid and
homeowner-counseling agencies across the state that have provided a
last-ditch legal and economic lifeline to thousands of distressed
homeowners.

“I am not sure I will have enough money to pay my staff by the end of this year,” said Jennifer Ching, the project director of Queens Legal Services,
one of the groups whose future is threatened. “New York could soon find
itself with thousands of unrepresented homeowners who risk falling
through the cracks.”

Foreclosure-prevention programs, which over the past three years have
helped more than 3,000 homeowners facing foreclosure in New York City,
have been financed since 2009 by federal stimulus spending, but that
money will run out by the end of this year. That has left lawmakers
scrambling to try to find new state financing, while the small army of
pro bono lawyers fighting foreclosures wait and worry. Some have already
stopped taking on new clients.

To bridge the three-month gap between the end of the calendar year and
the start of New York’s next fiscal year in April, Democrats in the
State Assembly sought to add $4 million in foreclosure-related spending
to the state budget that took effect April 1, but they were
unsuccessful. If the program is halted, even for three months, its
supporters fear that it will be very difficult to get permanent
financing for it in the future.

As a stopgap effort to come up with new money, Assemblyman Vito J.
Lopez, a Democrat from Brooklyn, who is chairman of the Assembly Housing
Committee, inserted a $1.5 million earmark in the budget for the
programs.  But that failed, too: Gov. Andrew M. Cuomo, who banned new
earmarks from the budget, vetoed the money.

“We were disappointed,” Mr. Lopez, whose borough has also been hit hard
by foreclosures, said. “That veto almost makes it impossible for us to
have a support system available for people that have such a need.”

New York’s foreclosure-prevention laws are among the most stringent in
the country, requiring lenders to give a 90-day preforeclosure notice
during which homeowners can seek help. But Ms. Ching said that the lack
of new financing would undercut the law’s effectiveness.

 “It is incredibly disappointing that the governor, a former son of
Queens and former housing secretary under President Clinton, can cut the
last line of defense for people who are about to lose their homes,” she
said.

Cuomo administration officials say that pinning the blame on Mr. Cuomo
is unfair, since the bulk of the financing for foreclosure prevention
has come from the federal government, and the state reduced its spending
this year for the first time in more than a decade, cutting areas like
education and state operations.

But such arguments are cold comfort to distressed homeowners who are
 fighting to keep their homes and have turned to advocacy groups like
Queens Legal Services as their last resort.

Luis Mendoza, a 64-year-old truck driver, was behind on the $477,000
mortgage on his Queens home two years ago when there was a knock on his
door at 5 a.m.  As his wife and four children looked on, he said, he was
served with court papers warning him that he faced foreclosure on his
handsome four-bedroom home in Woodhaven.

 Unable to afford the interest rate on his adjustable-rate subprime
mortgage when it rose to 7.8 percent, he turned to Queens Legal
Services. The group represented him at his settlement hearing with
Deutsche Bank, which holds the loan in a trust, and helped him apply for
a loan modification under an Obama administration program intended to
provide a safety net to homeowners. After nine months of fraught
negotiations, the bank said that changes to Mr. Mendoza’s loan had been
approved for a trial period. But the paperwork never arrived. Then, the
bank rescinded its offer, according to Mr. Mendoza’s lawyer.

So Queens Legal Services brought a successful action against the bank in
State Supreme Court in Queens arguing that it had not negotiated in
good faith. In October, American Home Mortgage Servicing, the agent
servicing the loan for Deutsche Bank, offered Mr. Mendoza a trial loan
modification at an interest rate of 2 percent for five years. The court
also ordered that five months’ worth of interest be waived due to
Deutsche Bank’s previous delays, helping him save $13,000.

 “I didn’t know where I would go, with six people, if we got kicked
out,” said Mr. Mendoza, speaking through a translator provided by Queens
Legal Services to help him navigate the process. “It was my dream to
buy a house for my kids.”

Read the rest of the article by clicking here.