New State Legislation to Strengthen Protections for Homeowners, Tenants and Neighborhoods

The New York State Legislature on November 16th
passed Governor’s Program Bill No. 46, which provides critical protections for New York State homeowners, tenants and
neighborhoods in the wake of the ongoing foreclosure crisis. The legislation will help
homeowners facing foreclosure by, among other things, expanding the 90-day
notice requirement and settlement conference process previously mandated for
sub prime loans to all home loans; tightening the requirement that
servicers negotiate in good faith at settlement conferences; and closing (at
least partly) broker and attorney loopholes in the law governing
"distressed property consultants," or loan modification scammers.

The legislation will also
provide tenant protections, ensuring that tenants of foreclosed properties are
informed that they have the right to stay in their homes for the remainder of
their leases, and giving them a minimum of ninety days to move if the new
purchaser does not want to keep the existing tenants. The
state measure is an improvement on current federal law because it requires
tenants to be told about their rights of the foreclosure and it ensures that
any court-ordered removal of a tenant takes these rights into account. 
Moreover, these protections will remain in effect past the sunset date on the
federal law.

Additionally, the new legislation will
require the foreclosing lender to maintain conditions in foreclosed
properties to minimum safety standards once the judgment of foreclosure has
been entered (which can be months prior to the actual sale).

An excerpt from the Governor's Office press release is below: 

Governor David A. Paterson and Legislative Leaders today announced
passage of the Governor’s Program Bill No. 46, which provides
additional critical protections for New York State homeowners, tenants
and neighborhoods in the wake of the ongoing foreclosure crisis. The
legislation builds upon Governor Paterson’s landmark subprime lending
reform law enacted last year, by assisting homeowners currently at risk
of foreclosure and minimizing the negative impacts that foreclosures
have on communities.

“The laws we have passed in New York have stood as a national model for
foreclosure mitigation. This is about keeping New Yorkers in their
homes and protecting them during this economic crisis,” Governor
Paterson said. “This legislation protects New York neighborhoods from
the decay caused by foreclosure, by reducing the erosion of area
property values and by preventing vacant homes from becoming sites of
criminal activity. While the critical work of closing New York’s budget
deficit still needs to be completed, I commend the legislature for
passing this important piece of legislation.”

The Governor’s program bill expands the protections of reforms achieved in last year’s law. The bill would:

• Require
  the 90-day pre-foreclosure notice currently sent for subprime loans to
  be expanded to include all home loans. This measure allows additional
  time for many more homeowners to work with their lender to find an
  affordable solution to prevent unnecessary foreclosures.
• Require
  those lenders who serve a 90-day notice on a homeowner to within three
  days of that service make a regulatory filing with the Banking
  Department with specified information. This regulatory filing will
  allow the Banking Department and the Division of Housing and Community
  Renewal (DHCR) to provide targeted assistance to distressed homeowners
  during the critical pre-foreclosure timeframe and closely monitor
  foreclosure statistics.
• Expand the scope of the early
  mandatory settlement conference to include borrowers of all home loans
  and not just borrowers with subprime loans.
• Establish
  protections for tenants in foreclosed properties by requiring that they
  receive written notification of the change in ownership of the property
  and be permitted to remain in their home for the remainder of their
  lease term or 90 days, whichever is longer.
• Require
  plaintiffs in a foreclosure action who obtain a judgment of foreclosure
  and sale to maintain the foreclosed property.
• Prevent brokers who perform distressed property consulting services from accepting upfront fees.