NY State Pre Foreclosure Notices Help Outreach Most At Risk

The good and the bad often come in the same package, or so they say. And it may be true for licensed credit counselors who because of the crisis fit right into everyone's agenda and urgency to prevent foreclosures and curtail loan losses.

As various government and private entities across the country are redefining efforts to assist homeowners in distress, two years after the financial meltdown, "most Americans remain anxious about personal finances," according to a national opinion poll conducted for Certified Financial Planner Board of Standards during the first week of July.

Nearly two out of three or 65% of the 1,002 people who participated in the poll are more concerned about their finances today than they were at the beginning of the financial crisis in 2008.

These findings also highlight the need to further improve financial education and New York State is one of a few states setting a good example in this area.

"An important part of resolving this mortgage crisis is getting homeowners the help that they desperately need before they fall too far behind to recover," noted New York State Superintendent of Banks, Richard H. Neiman, when in June New York State sent over 57,256 90-day preforeclosure notices to New York homeowners who have fallen behind on their mortgage payments since mid-February.

In further expanding its preventive approach to foreclosures the New York State Banking Department has developed an updated model of databases of mortgage servicer notifications that is one of the few nationwide. New information gained from preforeclosure notices will allow the agency to identify geographic areas of the most at-risk homeowners before they fall into the foreclosure process and develop targeted outreach. One important item in these notifications is a call for and information about free counseling options. The information gathering may ultimately feed into "a national database of mortgage statistics," Neiman said.

The notices were based on information filed from almost 200 mortgage servicers in accordance with the new 2009 Mortgage Foreclosure Law signed into law by Gov. David A. Paterson. It requires all residential mortgage servicers to provide the Banking Department with key information from the 90-day preforeclosure notices. These notices, required for high-cost, subprime and nontraditional mortgages since September 2008, notify the homeowners of their default status and outline steps they can take to avoid foreclosure, including working with a local, nonprofit housing counselor. In time it is expected to build up a wealth of information given that the aggregate assets of the depositories supervised by the department are over $2.4 trillion.

The 2009 Mortgage Foreclosure Law enables the Banking Department to share information with housing counseling agencies, in an effort to intensify foreclosure prevention. Initially the department shared information with nine counseling agencies covering 38 counties but more counties will begin receiving data going forward.

In June over half, or 30,182, of the preforeclosure notices were sent on mortgages or refinances originated between 2005 and 2007; over 31% of the preforeclosure notices were sent on loan amounts under $100,000; over half, or 31,044, of the preforeclosure notices sent were on mortgages that were less than 60 days delinquent.

"We are well past the point of this being a subprime or predatory loan crisis," said Neiman. "The recession and job losses, as well as the overall decline of the housing market, have led to the current situation of responsible homeowners who may have had a good loan being overwhelmed by temporary economic hardships."

The department is encouraging all homeowners who may have received a letter to contact their servicer or local nonprofit housing counselor for assistance.

Since this crisis began, says NY State commissioner of the Division of Housing and Community Renewal Brian Lawlor, homeowners are continuously urged "to beware of scam artists who charge a fee and often make the situation worse." The new provision of the law helps housing counselors make a direct connection with the borrower and put a plan in place. Executive director of CNYCN, Michael Hickey said his firm is inviting owners to attend monthly Foreclosure Clinics to meet one-on-one with experienced attorneys and housing counselors to review options so they get well-informed advice at no charge, and do not need to pay a mortgage "rescue" company that may end up scamming them.