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New York State Foreclosure Mediation Shows Glimmers of Hope in Helping Homeowners

New York is requiring banks to sit down with homeowners before foreclosing. And it’s slowly starting to pay off.

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Homeowners sit with counselors to help them modify their mortgages at the Jacob Javits Convention Center on Dec. 12, 2009, in New York City. (Michael Nagle/Getty Images)

With foreclosures at close to record highs, local and state governments around the country have tried to intervene to both make sure banks aren't taking shortcuts and to help keep people in their homes.

New York State has one of the most aggressive efforts, mandating that homeowners and banks meet regularly under court supervision. The idea is simple: Banks and mortgage servicers have often done a poor job communicating with homeowners, and if the two sides are forced to sit down, there may be fewer foreclosures. Banks can proceed with foreclosure only if the court finds the two sides can't reach a resolution.

A new report looking at New York's efforts found that the mandatory conferences, refereed by court officials, have delayed foreclosures as tens of thousands of homeowners remain in prolonged negotiations with banks. In the small number of cases that have finished the conferences, homeowners have frequently avoided foreclosure and received loan modifications.

At a congressional hearing on Tuesday, the National Consumer Law Center's Diane Thompson pointed to the New York settlement conferences as a promising effort to keep people in their homes.

"If you can get the servicers into a program where they are forced to focus on that particular loan and get it out of the automated processes, you are very likely to avoid many foreclosures and reduce the numbers dramatically," Thompson told the Senate Banking Committee.

New York's program has been far from a complete success. Banks have been slow to sign off on settlements, according to Paul Lewis, the court official overseeing of the program. "For one reason or another, the finish line keeps moving," he says. "The ability for the referees to say ‘enough' is limited." Initially homeowners were unprepared for the meetings too, but the court's outreach efforts have improved the situation, Lewis says.

The conferences could add another year, on average, to New York's already slow foreclosure process. Homeowner advocates and some government officials say slowing down the process provides time to fight wrongful foreclosures as well as forestalling a flood of the housing market at a time when prices are already so low.

Banks, investors and some economists say such long foreclosures leave homeowners in stressful limbo and just delay the inevitable, prolonging the housing crisis while allowing homeowners to live rent-free for months on end. New York is now the slowest state in the country at processing foreclosures; the average New York homeowner in foreclosure is 600 days behind on their loan, according to data from Lender Processing Services.

The report said the average case takes from four to eight separate meetings to reach a conclusion. The result has been taxing on the court system, which oversees the process, according to the annual report on the program submitted by the state's chief administrative judge.

Responding to the housing crisis, in September 2008 the New York legislature passed a bill requiring that the conferences take place before judges would allow banks to foreclose on certain subprime borrowers. Typically a court-appointed official referees the conferences and brings in judges as necessary. The program expanded in 2009 to include all one- to four-family homes that are primary residences.

Since then, the courts have been inundated. There are around 80,000 outstanding foreclosure cases, but this year there have been only about 4,000 settlements. The vast majority of cases are still unresolved.

About 20 percent of eligible homeowners don't show up to the conferences. Of the conferences that do reach a conclusion, Lewis says about half go on to foreclosure while the other half result in a settlement, usually a loan modification. Sometimes the settlements still require homeowners to lose their home but in ways that reduce the costs and the credit damage associated with foreclosures.

In the New York City borough of Queens, for example, 54 percent of the completed cases this year avoided foreclosure. The court covering several suburban counties outside of New York City had similar results, according to Lewis.

The foreclosure process continues as usual for commercial properties, homes that aren't owner-occupied or residences where the homeowner does not show up for the conferences.

In most of the mediations, the banks evaluate homeowners for the government loan modification program, which reduces monthly payments to 31 percent of a borrower's income. But since the government program is an agreement between the federal government and the banks, the state court has little leverage to deal with any problems they may see with banks' implementation of the federal program. If the banks say the homeowner doesn't qualify for a government modification, they are supposed to see if one of their own, proprietary modifications could work. We've found in-house modifications typically provide less help.

Lewis says when the conferences first started, homeowners were not prepared for the meetings, so the court has been working with housing counselors and legal-aid attorneys to get homeowners to go through an initial screening a few weeks before their first conference date. The screenings help homeowners prepare their paperwork in advance.

Through the screenings and other outreach efforts, the settlement conferences have helped engage more homeowners in the foreclosure process. Previously, 90 percent of homeowners did not challenge or fight their foreclosure notices at all; the conferences brought that rate down to 20 percent.

But nearly two-thirds of homeowners don't have attorneys or advocates, which contributes to the stress on the courts. The report says the lack of representation is one of the program's "great challenges" because the burden has instead shifted to the judges and court officials to explain the process and help homeowners as much as is legally possible.

Nationwide, over 25 programs have created venues for this communication between banks homeowners—everything from mandatory negotiations overseen by courts to giving the homeowners the option to request unmediated meetings with their mortgage servicer. As recently as last week Washington, D.C., approved a new program.

In her congressional testimony, the NCLC's Thompson said in order for the efforts to be effective, there needs to be funding for legal help for homeowners in mediation programs. The Dodd-Frank financial reform bill authorized $35 million for legal services, but Congress has yet to appropriate the money. "We urgently need that funding," Thompson told the Senate Banking Committee.

I would be extremely cautious about in-house bank mods: most of them leave the nut intact and find a way (extending terms) to fold in a Pandora’s box of fees, penalties, arrears, etc.
Th elower interest rate is good but the federal program called for striking the padded menu of jacked-up fees and fines the banks want to slip in.
In the end, the bank would make more on an in-house mod than the original one, in many cases.
And the homeowner is still facing down the barrel of a boom-time nut when comes time to sell.
It might seem odd but leaving the house might be better to clear the slate. I want to pay *less* not more, over time. My house is great but I am not overly emotional and throwing good money after bad.
Be clear-headed and consider bailing, maybe get another opinion? Don’t let them make *more* on interest from you…

AcModspecialists

Nov. 19, 2010, 7:22 p.m.

Another big problem with Loan Mods, is that the Bankters and Servicer’s have a dual track system on one track they are processing a Loan Modification (while the banks makes it hard for the borrower to get approved) at the same time, In another track system they are foreclosing on the homeowner, This dual tracking system should stop immediately, while the borrower is trying to get approve for a Modification or its in the process, they should not do the foreclosure process in another system at the same time , Another big solution to this mess is to take away the Loan Modification program from the servicer’s and give it to and independent agency that can be fair and balanced

It amazes me how whiney the banks are.  For years they’ve been screwing the customer and making out like bandits.  Funny how reluctant they are to give anyone else a break.  I guess they don’t like the way the shoe feels on the other foot.

Why am I not crying tears of sympathy for the bankers?  I guess I’m feeling just as cold and emotionless toward them as they are toward those they helped vicitmize.

Even if I manage to stay in my home. whenever I drive past one of the abandoned weed-strewn lots whose centerpiece is a sad looking home with black vacant eyes and sagging gutters weighted down with hundreds of tiny sprouting maple trees.  Nobody looks happy in my neighborhood.  It just doesn’t “feel” right even to those homeowners not at risk.  What a sorry turn of events.

The modification/settlement conference procedures do not belong in the courts.

A judicial settlement conference is not available unless a foreclosure action has been commenced. Although the conference process is suppose to stay all applications in a pending action, the time to measure the default of the mortgagor in appearing in that action is not affected by his or her participation in the conference process.

While quasi judicial court referees presiding over judicial conference procedures use strong arm tactics to secure loan mods and disperse kumbya messages to mortgagors that everything will turn out right, the adversarial foreclosure action which generated the conference is pending against the mortgagor in the same court before an assigned Judge who must move all of his or her cases, including foreclosures.  Why the strong arming?  Because the referee’s work product and success in job performance is measured by the number of loan mods and/or settlements he or she secures.

Under the cannons of Judicial Ethics, judges and quasi judicial court personnel, such as those presiding over the settlement conference process, are prohibited from rendering legal advice, in aiding in the preparation of any party’s claim or defense, and in acting other than in a judicious and impartial manner as to both sides in a pending action.  The current conference process is at odds with these longstanding rules of judicial conduct. 

It’s imperative to get the modification/settlement process out of the courts and into the banking department or another like administrative department and to make completion of the modification/settlement process a condition precedent to bringing a foreclosure action.

This will assure that the mortgagor defendants are not victimized by a court system that seemingly talks out of two sides of its mouth.  It will also assure that court personnel retain their independence and impartiality and render legal determinations based upon controlling legal maxims rather than on political or socio-economic sentiment derived from personal biases or the news media.

To upside down
What they should do its get the modification process and specially the HAMP program out the hands of servicer;s and Banksters (who are cheating thir customers in to foreclosure) and give it to an independe

To upside down
What they should do its get the modification process and specially the HAMP program completely out the hands of Servicer;s and Banksters all together (who are cheating their customers in to foreclosure) and give it to an independent agency that can be fair and balance for both sides, They way that it is now set, everything goes to favor these Banksters who by the way they are still stealing the wealth from the middle class with their practices and their FRAUD-CLOSURES

acmodspecialists

Nov. 20, 2010, 12:47 p.m.

Another big problem with Loan Mods, is that the Banksters and Servicer’s have a dual track system on one track system they are processing a Loan Modification (while the banks makes it hard for the borrower to get approved)  In another track system they are foreclosing on the homeowner, This dual tracking system should stop immediately, while the borrower is trying to get approve for a Modification or its in the process, they should not do the foreclosure process in another system at the same time , I agree Nissim, One very good solution to this mess is to take away the Loan Modification program from the servicer’s completely and give it to and independent agency that can be fair and balanced

Great videos about the current mess in foreclosure crisis.

http://www.msnbc.msn.com/id/31510813/#40221916

After all the lop-sided favors and protectionism and BAILOUTS to the bank, forgive me if I forget about what is proper for judges to do while I bask in the momentary glow of knowing the bankers don’t hold all the cards.

If the bankers are inconvenienced that’s good enough for me.  Their whining about how long people are living in their homes w/o paying a cent, well gee whiz now they know how I feel about their bonuses which amount to more than I’ll make in my lifetime probably.

Like I said, they have plenty of sympathy for themselves which just makes their public displays of self-pity truly pathetic.

I sound like a real hard cookie?  Dealing with lying low-life bankers does that to you I guess.

After trying to get a loan modification starting out with Countrywide and now with Bank of America for about 3 years or so and having just been tortured (and its still going on everytime I have to make a payment and TRY to get someone to take it) throughout a forbearance and the subsequent “trial modification” i signed a permanent loan modification (lol) which had some obvious flaws no one would answer but I figured what the heck and signed it I mean what are they going to do?  throw me out?  Well anyway, that has been almost 3 months ago and haven’t heard a word since then AND I’m still paying my own insurance even though they payments are supposed to be all inclusive.

I don’t trust these low-lifes for one second.

acmodspecialists

Nov. 20, 2010, 10:17 p.m.

Garbor You right, Great videos !

http://www.msnbc.msn.com/id/31510813/#40221916

The number must be very few. In Michigan, I haven’t heard of any. We lost our home to that wonderful pack of liars called JP Morgan/Chase two months ago. I wish some brilliant lawyer with gutter-fighter instincts would begin a class action suit against the them.

We need mass bankruptcies to occur to emerge from this mess.  Bankruptcies will force the reality of the real estate/banking/servicing/Wall Street scam to be exposed, big time.
Yes, it will hurt personally.  But, that’s the only way we can “deleverage” out of this economic property depression.
The sooner the better.
People bought homes they couldn’t afford or understand the paper they were signing….Banks and Wall Street literally “screwed” the consumer and the investor world wide….They deserve nothing more than the whole system collapsing on itself….then a new kind of social/economic world may be rebuilt…..
Until deleveraging occurs all across the western world, no progress will be made….
Its inevitable….
All the horror stories by individuals trying to redo loans is a huge scam for banks/investors/lenders to tack on more and more fees to keep the borrower under water for LIFE….Banks/lenders don’t want to take any hits at all….but they will also realize that we will get nowhere until the inevitable happens.

I think the most disturbing revelation I’ve experienced lately is HOW MUCH b.s. “the people” (I mean mainstream, everyday people, the people who make America run - bus drivers, waiters, nurses, maintenance men, factory workers) have been brow beaten into accepting.  Everyday we see stories of uncontrollable greed ruining thousands and thousands of lives, crooked moneylenders and debt collectors, police-state cops conducting unlawful search and seizure, “our” elected politicians who’ve sold themselves out to the highest bidder, a corrupt justice system, the examples are endless.  We used to rail against that stuff, en masse.  The media (my continued thanks to Pro Publica and the lack) used to help keep things sorted out.  Now the media is mostly part of the problem.  Questions arose during the most recent presedential election concerning Obama’s questionable citizenship, conflicting tales of allegiances and affiliations to radical groups (including militant islam), marxist philosophy/agenda, etc., but the media continued to not only downplay any negative information coming to light but outright ridiculed and mocked anyone who dared to ask questions.  “Crazy birthers” was the coined term for anyone who asked too many questions about the specifics of Obama’s parentage/homeland.  I guess the thinking was if you are unsuccessful in squelching the questions next best thing is a counter-attack raising doubt about the possibly racist motivations and intelligence of the nay-sayers.  The cops are seizing video cameras belonging to private citizens who dared to film “questionable” police activity.  The anti-citizenry feel, at least in my mind, is oppressive and disturbing.  I almost feel as though I’m living in one of those cheap “B” movies with plots about space ships carrying alien invaders and pod people with plans to take over the country.  I must be one of the last holdouts prior to the complete collapse of civilization as we’ve known it.  Strip-searches, Cover-ups of government malfeasance, selective shut-down of information sources including the internet, encroachments on our constitutionally-guaranteed civil liberties, all create a very alarming pattern that ought to result in massive public protest but everywhere I look I instead see evidence of my somnolent neighbors who seem mostly unaware.

Sometimes it feels like a bad dream that I wish to awake from.  Trouble is, it is becoming increasingly clear that however unpleasant the feelings I have they cannot be attributed to nightmares because my eyes are wide-open and seeing things I never thought I would.

The fact that these conferences add months to the average foreclosure is just another indictment of mortgage servicer’s loss mitigation efforts.  Banks already say they do not foreclose on people without performing loss mitigation.  These conferences are just keeping them honest.  Evidently it takes banks, on average, a year to complete a good faith attempt at loss mitigation.  The banks are responsible for the additional delay in the vast majority of cases.  If banks find the additional delay unacceptable, they should improve their loss mitigation operations so they can quickly determine when foreclosures are necessary and when loans can be modified according to standardized guidelines.

Upside down’s concerns about the conference process leading to especially lawless and biased judging are unfounded.  As with any area of the law, if a ruling is unsupported by the law, an aggrieved party can appeal it.  Banks in these conferences surely have the resources to appeal decisions that are unsupported by law.  They choose not to in the vast majority of cases because their attorneys understand that judges presiding over conferences act well within their authority when reining in outrageous bank conduct through every part of the foreclosure process.

The banks are 95% responsible for the slow loan modification, so that they can add extra and illegal fees.  The bankruptcy courts are more sympathetic towards the homeowner, and there are more ways to protect the homeowner from the pretender/lender.  The banks have been scamming us for years.  It is very difficult for me to understand how anyone can think that 20 million ordinary Americans got together to scam the banks and lose their homes.  Wake up!  The biggest transfer of wealth from the Middle class to the Wall Street banks in history.  http://www.challenginforeclosure.com

After waiting over a year to even get in line for a loan mod and then going through a 7 month trial modification and now having a permanent modification that is probably never going to go through (I signed the papers months ago and now, its back in “underwriting”).

These bankers just really are pushing on my last nerve.  The permanent modification had a couple of things I didn’t understand but when I called the number on the letter that came with the permanent mod for “information” guess what happened?  “I’m sorry, I can’t help you with that let me transfer you”....... and transfer and transfer and transfer until you give up and hang up.

This article is part of an ongoing investigation:
Foreclosure Crisis

Foreclosure Crisis: Banks and Government Fail Homeowners

Banks and the government have fallen short in helping homeowners in danger of foreclosure.

The Story So Far

Systemic failures at the country’s banks and mortgage servicers have exacerbated the most severe foreclosure crisis since the Great Depression, and government efforts to limit the damage have fallen short. ProPublica created an unrivaled database of homeowners who have faced foreclosure, opened a Facebook page to encourage homeowners to share their stories, wrote profiles of some of them, and incorporated their experiences into our reporting. We also provided a comprehensive rundown of the numbers behind the crisis.

More »

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