Bill will help prevent New York homeowners from getting trapped in the growing "shadow docket" of frozen foreclosure cases
Attorney General Eric T. Schneiderman announced that the New York State Legislature has passed the "Certificate of Merit" bill (A. 5582/S.4530A), which will help more New York families avoid foreclosure. The bill enacts common sense reforms to bring greater integrity to the foreclosure process and expedite homeowners' participation in court-supervised mediation sessions where they can negotiate workable alternatives to foreclosure with their lender.
This joint program bill was proposed by the office of the attorney general and the office of court administration. It was sponsored in the Assembly by Judiciary Committee Chair Helene Weinstein, and in the Senate by Senate Co-Leader and Independent Democratic Conference Leader Jeff Klein. The bill passed by a vote of 51 to 12 in the Senate. It was passed in the Assembly on May 22 by a vote of 111 to 26.
"By passing this critical legislation, the Legislature has taken a strong stand on the side of hard working New York families who are fighting to keep their homes but can't get a fair shake from mortgage providers," Schneiderman said. "The 'Certificate of Merit' bill will give countless homeowners a fighting chance to save their homes. Instead of being trapped in the growing 'shadow docket' of essentially frozen foreclosure cases, homeowners will be able to schedule mandatory court settlement conference promptly, and negotiate to keep their homes."
The legislative was top priority for Schneiderman, who has been a staunch advocate for homeowners who bore the brunt of the financial crisis caused by the collapse of the housing bubble. Many homeowners in New York are still fighting to stay in their homes, and the certificate of merit bill will ensure that, when a family gets a foreclosure notice, they will be able to schedule a settlement conference promptly, before they sink deeper in to debt.
Homeowners' foreclosure cases regularly languish for months - and often years - when mortgage lenders delay in filing critical paperwork that affirms the basis for the foreclosing bank's right to foreclose on the property and ultimately triggers a settlement conference - the mandatory process under New York law that provides borrowers and their financial institutions an opportunity to mutually negotiate alternatives to foreclosure, such as loan modifications or short sales.
The delays and subsequent backlogs, often referred to as the "shadow docket," have become a major burden on both homeowners and the judicial system. This legislative fix will require banks to file the necessary paperwork, which ultimately triggers the settlement conference, simultaneously with the filing of any foreclosure action, thus avoiding future delays. The office of court administration has reportedly estimated that 25,000 families are trapped in this legal foreclosure limbo.
Schneiderman has made protecting homeowners struggling to avoid foreclosure a top priority. In June of 2012 he announced the Homeowner Protection Program, a three-year, $60 million initiative to fund housing counselors and legal services across New York. The program strives to ensure that every family facing foreclosure has access to a knowledgeable and qualified professional advocate.
Throughout New York, 34 legal services organizations and 59 housing counseling agencies will receive more than $16.1 million this year to provide free foreclosure prevention services. An additional $3.9 million has been allocated for training, technical assistance, and other support services to assist homeowners in foreclosure. In part because of the advocacy of HOPP-funded housing counselors and legal services providers, more than 4,300 New York homeowners have completed, or have active trial modifications for approximately $540 million worth of first mortgage principal reduction.
Schneiderman has also sued HSBC Bank USA and HSBC Mortgage Corporation (USA) seeking relief for homeowners already trapped in the shadow docket.
For more information on Schneiderman's efforts to support New York families caught in the foreclosure crisis, visit www.AGHomeHelp.com.