Subprime Loan Law
Despite the new law in effect that requires lenders to inform homeowners that their mortgage is about to be foreclosed on, some in the industry believe it still may not be enough to save those who are in trouble. Among the areas of New York City that are among the hardest hit, Staten Island residents are seeing foreclosure rates “354 percent higher than Brooklyn, and 533 percent higher than the Bronx.” Now homeowners who are on the verge of being foreclosed on by banks who offered bad subprime loans in the last few years are seeking legal counsel to ensure that the mortgage lending reform law is on their side.
It was enough to prompt him [attorney Michael Menicucci] to begin a letter-writing campaign to state legislators and the New York Banking Department, which earlier this month announced a new mortgage lending reform law. The law requires lenders and loan servicers to send a 90-day preforeclosure notice to troubled homeowners, giving them a chance to consult with a housing counselor and seek a loan settlement before foreclosure begins. It also calls for a mandatory settlement conference to take place within 60 days after a foreclosure starts.
But Menicucci said the law does not guarantee settlements or set specific time frames for negotiating loan modifications or short sales. The latter is when the bank agrees to take less than the mortgage owed in order to avoid foreclosure. In return, the homeowners avoid the black stain losing a house leaves on their credit.
However, what exactly does the law entail? A statement by the New York State Banking Department aims to break the law down:
A spokeswoman for the state Banking Department said the new state law encourages the lender to act in good faith and work with the homeowner. The law also establishes more consumer protections for subprime loans and minimum underwriting standards, and it classifies mortgage fraud as a crime.
