Silver Praises Three-Way Agreement On Legislation Aimed At
Addressing Subprime Lending Crisis

Calling it one of the most comprehensive legislative remedies to one of the major issues facing New Yorkers, Assembly Speaker Sheldon Silver, Assembly Banking Committee Chair Darryl C. Towns and Assembly Housing Chair Vito J. Lopez today praised a three-way agreement between the Assembly, Senate and Governor on legislation aimed at bringing relief to families and communities across New York impacted by the national subprime lending crisis.

The comprehensive measure would provide assistance to current and future homeowners by modifying the foreclosure process, enacting a subprime mortgage lending statute, setting standards and limits for home loans, and requiring the registration of loan providers. The legislation would also establish the crime of residential mortgage fraud.

"Homeownership is one of the most basic American dreams, but the pursuit of this dream has resulted in a nightmare for the many borrowers who were enticed with subprime loans that they can no longer afford," said Silver (D-Manhattan). "One of the Assembly's first orders of business this session was to bring meaningful relief to the tens of thousands New York homeowners struggling to hang on to their homes. We proposed a much-needed mix of direct financial assistance, support for counseling and legal services, and active lender participation in solving this problem. I am very pleased that together with the Governor's leadership, New Yorkers will receive the type of comprehensive relief we have been fighting for."

"Families and communities statewide are reeling from a national crisis caused in large part by deceitful lending practices in the mortgage industry," said Towns (D-Brooklyn). "Today's agreement fulfills one of the Assembly's chief goals this session, to bring relief to hardworking families who are facing upheaval caused by the loss of their homes. By tackling the fallout of the subprime crisis and enacting statutes that prevent the types of predatory lending that has created this situation, New York is facing this crisis head-on and taking a lead in protecting working families."

"This sensible agreement can be a lifesaver for thousands of New Yorkers facing the loss of a home due to manipulative and dishonest practices in the mortgage industry," said Vito Lopez (D-Brooklyn). "By providing for greater notice to homeowners of pending foreclosure, financial assistance to borrowers and setting clearer standards for mortgage lending we can staunch the bleeding of our communities caused by the subprime crisis. Additionally, by making residential mortgage fraud a crime, we have a means of punishing unscrupulous lenders."

Under the terms of the agreement homeowners currently struggling to make mortgage payments must receive a 90-day pre-foreclosure notice to alert borrowers that they are in default or foreclosure and advise them that there may be help available. Another provision would establish mandatory settlement conferences to bring a borrower together with the party initiating the foreclosure proceeding to attempt reach a satisfactory conclusion.

The legislation, which is expected to be acted upon next week, also seeks to protect future homeowners by enacting a specific subprime mortgage lending statute. The lawmakers noted that in 2002 New York State enacted an anti-predatory lending statute placing limits on high cost loans. However, since then the lending industry quietly came out with a series of abusive practices which have led to the current crisis. The legislation will require verification of income and verification of the ability to repay the fully indexed loan.

Provisions of the legislation also include:

• Defines a subprime home loan as a fully indexed loan that exceeds the average commitment rate for home loans by 1.75% on a first loan and 3.75% on a subordinate lien
• Identifies limitations and prohibited practices for subprime home loans such as no negative amortization, no loan flipping, and no prepayment penalties
• Requires a mandatory escrow of taxes and insurance on a first loan
• Requires lenders to consider the borrowers' reasonable ability to repay the subprime loan even after the adjustable rate mortgages re-set
• Provides for assignee liability as a defense in a foreclosure proceeding;
• Provides remedies to borrowers who have been subjected to violations of this act that will be enforced by the Attorney General and the Banking Superintendent

• Establishes standards for brokers that require them to act in the best interests of the borrowers with reasonable skill, care and diligence
• Prohibits lenders or brokers from improperly influencing the outcome of a real estate appraisal

• Provides for the registration of all businesses servicing mortgage loans in the State
• Exempts entities that are already licensed by the Banking Department from the loan servicer requirements
• Authorizes the Banking Superintendent to establish the grounds for imposing fines and penalties with respect to the activities of mortgage loan servicers
• Requires that the mortgage loan servicer who initiates a foreclosure proceeding is the owner and holder of the mortgage and note

• Creates a systematic range of violations to the penal law by lenders and brokers that encompass residential mortgage fraud in the first, second, third, fourth, and fifth degree
• Establishes penalties for residential mortgage fraud ranging from a Class A Misdemeanor to Class B Felony

• Prohibits unscrupulous "rescue scams" that prey upon homeowners' fears of losing their homes in foreclosure
• Prohibits distressed property consultants from inducing homeowners into unwanted contracts, charging or accepting payment for consulting contracts before the completion of services, and taking power of attorney from a homeowner

According to experts, an estimated 50,000 New York households were in some state of foreclosure in 2006 alone. The lawmakers noted these foreclosures could significantly impact many New York communities since the incidence of delinquency tended to be geographically concentrated, suggesting that pockets of the state may be impacted more severely than others.

"This crisis requires a rapid response that effectively keeps families in their home and preserves communities. As we continue to revive the state's economy, particularly upstate, New York cannot afford to ignore this crisis. The ripple effect on communities is far too great," said Silver.