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Study Finds Lenders Routinely Ignore New York State Foreclosure Settlement Law

January 1, 2010

As Chino loan modification lawyers, we have long been cynical about the behavior of mortgage lenders when their financial interests oppose the common good. So we were not surprised by a Dec. 30 article on BNET about a new study of New York State's relatively recent foreclosure settlement law. Effective in September of 2008 and intended to prevent avoidable foreclosures, the Foreclosure Prevention and Responsible Lending Act of 2008 requires mandatory settlement conferences between lenders and subprime borrowers before a foreclosure lawsuit can proceed. But a study by the Center for New York Neighborhoods (PDF), a network of nonprofits focused on housing issues, found that lenders come to these conferences with inadequate preparation, documentation or authority, making real negotiations impossible and undermining the law's intent.

Under the New York law, lenders and borrowers meet for a settlement conference supervised by a court employee. The law specifies the topics they must discuss, including each party's obligations under the loan documents and negotiations for a "mutually agreeable resolution." However, the CNCYN report found that lenders' attorneys knew the status of the loan just 6% of the time; had a copy of the homeowner's officer just 3% of the time; and had the phone number of someone with settlement authority just 13% of the time. Even worse, the report said, courts rarely take steps to penalize this lack of preparation. Due to inadequate training, little guidance and high caseloads, courts determined how far apart offers were just 5% of the time and asked lenders for a payment history just 8% of the time. To make matters worse, fees for the lender's attorney are charged to the homeowner regardless of preparation.

As the BNET article points out, these are the results in a state with a consumer rights law on the books to deal with foreclosures. Under those circumstances, our Yorba Linda loan modification attorneys aren't surprised that the situation is even worse in states without such a law. Like the New York State law, the federal HAMP program provides virtually no accountability to lenders who fail to make a reasonable effort to modify loans. Both programs also lack well-trained mediators and mandatory pre-negotiation counseling, features of the apparently more successful foreclosure mediation programs. Without accountability and consumer education, these laws are virtually toothless. In fact, since New York's law allows lenders to bill borrowers for the time of unprepared attorneys, it may even do more harm than good.

Howard Law LLP represents homeowners who are tired of waiting for lenders to voluntarily treat them fairly and competently. We help clients throughout California demonstrate to their mortgage lenders that they are serious about their legal rights, through lawsuits if necessary. Our Costa Mesa loan modification attorneys have had good results negotiating for loan modifications, even in cases where the homeowners have had no luck on their own. We believe that when a lawyer comes on the job, banks pay attention because they know they could be sued for violating our clients' rights. In fact, we are more than happy to file lawsuits whenever we find gross negligence or violations of state and federal predatory lending laws. We want to leave every client with a lowered monthly payment they can actually afford.

If you're frustrated by the lack of adequate response to your efforts to modify your loan, Howard Law LLP can help. To set up a free, confidential evaluation of your case, please send us an email through our Web site or call 1-800-872-5925 today.