A.G. Schneiderman Details Initiatives To Promote Housing Recovery In Speech To Long Island Business Leaders

A.G.’s Initiatives Include Protecting Rights Of Homeowners Facing Foreclosure, Delivering Relief To Struggling Families, And Pursuing Accountability For Misconduct That Caused Housing Crash

Schneiderman: We Can Restore Our Housing Market And Revitalize Communities Like Long Island That Were Devastated By The Housing Crisis

MINEOLA – In a speech to Long Island business leaders as part of Hofstra University’s Distinguished Lecture Series, Attorney General Eric T. Schneiderman today detailed his multi-pronged strategy to restore New York’s housing market and protect homeowners from foreclosure. Excerpts from the speech are below.

On the Economic Impact of the Housing Crisis

The biggest impediment to a more rapid recovery is the ongoing crisis in America's housing market…. Homeowners who are facing foreclosure, or who are underwater on their mortgages, are saving every penny they have to try to pay down their debt and save their homes. They can’t spend at local businesses. They can’t move for a better job or invest in starting their own small business.  They’re stuck under America’s $628 billion mountain of negative equity.

On the Ongoing Housing Crisis on Long Island

This crisis is far from over.  Five years after the housing market crashed, in the third quarter of 2012, foreclosure filings were up 35% in Nassau County. 

On Attorney General Schneiderman’s Goals for Recovery

Our housing relief initiative has three essential objectives: First, to protect homeowners’ legal rights; second, to speed as much relief as possible to those who are still struggling because of past abuses; and finally, to hold accountable those who caused the crisis, so that we can restore confidence that there is one set of rules for everyone.

On Protecting Homeowners Legal Rights

When I took office, half of New Yorkers facing foreclosure had no access to a lawyer at any point in the process….  So last year, we set up the attorney general's Homeowner Protection Program, or HOPP.  This is a three year, $60 million dollar commitment to fund housing counselors and legal services providers all over the state to help homeowners avoid foreclosure. 

On Speeding Relief to Struggling Homeowners

When the National Mortgage Settlement was executed last spring, H.U.D. estimated that new york homeowners would receive approximately $600 million in mortgage relief, principal reductions, rate reductions, and other benefits. Thanks to our H.O.P.P. network, our homeowners actually received around $2 billion in the first year.

On Improving Protections for Homeowners

Earlier today we announced that I have introduced two bills—one civil and one criminal—to protect New York homeowners from wrongful foreclosure. 

On Pursuing Accountability for the Root Causes of the Crash

We are continuing to investigate the conduct that led to the crisis in the first case.  My office has filed securities fraud cases against two major banks that engaged in a systemic pattern of fraudulent misrepresentations and omissions in the packaging, promotion, and sale of mortgage backed securities.  We see these cases as templates for future actions and our investigation is ongoing. 

The misconduct in the mortgage backed securities market contributed to the bubble and crash that cost Americans over $7 trillion dollarsin home equity and precipitated the worst recession in 70 years.  There has to be accountability and we have to restore the principle that everybody plays by the same set of rules.  If we don’t, this kind of crisis will happen again.

Attorney General Schneiderman’s speech at Hofstra University followed a news conference earlier in the day at the Attorney General’s Nassau Regional Office with New York State Senate Majority Coalition Leader Jeff Klein pushing for passage of the "Certificate of Merit" bill (A. 5582) and the Foreclosure Fraud Prevention Act (A.7395), two important pieces of legislation to protect New York homeowners facing foreclosure. Both bills passed the New York State Assembly last week, and will be soon be decided on by the New York State Senate. Many homeowners in New York are still fighting to stay in their homes, and these bills would ensure that families are protected from careless, or irresponsible, or even criminal behavior.

The "Certificate of Merit" bill would ensure homeowners have a chance to participate in court-supervised mediation sessions that could help them keep their homes. The Foreclosure Fraud Prevention Act would impose criminal penalties on residential mortgage lenders, servicers and their agents who intentionally engage in fraudulent or deceptive conduct in the preparation, execution or filing of false foreclosure documents. This legislation was proposed by Attorney General Schneiderman and are being sponsored in the Senate by Senator Klein.

Homeowners' foreclosure cases regularly languish for months, or even years, when financial institutions 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 an opportunity to 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 issued a report in July of 2012 which found that 25,000 families are trapped in this legal foreclosure limbo.

In 2009, Senator Klein authored landmark foreclosure legislation aimed at protecting homeowners and preserving property values in communities stricken with high rates of foreclosure. Senator Klein's legislation, which was signed into law by Governor Paterson, requires banks to maintain foreclosed properties, creates new ways for homeowners to stay in their homes after foreclosure proceedings, and guarantees every homeowner the right to a settlement conference prior to any court proceeding.

The Foreclosure Fraud Prevention Act would impose both misdemeanor and felony-level penalties for lenders and servicers who knowingly engage in fraudulent residential mortgage foreclosure practices. These fraudulent activities include falsifying mortgage foreclosure documents--a practice that came to be known as “robo-signing,” which was rampant in New York and across the country during the early part of the foreclosure crisis.

An investigation of robo-signing conducted by the Office of the Attorney General with 48 State Attorneys General, the Department of Justice and the U.S. Department of Housing and Urban Development, led to the signing of the National Mortgage Settlement, a $25 billion agreement with the nation’s five largest mortgage servicers and provides for billions in mandated consumer relief including mortgage refinancing and principal reductions.

The bill will create a legal definition for residential mortgage foreclosure fraud, which will apply to mortgage lenders and servicers, and extend both to their lower level employees and "high managerial agents." This aspect of the bill is particularly significant because it carries the potential to bring criminal charges against law firms and servicers that specialize in high-volume residential foreclosure cases and knowingly engage in fraud.

Attorney General Schneiderman has made protecting homeowners struggling to avoid foreclosure a top priority. In June 2012, he announced the Homeowner Protection Program (HOPP), a three-year, $60 million initiative to fund housing counselors and legal services across New York State. The program strives to ensure that every family facing foreclosure has access to a knowledgeable and qualified professional advocate.

Throughout New York State, 34 legal services organizations and 59 housing counseling agencies will receive over $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, over 4,300 New York homeowners have completed, or have active trial modifications for approximately $540 million worth of first mortgage principal reduction.

For more information on Attorney General Schneiderman’s efforts to support New York families caught in the foreclosure crisis, visit www.AGHomeHelp.com.

The Distinguished Lecture Series at Hofstra University is organized by the Scott Skodnek Business Development Center (BDC) at Hofstra University. The BDC assists businesses, public entities and community organizations on Long Island and in the surrounding area start-up, expand, or diversify. The Distinguished Lecture Series is designed to bring together the elite of Long Island's business community and offer them the opportunity to interact with some of the country's most powerful and influential thinkers in fields ranging from science to politics to investments.  

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