Bills Push Moratorium on New York Foreclosures

There are a lot of different bills floating around state and federal governments these days proposing various reprieves for subprime

There are a lot of different bills floating around state and federal governments these days proposing various reprieves for subprime borrowers in danger of foreclosure. One of the most far-reaching plans is a bill being pushed by two state legislators proposing a one-year moratorium on foreclosures in New York to allow at-risk mortgage holders to remain in their homes while they work with their lenders to restructure loans.

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The bill is currently being reviewed by the State Legislature and has gained wide support from both Democrats and Republicans—it currently has 71 Assembly sponsors and 19 Senate sponsors.

A host of city officials joined the original sponsors, Republican Senator Frank Padavan of Queens and Democratic Assemblyman Jim Brennan of Brooklyn, at Brooklyn Borough Hall today to rally support for the bill, whose most recent precedent was a 1933 law imposing a one-year moratorium on foreclosures in New York State.

The statistics the legislators point to in a press release issued today are indeed dire, but are they Great Depression-dire?

RealtyTrac reported 59,000 foreclosure filings involving 39,000 homes in New York State in 2007; 66 percent of those filings took place in New York City. In February 2008, 4,950 homes entered the foreclosure process in New York State, and 3,280 of those filings were in New York City, according to Foreclosures.com.

In communities like Bed-Stuy/Crown Heights in Brooklyn, one quarter of all homeowners with subprime mortgages have now lost their homes, according to the Federal Reserve Bank of New York. A study of city subprime lending by N.Y.U.’s Furman Center for Real Estate and Urban Policy found that foreclosure filings for 1-4 family homes had more than doubled between 2005 and 2007; the study showed Bronx homeowners with the highest percentage of subprime mortgages loans—27.4 percent—while Brooklyn and Queens are close behind. Profiles Publications, which tracks N.Y.C. foreclosures, reports that every week, 150 to 200 homeowners in Queens and 125 to 150 homeowners in Brooklyn enter the foreclosure process.

A representative for the Senate’s majority leader, Frank Bruno, agreed the “subprime mortgage situation is critical,” but he said the Senate wants to ensure the solution “effectively addresses the issue.”

The Senate Banking Committee met with the State Banking Commissioner in December, and will be holding hearings that have yet to be scheduled, the spokesman said.

Governor Spitzer’s office said it has a policy of not commenting on bills that have yet to pass through both houses, but suggested The Observer look into the legislation the administration proposed this week.

“We’re not calling it a moratorium,” a Spitzer spokesman said of the bill. “But it does give borrowers a little extra time to have a conversation with their lenders.”

Mr. Brennan said in a statement today that ultimately only a major intervention by the federal government, in cooperation with responsible lenders, can adequately address the crisis. “It is likely that implementation of solutions that involve hundreds of billions of dollars will take years. That’s why helping people buy time is vital and needs to be done now.”

Bills Push Moratorium on New York Foreclosures