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Foreclosure crisis entering a new phase

Foreclosure filings nationwide hit a three-year low in Feb and dropped 27 percent from a year ago, according to the latest study from RealtyTrac.

Attorney Paul Riordan, foreclosure settlement conference referee for Monroe County, used to handle over 150 cases a month, but has seen that drop to a trickle in recent months. While that may sound like good news, the decrease both nationally and locally isn’t necessarily a positive trend.

By the end of 2010, state attorneys general nationwide were investigating the process of “robo-signing,” where mortgage lenders sign foreclosure documentation without reviewing it first.

According to Ruhi Maker and Rebecca Case-Grammatico, both with Empire Justice Center, new statewide attorney affirmation requirements (which took effect in October 2010) only delayed proceedings until lender attorneys could get used to the new law.

“There is a backlog of approximately 900 cases [here in Monroe County] that will enter the system as early as April or as early as attorneys figure it out,” Case-Grammatico said.

Dr. Barbara van Kerkhove, Research and Policy Analyst at the Empire Justice Center recently published an exhaustive report on the state’s foreclosure crisis. The report indicates the state is nowhere near the end of the foreclosure crisis, which now includes those homeowners with good credit and prime loans.

Van Kerkhove said the number of loans 90-plus days past due exceeds the number of pending foreclosures in every county of the state, meaning a flood of new filings is forthcoming. To make matters worse, funding for the state’s Foreclosure Prevention Services Program will run out at the end of 2011 if the legislature does not renew it, leaving thousands of New York homeowners without representation or legal assistance in foreclosure proceedings.

If the funding is not renewed, restoration program providers such as Empire Justice will need to wind down their current caseload to close the program at a time when their services are needed more than ever.

This week Empire Justice Center representatives and other foreclosure prevention groups met in Albany to call attention to the plight of the program that will need legislative support to survive.

“We’ve spoken with leadership in the assembly and we’ve been in touch with local delegates,” Maker said. “We have a full court lobbying effort going on.”

They may have found a sympathetic ear with legislators such as Assemblyman David Gantt, who sent a letter to the Speaker of the House asking that the funding not be cut. Empire Justice Center needs approximately $15 million to keep the program running.

If the program funding is cut, many homeowners in foreclosure proceedings will not be represented. However, as van Kerkhove points out, lenders will be.

“Who has the power in that relationship?” van Kerkhove said. “That’s scary.”

Empire Justice Center representatives argue the state saves more money funding the program than it does by cutting it. The city owns 4,000 abandoned homes now, but without homeowner foreclosure program assistance that number could be on the rise. This would result in decreased property tax revenue, decreased property values in the neighborhood and more blight in the community.

Even lender attorneys would prefer the funding be kept so that borrowers have court representation, Case-Grammatico said