"A government big enough to give you everything you want, is big enough to take away everything you have"
Thomas Jefferson

Sunday, June 15, 2008

New Foreclosure Laws

The legislative session is due to end in a little more than a week and as the session comes to close, there is a variety of issues still in the balance. The unresolved issues include, but limited to, a property tax cap, mortgage foreclosures, nursing shortage and brownfields.

The Governor and Legislature are approaching the mortgage situation from very different directions. The Governor, Assembly and Senate should recognize that the responsibility of the foreclosure situation rest to a certain degree with both the borrower as well as the lender.

Borrowers should possess knowledge of their own finances and their ability to pay back a loan. The borrower needs to accept responsibility for seeking a mortgage they can afford and comprehend the details of that mortgage. People have the responsibility to be an astute borrower and shop for a mortgage that minimizes the interest versus always focusing on the lowest payment.

The financial institution has the responsibility by law of disclosing all the details of the loan. They have a responsibility to lend people money who can afford to pay it back, and not necessarily lend money to anyone who crosses their doorstep.

Banks and other lenders have a responsibility to "shock" adjustable rate loans in order to determine whether the borrower can afford them in rising rate environments. Subprime and predatory lending by banks is short sighted; it is a disservice to consumers and if the financial institutions have any foresight, it does not serve them well as being seen now. This type of activity deserves any punitive effect legislation may pose.

Assembly Speaker Silver wants to freeze foreclosures, while Governor Paterson wants new rules imposed on the mortgage industry.

Freezing foreclosures will do nothing to solve the problem; actually, it will negatively affect the consumer even further than they are now. A foreclosure proceeding already takes over a year to complete. Forcing banks to carry non-earning assets on their balance sheet even longer will only drive up the cost of doing business and ultimately cost the consumer more for a mortgage.

Paterson has it right; protecting the consumer from subprime and predatory lending needs to be the focus. Although, as they say, the devil is in the details, the legislation should strike a balance between consumers and guard against making lending too onerous as to constrict the access to mortgages.

Banks that have lent people money within all the correct parameters should be allowed to proceed with foreclosures if people are not paying and banks that loaned money based on dubious practices should have a moratorium on foreclosing affected loans and be forced into workouts on these classified loans.

Protecting the consumers means eliminating poor lending practices by banks, yet maintaining access for consumers who pay their loans to institutions who have good lending principles.

If this issue and the other issues are not completed in the remaining days of the legislative session in Albany then the candidates for the seats in the 118th Assembly district and 48th Senate district should have positions on the best way to proceed.

Ask them, people deserve their thoughts.

1 comment:

Anonymous said...

And the MSM agrees!

NY Post editorial


June 16, 2008 -- Meanwhile, on the local mortgage front, Albany appears poised to make a bad situation worse.

Think fed-up New Yorkers are fleeing the state now? Just watch what happens when they can't find a mortgage.

Any mortgage.

Yet that's precisely the state of affairs lawmakers are trying their hardest to bring about - under the sweet-sounding guise of "foreclosure relief."

A bill that passed the Assembly last month, for instance, would tack an extra year on to the 400-plus days it now takes a lender to foreclose on a subprime mortgage - during which time a judge would be free to impose new repayment schedules and terms.

Manna from heaven for New York's most desperate homeowners? It very well could destroy what remains of the mortgage industry's incentive to lend to anyone without perfect credit.

Think about it: What lender would ever take a chance on a subprime loan - by definition the riskiest - if any attempt to collect on it would almost certainly be tied up in court for years?

Gov. Paterson's proposal, currently fronted by Senate Republicans, isn't much better. Among other things, it essentially would greatly expand the definition of a subprime loan - bringing all but the most exquisite loans under the regulations and penalties that have already helped to dry up the subprime market.

Sure, the bill also contains a number of common-sense measures - such as requiring lenders to let imperiled borrowers know all their options before foreclosure proceedings get under way. But that's not likely to be much good for folks who can't get a mortgage in the first place.

Paterson, Assembly Speaker Sheldon Silver and Senate Majority Leader Joseph Bruno say they're committed to getting some legislation agreed to by the end of the legislative session - perhaps as early as this week.

And this being an election year, they're liable to live up to their promise.

However unfortunate that may be for the state of New York.


Live Blogging