New Law Says Lenders and Borrowers Meet to Fend Off Foreclosures

For homeowners facing unaffordable mortgage payments, courts across the five boroughs are offering conferences between lenders and borrowers in an effort to avoid foreclosures. A new law requires that the two sides meet. Elected officials and advocates thought the process would save thousands from losing their homes but so far things have gotten off to a slow start. WNYC’s Cindy Rodriguez visited Queens Civil Supreme Court and has this report:

REPORTER: Getting a loan servicer to reduce her mortgage payment has been a drawn out process for Raquel. The mother of three didn’t want to give her full names because she says she’s embarrassed about her situation:

RAQUEL: With this bank you keep on calling and nobody answer the phone….maybe they have so much foreclosure going on right now.

REPORTER: Raquel works in housekeeping at a hotel and earns about 24-hundred dollars a month – that’s less than the amount of her current monthly mortgage payment. She bought her home in South Ozone Park Queens for just over 300-thousoand dollars. Raquel sits on a bench with her mother and her attorney. All of three of them just finished meeting with a court appointed mediator.

RAQUEL: The guy in there he’s trying very hard cuz what he already told us today, he’s not leaving until he hears something because this is like my fourth time coming here.

REPORTER: Leonard Florio is the court appointed mediator in Queens. The conferences are conducted in his office. All parties sit at a long wooden table perpendicular to his desk. The words Plaintiff and Defendant are taped on each side. In front of him are a stack of cases:

FLORIO: Uh on today’s calendars we have 16 matters scheduled for conferences purposes.

REPORTER: Everyone sits close to each other and lenders are not the only ones showing up unprepared. Earlier, Florio saw a woman who came to the conference on behalf of her mother:

FLORIO: The borrower has not yet provided all the paperwork although this case has been here now since January.

REPORTER: But these housing conferences in Queens and other boroughs are facing an even more basic problem – homeowners are not taking advantage of them. According to court administrators in Queens, between October and March, more than 5-thousand homeowners facing foreclosure were sent court notices but only a small percentage responded and so far fewer than 400 conferences have been held. The results have been slightly better in other boroughs and court personnel point out that default rates are always high among defendants in any type of court case not just foreclosures. Still advocates that helped implement the housing conferences acknowledge it’s been an uneasy start. Josh Zinner is from the Neighborhood Economic Development Advocacy Project. The organization has been working with groups providing counseling and legal help to homeowners statewide. Zinner says more direct outreach is needed:

ZINNER: And I think all of us are gearing up to do that including making calls knocking on doors, public service announcements anything that really can break through and educate people that in fact there is this process available for them and there is free assistance available.

REPORTER: Zinner says even when you do get both parties to the table, there’s also the problem of getting them to negotiate in a meaningful way:

ZINNER: Throughout the state the conferences have been working better in judicial districts where the courts have taken a more active role in trying to push the parties to settle and frankly to push the lenders to be flexible and to come up with reasonable solutions.

REPORTER: He points to Buffalo as an example of where settlement rates are higher. But also acknowledges that property values there have plummeted more severely than in New York City and the mortgages are much smaller - both factors that might make settlements more appealing for banks.

REPORTER: In Queens, only 13 settlements have been reached. Court personnel says it’s important that the agreements be realistic. Leonard Florio says he often calculates payments for loans at specified interest rates in order to demonstrate to people how much they will owe each month:

FLORIO: …it is one thing for the person to say they want to stay in the house but if they get in the house and they can’t turn on the gas and they can’t hook up the electric then being in that house is not in their best interest.

REPORTER: Loans must be sub-prime in order to qualify for a housing conference which means many times, the homeowner was given a loan they could never pay off. Advocates say half a million dollar loans given to people earning poverty wages are common. Florio says one way to deal with that is to get other people in the home with jobs to sign on to the loan so there income can be counted too.

REPORTER: At Queens Civil Supreme Court, the conferences are wrapping up for the day.

FLORIO;_Do we have the banks attorney’s outside? Alright, let’s start bringing them in

REPORTER: When the homeowners don’t show up, Florio says he’s forced to release the cases.

FLORIO:…I have the plaintiffs here. I don’t have the borrowers.

And allow the banks to move forward with the foreclosure.

For wnyc, I’m Cindy Rodriguez