Come next year, more than 100,000 families in New York may be plumb out of luck.
Since 2008, the state has offered one of the best systems in the country for guarding homeowners against foreclosure. New York’s Foreclosure Prevention Services Network has helped stave off foreclosures for more than 20,000 households annually ever since.
While the housing crisis is ostensibly over, the bleeding hasn’t stopped in New York. There were more than 34,000 new foreclosure filings in 2016, adding to 72,000 pending foreclosures across the state. Unless the state legislature decides to renew funding for the Foreclosure Prevention Services Network in the next round of budget negotiations, however, those service providers will run out of options after 2017.
“These cases take years to resolve, so organizations are going to have to start making hard choices about intake,” says Meghan Faux, project director for Brooklyn Legal Services, one of more than 90 housing, counseling, and legal- aid organizations that comprise the network.
Faux describes the Foreclosure Prevention Services Network as the rare silver lining for a state that is still suffering foreclosures at 2008 levels. The federal funding that supported the network when it launched, the Homes and Community Renewal Foreclosure Prevention program, expired back in 2012. Since then, the New York State Attorney General’s Homeowner Protection Program has funded the network, using money the state received from national settlements with banks. That purse expires in September.
Late last month, New York Attorney General Eric Schneiderman found $10 million from dwindling settlement funds to fund critical services starting October 1. But the network is asking the state legislature to add $20 million to its annual budget to fund foreclosure mitigation services.
That work is vital to vulnerable homeowners across New York—now more than ever. One of the key federal foreclosure protections, the Home Affordable Modification Program, expired in December 2016. Since then, New York has witnessed a spike in reverse-mortgage foreclosures for seniors.
Affiliates in the network—there are 63 housing counseling organizations and 31 legal-services providers—help homeowners first and foremost by explaining their options to them. Counselors and attorneys work with individual homeowners to prevent default and, in the best cases, reinstate or modify the loan to keep the owner in place. When that’s not possible, network counselors help homeowners through the difficult process of transition.
“There are always going to be homeowners who are struggling to pay their mortgage due to a loss of income,” Faux says. “It’s been almost 10 years and you’re still seeing significant foreclosure rates [in New York]. For 10 years we’ve been operating in response to this crisis, and it really isn’t showing any signs of significantly reducing.”
More than 60 percent of New York homeowners struggling with their mortgage are represented by counsel in settlement conference proceedings—an option that didn’t exist before 2008. Some of that counsel is private, but much of it represents the work of the Foreclosure Prevention Services Network. Before 2008, Faux says, more than 90 percent of foreclosure filings led to default.
“There has been a sea change in how many homeowners are appearing in court for arbitration,” she says. “More than 80 percent of homeowners appear in court to try to negotiate with the plaintiff.”
The problem is especially significant for New York City, which saw 7,310 new foreclosure filings last year and more than 50,000 foreclosure notices. Long Island continues to be hit very hard; both Brooklyn and Queens also have high foreclosure rates. While the figures in Staten Island and the Bronx are lower, Faux says, the impact on those communities is still significant.
More homeowners pursuing their full legal options means fewer families displaced, which results in stronger communities with fewer vacancies. That’s better for families and neighborhoods, of course, but it’s also better for the banks. In the long run, funding the network on a permanent ongoing basis may cost the state far less than the price of displacement for communities across the state.