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New York’s New Mortgage Proposal

foreclosure defense attorneysNew York is considering a new proposal which would provide an incentive for banks to modify mortgages on homes which are under water. Under this new proposal, the financial institutions would reduce the amount of the mortgage on homes under water. The mortgage amount would then be brought into conformity with the value of the home. In exchange for the reduction in the mortgage, the bank would be entitled to share in the profits if the home eventually increases in value and is sold. This new proposal will require changes in various state regulations. Under the current law, banks cannot enter into these types of arrangements with homeowners.

Governor Cuomo Backs New Mortgage Proposal

Governor Andrew Cuomo stated this initiative will help keep families in their homes and out of foreclosure, while at the same time reducing potential loses for investors. He went on to further state with regard to this new proposal “that’s good for homeowners, good for local neighborhoods, and good for the long term strength of the housing market.”

Unfortunately, pursuant to existing federal rules and regulations, the large majority of home loans in New York cannot qualify under this program. This is because Fannie Mae and Freddie Mac, the two federal agencies which purchase mortgages for approximately two-thirds of all home loans in the State of New York, do not allow forgiving outstanding mortgage balances.

The new proposed program would be available to homeowners who owe more on their homes than their homes are worth and have tried to obtain mortgage modifications and have been unsuccessful. Under this program, banks would provide disclosure to the homeowners concerning the terms of the new loan modifications and how much of the profits the bank would receive upon the sale of the home. The proposal would limit the bank to either 50% of the increase in value in the home or the total amount forgiven under the mortgage, whichever is less.

Homeowners Reluctant to Share in Appreciation

Interviews with a number of homeowners with regard to this new proposal, indicated they were reluctant to share in the appreciation of their homes with banks.

Conclusion

The program is an excellent idea. Homeowners whose homes are under water and are behind on their mortgage would be given a second chance to stay in their homes and have their mortgage modified to a realistic amount they could afford.foreclosure advocate for homeowners

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