Benjamin Lawsky is the Superintendent of Financial Services in New York State. He feels the delays in foreclosure settlement conferences are the main reason why New York’s foreclosure system is “broken and badly in need of change.” A study by the Department of Financial Services found that it takes approximately 9 months from the time a foreclosure lawsuit is initiated to when the foreclosure settlement conference procedures are completed. With regard to this approximate 9 month period, he stated “unfortunately…the mandatory settlement conferences have not been the timely and efficient forum for foreclosure resolution that was once envisioned.” He went on further to state “for borrowers that are already at the end of their rope, any interruption – let alone nine months of start – and – stop delays – can be the death knell to any chance of saving their home.”

New York Civil Practice Law and Rules section 3408(a)(1) requires both the homeowner and the financial institution negotiate in good faith. Lawsky finds that there is a lack of a clear definition of what is “good faith.”

Bank’s Representatives Having No Authority To Settle

In many situations, courts are confronted by bank attorneys appearing at foreclosure court conferences who do not have authority to enter into settlements or mortgage modifications with homeowners. In these situations the courts often simply keep adjourning the case until someone shows up who has greater authority to enter into mortgage modifications on behalf of the banks.

Lawsky believes the law creating foreclosure court conferences is flawed. He stated “the unintended consequences of this legal flaw are unproductive conference sessions, useless delays, waste of court resources, and most importantly, needless foreclosures.” Lawsky wants there to be new legislation which will define what negotiating in good faith means to both homeowners and financial institutions. He also feels courts should have greater authority to impose sanctions on the parties to these proceedings who do not negotiate in good faith.

Zombie Homes

Lawsky feels there is a special problem in the courts with the processing of foreclosures on “zombie homes”. Zombie homes are homes which have been abandoned by the homeowners. These homes create a blight in communities. They are vacant. Sometimes they are vandalized. Vandals remove the pipes from these homes. Lawsky wants the foreclosure process on vacant homes to be streamlined to allow them to be expedited. Lawsky has specifically suggested a new non-judicial process for either uncontested foreclosures or foreclosures on vacant homes be established.

Courts Flooded With Foreclosures

Approximately one-third of all the cases brought before the Supreme Court Civil Parts throughout the State of New York are now foreclosure cases.

Conclusion

The foreclosure process should be set up in a manner to help homeowners who have the wherewithal to keep their homes and obtain mortgage modifications.