AG James: Steps must be taken to avoid another foreclosure crisis
The foreclosure crisis of 2008 hit Brooklyn so hard that there were nearly 15,000 cases involving foreclosure brought in the Kings County Supreme Court, and just under 5,000 related cases continue to this day.
Attorney General Letitia James sent a letter this week to 35 of the state’s major mortgage servicers and said that in order to avoid another mortgage collapse, New Yorkers are going to need their help.
“This pandemic is not only wreaking havoc on our health, but on the pocketbooks of millions of Americans,” said Attorney General James. “If we plan to rebuild our economy, we must ensure that homeowners are granted the relief they need. We cannot afford to repeat the costly mistakes of the 2008 foreclosure crisis, which is why I am calling on mortgage service providers to take steps to help homeowners impacted by this crisis.”
The letter, addressed to Kevin Harrigan, CEO of NewRez LLC, and 34 other CEOs, was sent on Wednesday. In it, James applauds the steps mortgage servicers have already taken, whether those steps were voluntary or not, but stresses that more needs to be done.
“Taking aggressive action now has the potential to shorten the duration and limit the severity of any economic hardship, and an efficient, streamlined process can also reduce strain on servicers when the crisis peaks,” James wrote. “We learned the hard way during the last financial crisis – and we are seeing it again now through our response to this public health emergency – that a tepid, piecemeal response that does not meet the challenges of the moment works against everyone’s interests.”
James explained that her office will be closely monitoring for compliance with emergency laws and regulations and will evaluate the mortgage servicers’ performance implementing COVID-19 relief programs. She also requested each company’s response plans to help provide homeowners with relief.
“The Office of the Attorney General (OAG) has already received complaints from borrowers who have had difficulty contacting their servicer at this critical moment and who have already highlighted that their economic hardship is likely long-term,” James wrote. “Servicers who are unable to meet the demand from consumers who are struggling and need help will face additional scrutiny from the OAG and will be held accountable for harm caused to consumers”
Specifically, James has asked the mortgage servicers to automatically waive late fees and place homeowners into a three-month forbearance as soon as a payment is missed, to allow homeowners to renew their 90-day forbearance for up to a year and allow homeowners to provide verbal or written notice that their problems are COVID-19-related without additional documentation, and to provide homeowners with their post-forbearance options.
James also said that these companies should ensure that they have enough staffers still working through the pandemic to assist homeowners, and that they work with people to develop plans to resume payments after forbearances.
“COVID-19 is unprecedented in our history; many American lives will be lost and we will be a society completely altered by the trauma, both psychologically and economically; some may never recover,” James said. “Now is not the time for business as usual.”
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