New York has been among the most aggressive states in trying to protect homeowners from foreclosure, granting new legal protections and turning courts across the state into teeming negotiation centers working to keep people in their homes. But four years into the foreclosure crisis, the state’s courts are largely at a stalemate, facing an estimated 100,000 foreclosure cases — a record number — with tens of thousands more expected. Courts statewide have been mired in often hopeless cases involving loans that have left bus drivers and grocery clerks, among others, owing $700,000 or more on homes that have fallen in value.
As the Obama administration works on new mortgage-relief programs, lawyers and officials say New York’s experience shows the limits of a state’s ability to cope with the national foreclosure morass. “We are a shining example of somebody’s best efforts falling short through no fault of our own,” said Paul Lewis, a senior official in the New York court system who has been helping coordinate foreclosure cases since the start of the crisis.
Special funding to provide lawyers for homeowners has largely dried up, with more than 75 percent of New York City residents going into foreclosure court without a lawyer, state data shows. The state’s judges have grown increasingly vocal about what some of them have called “outrageous” conduct, “patently false” statements and “inexcusable” actions by lenders’ lawyers.
The hearings that form the core of New York’s approach — special settlement conferences, which are required to try to modify mortgages to make them affordable — have become comic exercises slowed by endless paperwork, requests for additional information and the mysterious loss of documents. During a day of more than 30 of the conferences in State Supreme Court in Queens last week, homeowners with screaming children and wheelchair-bound grandmothers appeared befuddled by the paper chase. Some of the cases had already been taken up in the settlement conferences as many as nine times, over many months, only to be delayed each time until yet another meeting. “We don’t have the full file,” said a bank’s lawyer during one of the conferences. “Unfortunately, I wasn’t able to review the documents,” said another lender’s lawyer in another case a few minutes later. “We should have received it, but it didn’t get into our system,” said a third. A fourth lawyer conceded that the homeowners had mailed information to the bank, but said that “only fax and e-mail” were acceptable.
On several occasions the court official who conducted the conferences that day, Tracy Catapano-Fox, mentioned to homeowners the system’s Catch-22: as they rush to gather newly demanded tax and bank records, information they supplied earlier to address other questions grows too old to be useful.
Completed applications turn back into incomplete ones, leading to more delays to collect more information while the newest information, in turn, grows stale. Ms. Catapano-Fox told one homeowner after another of the trap that awaited them. “I have psychic powers,” she said with a sympathetic grimace, having conducted hundreds of the conferences. “There’s no question that the next time we come in here, they will claim that the documents are stale.”
In the hallway after the latest of what he said had been a dozen monthly appearances in his yearlong foreclosure case, Juan Adon, a Jamaica homeowner, said he was baffled. “It doesn’t make any sense,” he said. Ms. Catapano-Fox had dryly mentioned during his hearing that there was a notation in his file indicating that the bank’s representative had said in August that it needed no additional information. Yet it seemed that nothing had happened.
Statewide, after some 82,000 of the settlement conferences were held, with many cases taken up multiple times, just 4,253 cases reached settlements during the 11-month period ending in September, according to a recent report by the chief administrator of the state courts. And some of those settlements led to the loss of homes anyway. “We are concerned that the gains we have made are being lost,” the report said. “We’re at a fork in the road,” said Anne Erickson, president of the Empire Justice Center, which represents low-income homeowners. “We can continue leading the way or we can watch the whole thing unravel.”
Lawyers say the difficulties encountered in the New York courts show how complex the task of working through the jumble of subprime mortgages can be, made worse by issues like “robo-signing,” the practice of having foreclosure documents signed by lenders in such high numbers that they could not possibly have been reviewed carefully.
After attention on robo-signing abuses that led to improper foreclosures, the New York courts adopted a rule in 2010 to try to repair what its chief judge, Jonathan Lippman, called “a deeply flawed process.” The rule required lawyers who pursued foreclosure suits to file a certification stating they had personally checked the accuracy of the claims about a homeowner’s loan.
Court officials quickly noticed that, while banks’ lawyers continued to file foreclosure cases at a rapid rate, they adopted a new strategy that seemed to be aimed at evading the new requirement. They filed the cases, causing damage to people’s credit ratings and adding to the fees they paid, but did not push the cases far enough to set off the requirement for the lawyer’s certification.
Around the state, court officials estimate there may be 25,000 or more such “shadow” cases in addition to the 75,000 already moving through the courts. In the cases in which lawyers do file the newly required certification, some judges have ruled that the lawyers had changed the mandated wording or otherwise resisted compliance.
The difficulties posed by the lawyer’s certification requirement are only the latest problem in the foreclosure docket to irritate judges. In a March ruling, a frustrated Queens judge, Anna Culley, described a foreclosure case that was much like many others. In one settlement conference, the bank asked for additional banking records from the homeowner, the judge wrote.
At another session, it demanded pay stubs. In a third, it asked for tax forms. In a fourth, it asked for all the paperwork to be resubmitted. At two meetings, the bank’s representative said a modification of the mortgage had been granted, lowering the required payments. But after two and a half years, the judge wrote, the bank had yet to modify the loan, and the foreclosure case was still pending.
Source: New York Times
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