It takes longer to foreclose on homes in New York than any other state—and it’s getting longer every month.
Two years ago, the state began requiring that banks and borrowers attend settlement conferences before a foreclosure takes place.
While the conferences are popular with borrowers and have succeeded in helping some families keep their homes, banks have been reluctant to participate. That, and recent revelations that some lenders have improperly submitted foreclosure documents, has prompted judges to take a harsher stance with lenders.
The foreclosure process typically begins after a borrower misses three consecutive monthly payments and ends once the lender repossesses the home or the borrower brings the loan current. Nationwide, there were 2.1 million mortgages in some stage of foreclosure as of October, according to research firm LPS Applied Analytics.
The average loan in foreclosure had been in default for 492 days as of October, up from 289 days at the end of 2005, according to LPS.
In New York and New Jersey—another state with consumer friendly laws—the waits are longer. The average loan in foreclosure had been in default for 604 days in New York and 544 days in New Jersey as of October.
“We try and help as many people as we can,” says New York Supreme Court Judge Michael Ajello. “We set up a conference and I try and persuade and cajole the banks to reduce the payments,” he says. But the banks, he adds, “are not very cooperative.”
The Mortgage Bankers Association, which represents some of the nation’s biggest banks, said that banks aren’t trying to be uncooperative but in many cases loan modifications won’t help borrowers because they are unable to meet payments regardless.
Michael Fratantoni, MBA vice president for research and economics, said that under federal guidelines banks are legally required to grant modifications in cases where doing so is expected to deliver the owner of the loan a better long-run return than foreclosure. That’s often not the case.
At Staten Island’s Richmond County Supreme Court, which has one of the biggest foreclosure caseloads in the city, tensions between borrowers, lenders and judges are rising every week.
The court now hosts settlement conferences four days a week—double that of last year—with about 40 borrowers scheduled to appear each day.
In one case, Judge Ajello ordered lender Wells Fargo & Co. to cease charging interest and penalty fees on a delinquent loan held by Edmund Lewandowski. The order was meant to punish Wells Fargo for failing to adequately explain why it rejected Mr. Lewandowski’s loan-modification request.
Mr. Lewandowski , a plumber, owes $430,621 borrowed against his Staten Island family home and his attorneys are attempting to have his interest rate reduced, to make the loan payments more manageable.
An attorney representing Wells Fargo argued Mr. Lewandowski had failed to submit certain documents.
The argument by Wells Fargo was rejected by Judge Ajello, and the lender agreed it would re-review Mr. Lewandowski’s loan-modification application. The case was postponed for five weeks, delaying the case once again.
