Enacts the "foreclosure prevention act of 2009"

* create a special fund to be known as the "New York state foreclosure prevention fund." Moneys of the fund would be authorized to be expended pursuant to the Act for the purposes of providing financial assistance to eligible homeowner's holding subprime or unconventional mortgages who are in default and facing foreclosure;

To provide that the fund would be administered by the Division of Housing and Community Renewal (DHCR). DHCR would enter into contracts with corporations organized under the non-for-profit corporation law, including, but not limited to, neighborhood preservation companies and rural preservation companies, legal service providers and municipalities, for the provision of foreclosure prevention assistance. Such assistance would take the form of the provision of payments on behalf of an eligible homeowner to mortgagees. DHCR would be required to give preference to applications involving two or more providers and attempt to award contracts in a manner that ensures homeowners in every region of the state would be covered by at least one provider. Contracts would be one year in duration and could be renewed from year to year at the discretion of the Commissioner of DHCR;

To require DHCR to establish eligibility criteria for use by non-profit assistance providers in ranking eligible homeowners for the provision of assistance. Such criteria would include the need for assistance and whether there is a reasonable prospect that a negotiated mortgage contract may be reached so that the mortgagor will be able to resume mortgage payments;

To provide that in order to qualify for assistance:

- the applicant's home loan must be secured by a mortgage or deed of trust on real estate upon which is located an owner-occupied, one to four family home located in this state;

- the applicant must be receiving counseling and be actively engaged with their lenders or loan servicers in the development of "workout" arrangements or loan modifications;

- the applicant has applied to a non-profit assistance provider on a form prescribed by DHCR, which shall include a financial statement;

- the mortgagee is not prevented by law from foreclosing upon the mortgage; - the non-profit assistance provider has determined that the mortgagor has insufficient household income or net worth to correct the delinquency or delinquencies within a reasonable period of time and make full mortgage payments;

- except for the current delinquency, the applicant shall have had a reasonably favorable mortgage credit history; and

- the applicant meets any other requirements established by DHCR.

To require DHCR to establish a system for the provision of foreclosure prevention payments to mortgagees who hold an eligible homeowner's mortgage. Such payments must be in support of a negotiated settlement that allows the homeowner to remain in his or her home and includes matching concessions from the mortgagee. Payments shall not exceed the total amount of three monthly payments owed by the homeowner before the date the homeowner applied for assistance. DHCR would be required to establish regional assistance limits based on regional disparities in the cost of housing in the state and restrict the total amount of payments to eligible homeowners based on the location of the home.

To require the Banking Department and the Consumer Protection Board to undertake outreach activities directed at eligible homeowners to inform them of the assistance offered under the Act;

To amend the Real Property Actions and Proceedings Law to provide that initial foreclosure notices include information about the availability of assistance offered under the Act; and

To require DHCR to report to the Legislature on or before December 31, 2009, on the implementation of the Act.

Justification

The extension of unaffordable mortgage loans, unaffordable second mort- gages and unaffordable home equity loans have resulted in thousands of homeowners losing their homes. The problems associated with these loans adversely affect the availability of capital, the demand for housing, the value of real estate, and more importantly, the ability of homeowners to keep their homes and communities viable. The pending reset of interest rates in many home mortgages, second mortgages and home equity loans will only exacerbate this situation for many homeowners. The expectation that many such variable rate mortgages will fall into foreclosure upon the reset of the interest rate necessitates the need for immediate action. State assistance to homeowner's through a voluntary program is necessary in order to stem this crisis.

This bill would provide direct financial assistance, which is necessary to help stem the rising tide of foreclosures and stabilize New York's neighborhoods and economy.