New York's foreclosure problem has become a full-blown crisis.
In 2009, there were 50,000 foreclosures in the entire state and nearly half were in New York City. Now, over 265,000 mortgages are past due or in the foreclosure process. Foreclosures in the city were up 16 percent in the first quarter of 2010 compared to the same period last year. Banks have provided little relief, making less than 12,000 permanent modifications throughout New York since May 2009.
That's why last month, New York Communities for Change (NYCC)—a coalition of working families fighting for economic justice throughout New York State—allied with City Comptroller John Liu and seven of New York's most powerful unions to demand that the Big Banks increase permanent mortgage modifications including principal write-downs. The banks have until September 1 to declare just how they intend to do that. If they don't they will face the consequences. Some key union leaders have said publicly that they will look to move pensions to alternative financial institutions if the banks aren't responsive.
Now NYCC has turned up the heat on the banks. It has joined with state and local legislators to make foreclosure a more expensive and onerous proposition for Wall Street.
In a press conference last week, members of NYCC, the State Senate, State Assembly and New York City Council announced legislation that would force banks to pony up to maintain foreclosed homes rather than letting them deteriorate at the expense of impacted communities.
State legislation that took effect in April required banks to maintain foreclosed properties so they don't fall into disrepair, increase blight and crime and further drive down property values while devastating entire neighborhoods.
The banks—shockingly—have been slow to respond. So the new legislation allows for a fine of $100 per day for every property the bank or servicer fails to maintain. That might not sound like a whole lot, but given the number of homes that are being boarded up and abandoned, it adds up. Under the legislation liens could also be placed on the property to enforce payment of the fines prior to any sale by the bank.
City Council Member Brad Lander—co-chair of the council's Progressive Caucus—introduced legislation that would require lenders to post a bond for every vacant property to ensure that fees and fines assessed during the foreclosure and post-foreclosure period are paid quickly.
“This is about making foreclosures a really unattractive, costly and unnecessary option so banks ramp up their mortgage modifications in an expedited manner so people can stay in their homes," said Jon Kest, executive director of NYCC. "This legislation says if you want to foreclose on a home there are going to be a lot of steps to maintain it, there are going to be fines and fees if you don't, and you guys are going to be responsible for the money. The city and the state and the taxpayers don't want the negative effects of having these foreclosed homes everywhere—and paying for it—and it's time for the banks to pay their fair share if they are going to refuse to negotiate with the borrower in a timely fashion."
This is just the next step in what is proving to be a very aggressive and broad campaign.
“The coalition is growing, the movement is building," said Kest."The unions and the comptroller are waiting to hear back from the banks on September 1 about what steps they are going to take to increase permanent modifications and principal write-downs. City and state representatives are now pushing this new legislation. This campaign is moving forward at a really successful pace. We're hitting the banks at all kinds of angles to force them towards modifications."