BROOKLYN — Thousands of New Yorkers are at risk of losing their homes years after the foreclosure crisis dominated headlines, and their cases are growing increasingly complex, experts say.
Yet, funding for the 32 legal aid and nonprofits in the city that provide free help to homeowners needing loan modifications or other assistance may soon disappear.
That's why advocates are calling on Albany to include $30 million in its budget to protect these services across the state through 2018.
“Communities are still struggling,” said Meghan Faux, of Legal Services NYC. “In New York City in particular, the homeowners typically have a renter, so these homes are a source of home ownership and a source of affordable housing for renters.”
New York City saw more than 7,300 new foreclosure filings last year and more than 50,000 pre-foreclosure notices sent, according to data from Legal Services NYC.
These numbers are down from the peak of the crisis, advocates said, but they are still well above pre-2008 levels.
In particular, pockets of Southeast Queens (like Jamaica, Ozone Park and Saint Albans) and Eastern Brooklyn (like East New York, Carnarsie and East Flatbush) are reeling from foreclosures, according to the Center for New York City Neighborhoods. Parts of The Bronx, like Highbridge, Crotona and Fordham, have the highest foreclosure rates in the city.
Though funded through Sept. 30, legal aid attorneys and nonprofits will stop taking new clients this spring in anticipation if further funding isn't earmarked for foreclosure services since the casework is so labor intensive and takes so long to resolve, Faux explained.
If this happens, she worries that New York will see an uptick in struggling homeowners falling victim to scams and coming closer to being homeless.
“People will turn to for-profit entities and private lawyers, and all of the money they could have used or should have used to pay their mortgages or for loan modifications, goes to lawyers. Then they’re deeper into debt,” Faux said. “And there are lot of scammers out there. A lot of our clients hire a lawyer they think they can afford and don’t have the resources to even know what to ask.”
That’s what happened with Barbara Brown, who bought her East New York home in 2004 with a Lehman Brothers’ interest-only loan.
After she lost her job of 18 years a housekeeper and cook for a Manhattan family that downsized in 2011 after the financial crisis, she blew through her savings and fell behinds in her loan payments as she struggled to find work for 9 months.
A friend passed along a flier for a loan modification company in Long Island, which took $3,100 from her without getting her a loan modification.
"It's not easy to work for that money," Brown, 59. "Their attitude wasn't nice once they got the full payment. When you're desperate, you try anything you think is helpful."
After Brown landed in court, she was referred to Brooklyn Legal Services, which is part of Legal Services NYC, and her pro bono attorney eventually helped get a modified loan, lowering the monthly payment from $2,100 to $1,800.
"He stayed on top of it," said Brown, who found work as a home health aide and lives with her mother and brother. "He assured me there was someone ready to help the family stay in the house I've been working so hard for."
Christie Peale, executive director of the Center for New York City Neighborhoods, noted that foreclosure cases are growing increasingly complex for a variety of reasons, including the fact that the federal Home Affordable Modification Program — which provided standards for mortgage modifications — ended in December.
“Now each servicer is doing their own modifications,” she said. “We have to retrain our entire network [of nonprofit helpers]. It’s really important work. Homeowners are less likely to get a modification when they don’t have these services and they’re more likely to lose their homes.”
There is also an increased presence of non-banks or debt buyers as banks have sold off a lot of loans, she explained, again making things more complicated with less oversight. Zombie foreclosures are also a bigger problem now, with people’s homes being foreclosed upon and seized, left empty but without actually transferring ownership. That leaves families homeless and behind on their mortgage payments, which they don’t realize they have to pay.
On top of this, many advocates are concerned about potential roll back of homeowner protections and of the Consumer Financial Protection Bureau under the Trump administration. Already, the government suspended a rate cut for FHA mortgage insurance, advocates pointed out.
Since 2012, the Attorney General’s Office committed $100 million help New York families stay in their homes. The funding came from the AG's settlements with banks over deceptive practices leading to the financial crisis. The settlement money now, however, goes directly to the state’s coffers instead of the AG’s office.
The state’s Division of Homes and Community Renewal currently has its own foreclosure prevention program, which provides housing counseling to about 3,000 households a year, state officials said.
The network of nonprofits and legal aid providers, however, serves more than 20,000 families a year, according to advocates.