New Yorkers Paul and Angelica Kashman, declared in default on their mortgage in July 2010 and foreclosed on by Wells Fargo & Co. (WFC) in February 2011, say they aren?t deadbeats.
?We always knew that when we get into a court of law and show that we have all the information and backup, the truth will come out,? said Paul Kashman, 37, a manager in the hospitality industry. The couple, stuck in limbo by legal bureaucracy, says they were mistakenly pushed into foreclosure, and are eager now to save their home, using court mediation.
Their case is among 72,000 pending in the New York system, accounting for a quarter of the civil caseload, and highlighting the strength and weakness of the state foreclosure process. While borrowers have protections unavailable in many other states, it takes more than 1,000 days for banks to repossess a home, stalling a housing recovery by keeping pressure on values for years to come as a constant drip of distressed properties enter the sales market.
The New York area was one of only two in the country to post year-over-year home price declines in the latest Case- Shiller 20-city index. Homebuyers also could lose, with the Federal Housing Finance Agency considering a fee increase to compensate Fannie Mae (FNMA) and Freddie Mac for doing business in New York and four other states with slow, costly foreclosures.
?New York suffers from what appears to be altruism, in that it postpones foreclosures as long as possible ? the problem is that altruism can be expensive,? said Anthony B. Sanders, an economics professor at George Mason University in Fairfax, Virginia. ?It slows down the housing market and it results in lenders being almost unwilling to lend. New buyers will pay the price for this.?
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It?s one of five judicial foreclosure states, including New Jersey, Connecticut, Florida and Illinois, in which home repossessions require court review that the FHFA is targeting. The agency has said it?s seeking to compensate Fannie Mae and Freddie Mac (FMCC) by bringing their pricing of risk more in line with how private lenders operate. The FHFA last year had the two government-controlled companies almost double the annual fees they charge for guaranteeing mortgage bonds, with increases averaging 0.2 percentage point.
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?The proposal would create the perverse incentive that states should either give up the fight against mortgage fraud and roll back consumer protections or face the consequences of higher mortgage rates for consumers,? Benjamin Lawsky, superintendent of the New York Department of Financial Services, wrote in the letter. ?The proposal would also shift the cost of the failures of lenders and servicers onto New York State borrowers.?
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?The byproduct of an aggressive and zealous defense is that the homeowner gets to stay in the home much longer than they otherwise could have and actually gets to keep his home,? Richardson said.
In New York it took 1,089 days on average to foreclose in the fourth quarter, the longest of any state and more than five times the pace in hard-hit Arizona, a non-judicial state that has worked through much of its backlog, according to data from RealtyTrac.
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