What happened to New York’s foreclosures? Following the subprime meltdown, states like Florida and Nevada experienced a wave of foreclosures and a sharp drop in property values. New York did not experience a similar downturn, and some pointed to differences in foreclosure laws, which in effect deferred foreclosures as opposed to resolving or preventing them.
At one point, New York State had among the longest foreclosure processes in the country, topping 1,000 days on average. Part of the reason was a rule intended to protect consumers. Lenders attorneys had been caught signing off on foreclosure paperwork without verifying their accuracy. So a rule was passed that required attorneys to affirm accuracy under the threat of stiff penalties. The consequence of this rule was the attorneys would begin the foreclosure process as before, but built a backlog of cases that were awaiting affirmation. Now the borrower was in foreclosure limbo as interest and fees piled up but the borrower could not negotiate a resolution with the lender. Some were left in limbo for years. Estimates of the foreclosure backlog in the state ranged from 12,000 to 25,000.
A new rule was passed mandating a settlement conference within 60 days of filing, intended to get foreclosures out of limbo. If successful, we should expect to see a surge in foreclosed property sales.
NY Times articles outlining the situation:
NY State Dept of Financial Services guide to the foreclosure process: