Moratorium Foreclosed from Subprime Deal, Despite Senate Democrats’ Insistence
With Paterson and banking industry opposed, grace period falls through
Mon, 14 Jul 2008 17:29:00
On June 18, Senate Minority Leader Malcolm Smith (D-Queens) called on the Senate majority to pass legislation instituting a one-year moratorium on home foreclosures, a big-ticket policy proposal pushed by Democrats nationwide and included in a bill passed by the Assembly in May.
“New Yorkers are facing an ongoing mortgage crisis and a crushing property tax burden. I am calling on the Senate Majority Leader to urge his members to stand up for New York homeowners and taxpayers. Our constituents need relief,” he said.
The next morning, Gov. David Paterson (D) was joined by then-State Senate Majority Leader Joseph Bruno (R-Rensselaer) and Assembly Speaker Sheldon Silver (D-Manhattan) in a hastily-arranged press conference to announce that they had reached agreement on the measure, which included a reconfiguration of state mortgage laws and a 90-day pre-foreclosure period.
“Albany has come through,” Paterson pronounced.
Missing in the final deal: the moratorium.
That missing plank would have frozen foreclosures for people already in the process of losing their homes, giving them the breathing space to work out a payment plan or perhaps even renegotiate their loans. Without it, moratorium advocates say, homeowners already caught up in the worst of the subprime mortgage crisis will go without relief.
How the moratorium, which has been supported in various forms by national Democrats—including Sen. Hillary Clinton during her presidential campaign—fell out of favor in the last-minute shuffle seems a question less of priorities than of politics.
Paterson, though, was never sold on the idea. The executive proposal on the bill, which he shepherded from its conception during the Spitzer administration, lacked a moratorium and he was open in his opposition to one.
State Sen. Frank Padavan (R-Queens), who introduced a bill with a moratorium in the Senate, said he and other legislators knew the measure would never be included in the final agreement.
“He said ‘this bill is unacceptable to me,’” Padavan recalled, explaining his own decision to abandon the moratorium. “We knew we had to involve the governor, otherwise we would end up with a bill that was going to be vetoed.”
The Assembly went ahead and passed a bill in May that included the moratorium on strong Democratic support, despite Paterson’s disapproval. However, many Assembly Democrats began to back away from the proposal between then and the end of the session in order to clear the way for a last-minute compromise.
“The direction changed when addressing subprime as opposed to just keeping people in their homes for another year,” said Darryl Towns (D-Brooklyn), chair of the Assembly Banks Committee.
But Senate Democrats continued to push for the moratorium up until the day the compromise was reached. They were ultimately left out of the negotiations, and were forced to settle for what the Assembly and Senate majorities agreed to.
Even though there was considerable interest among Senate Republicans in a one-year moratorium, banking interests and their advocates in the Legislature were worried such a measure would make offering mortgages in New York harder for lenders.
“The financial industry was very, very concerned about it,” said State Sen. Jeffrey Klein (D-Bronx/Westchester), sponsor of a failed amendment that would have restored the one-year moratorium.
As a result, the moratorium—which would have been one of the strongest anti-foreclosure provisions in the country had it passed—was set aside.
The few changes that were made in the final deal include increased standards of care for lenders when providing mortgages to subprime homeowners, as well as leeway for the Superintendent of Banks to adjust the definition of “subprime” according to changes in the market.
According to Jonathan Rosen, a spokesman for the Association of Community Organizations for Reform Now (ACORN), the low- and middle-income housing advocacy group, these victories for Democrats might not have been won at all had they not been able to use the moratorium proposal as a strong bargaining chip to win concessions from Republicans.
“The governor’s program bill became a moderate compromise,” Rosen said. “I don’t think that would have been possible if there hadn’t been a more radical alternative on the table.”
Despite those changes, Democrats and housing advocates who favored the moratorium said the bottom would continue to fall out from under homeowners currently fighting foreclosure.
“People who are actually in court fighting foreclosure don’t get as much help from this bill as I would have liked,” said State Sen. Martin Connor (D-Brooklyn/Manhattan), the ranking Democrat on the Senate Banks Committee. “At the end of the day, you’re forced to take what you can get.”
“New Yorkers are facing an ongoing mortgage crisis and a crushing property tax burden. I am calling on the Senate Majority Leader to urge his members to stand up for New York homeowners and taxpayers. Our constituents need relief,” he said.
The next morning, Gov. David Paterson (D) was joined by then-State Senate Majority Leader Joseph Bruno (R-Rensselaer) and Assembly Speaker Sheldon Silver (D-Manhattan) in a hastily-arranged press conference to announce that they had reached agreement on the measure, which included a reconfiguration of state mortgage laws and a 90-day pre-foreclosure period.
“Albany has come through,” Paterson pronounced.
Missing in the final deal: the moratorium.
That missing plank would have frozen foreclosures for people already in the process of losing their homes, giving them the breathing space to work out a payment plan or perhaps even renegotiate their loans. Without it, moratorium advocates say, homeowners already caught up in the worst of the subprime mortgage crisis will go without relief.
How the moratorium, which has been supported in various forms by national Democrats—including Sen. Hillary Clinton during her presidential campaign—fell out of favor in the last-minute shuffle seems a question less of priorities than of politics.
Paterson, though, was never sold on the idea. The executive proposal on the bill, which he shepherded from its conception during the Spitzer administration, lacked a moratorium and he was open in his opposition to one.
State Sen. Frank Padavan (R-Queens), who introduced a bill with a moratorium in the Senate, said he and other legislators knew the measure would never be included in the final agreement.
“He said ‘this bill is unacceptable to me,’” Padavan recalled, explaining his own decision to abandon the moratorium. “We knew we had to involve the governor, otherwise we would end up with a bill that was going to be vetoed.”
The Assembly went ahead and passed a bill in May that included the moratorium on strong Democratic support, despite Paterson’s disapproval. However, many Assembly Democrats began to back away from the proposal between then and the end of the session in order to clear the way for a last-minute compromise.
“The direction changed when addressing subprime as opposed to just keeping people in their homes for another year,” said Darryl Towns (D-Brooklyn), chair of the Assembly Banks Committee.
But Senate Democrats continued to push for the moratorium up until the day the compromise was reached. They were ultimately left out of the negotiations, and were forced to settle for what the Assembly and Senate majorities agreed to.
Even though there was considerable interest among Senate Republicans in a one-year moratorium, banking interests and their advocates in the Legislature were worried such a measure would make offering mortgages in New York harder for lenders.
“The financial industry was very, very concerned about it,” said State Sen. Jeffrey Klein (D-Bronx/Westchester), sponsor of a failed amendment that would have restored the one-year moratorium.
As a result, the moratorium—which would have been one of the strongest anti-foreclosure provisions in the country had it passed—was set aside.
The few changes that were made in the final deal include increased standards of care for lenders when providing mortgages to subprime homeowners, as well as leeway for the Superintendent of Banks to adjust the definition of “subprime” according to changes in the market.
According to Jonathan Rosen, a spokesman for the Association of Community Organizations for Reform Now (ACORN), the low- and middle-income housing advocacy group, these victories for Democrats might not have been won at all had they not been able to use the moratorium proposal as a strong bargaining chip to win concessions from Republicans.
“The governor’s program bill became a moderate compromise,” Rosen said. “I don’t think that would have been possible if there hadn’t been a more radical alternative on the table.”
Despite those changes, Democrats and housing advocates who favored the moratorium said the bottom would continue to fall out from under homeowners currently fighting foreclosure.
“People who are actually in court fighting foreclosure don’t get as much help from this bill as I would have liked,” said State Sen. Martin Connor (D-Brooklyn/Manhattan), the ranking Democrat on the Senate Banks Committee. “At the end of the day, you’re forced to take what you can get.”
