senate foreclosure billYou have to be very careful how you read titles like this because many have a knee-jerk reaction to thinking, “stopping foreclosure – that’s great!”. But there are many foreclosures that are simply going to have to happen if we want the economy to get itself back on track.

You can’t put a fire out by dumping gasoline on it.

This is probably a bill that needs to fail.

New York’s proposed foreclosure freeze is getting a cold reception in the state Senate, to the chagrin of some Democrats.

The bill — a response to rising foreclosure rates statewide — sailed through the Assembly last week, but seems to have shallow support among Republican leaders in the Senate, where it may not go to a vote.

Frustrated Senate Democrats on Wednesday held a news conference to demand that Senate Majority Leader Joseph L. Bruno allow a vote on the measure. They called the freeze a step that could keep thousands of New Yorkers in their homes by allowing them time to talk to housing experts and negotiate with lenders.

“A moratorium gives the chance for the counseling process to take place,” said Sen. Neil Breslin, D-Bethlehem.

Why does it need to fail?

The banking industry strongly objects to the freeze, in part because the foreclosure process in New York already includes consumer protections and, at an average of 445 days, is the nation’s longest.

An additional one-year moratorium would extend the foreclosure process to over two years, said Michael Smith, president and CEO of the New York Bankers Association.

And that could bring consequences — including a tightening of borrowing requirements even for New Yorkers with strong credit.

“A moratorium would not solve the problem today and would seriously hurt the credit market for the future,” Smith said.

Kieran Quinn, chairman of the national Mortgage Bankers Association, agreed, warning that the moratorium might cause some lenders to avoid New York.

While I don’t want to defend the banking industry, there is a point there. If New York is already the most flexible with regards to the foreclosure process – the time it takes to foreclose perhaps is NOT the issue. If over a year isn’t going to allow more counseling to take place, how will two years?

The other issue is that every month you’re in the foreclosure process, your back-debt is doubling or tripling now that legal has been brought in and the lawyers need to be paid.

What other options are there?

Gov. David Paterson supports foreclosure legislation that does not include a moratorium. Instead, it strengthens the state’s anti-predatory-lending law, establishes a “reasonable ability to repay” standard for loans, and requires the registration of mortgage loan servicers, among other steps.

There are other ideas being tossed around as well, but in the end, people purchased houses they might not have been able to afford. I understand the struggling economy means job losses and such. But that also needs to be factored in when you purchase a home. When making the largest purchase of your life, you need to figure liquidity into things.

Either way though, we’re going to see the foreclosures happen. One way or another.

They said the need for the moratorium is urgent, because thousands of adjustable-rate mortgages are scheduled to reset this year, demanding higher payments from homeowners.

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