By Caroline Nagy

Historic Louisiana floods a reminder to homeowners to check insurance coverage

by Caroline Nagy on 0 Comments

Last week’s tragic floods in Louisiana have caused 13 deaths, damaged more than 40,000 homes, and displaced tens of thousands. While initially underreported by the national media, the storm is being called the worst natural disaster since Hurricane Sandy.

Unfortunately, the devastation caused by the flooding will be much harder to recover from for the many homeowners in Louisiana who do not have flood insurance. While it’s unclear how many flooding victims were uninsured, so far just over 9,000 people have filed flood insurance claims. That means many will go without the benefits of flood insurance, and will instead have to rely on disaster assistance, which is much more limited.

For homeowners in the New York City area, especially those who live near the water, news coverage of the Louisiana flooding can bring back painful memories of the extreme, unprecedented loss of life and property damage the region experienced during Hurricane Sandy.

However, it should also serve as very urgent reminder for homeowners: as we reach peak hurricane season, now is the time to buy flood insurance! This is especially important because of climate change, which will cause more extreme weather events and worsen the impacts of rising sea levels.

Here’s what New York City homeowners need to know about flood insurance:

  • Homeowner’s insurance does NOT cover damage caused by flooding. You need a separate flood insurance policy in addition to your homeowner’s insurance policy to protect yourself.
  • Not sure if your property is at risk of flooding? Visit FloodHelpNY.org to learn more about your flood risk and flood zone.
  • If you live in the high-risk flood zone, your mortgage servicer should have already required you to purchase flood insurance. But even if you’re not required to purchase flood insurance, it is still an essential investment that will pay off when flooding hits.
  • If you live in a lower-risk area, it’s still a good idea to buy flood insurance. You might even qualify for very low flood insurance rates, which can cost as little as $146/year.

Make sure you’re protected from the next storm. Visit FloodHelpNY.org for more help on flood insurance.

read more >

Solutions to NYC’s Affordable Homeownership Crisis do Exist

by Caroline Nagy on 0 Comments

Brooklyn homes

A new study from the NYU Furman Center for Real Estate and Urban Policy and Citi confirmed what many New Yorkers already know: homeownership in this city has been increasingly priced out of reach for all but the wealthiest of New Yorkers.

However, there is nothing inevitable about the daunting rise in homeownership costs that we see in the five boroughs today, and we are not powerless to change the status quo. Rather, we can and must adopt policies and practices to safeguard affordable homeownership.

Two of the most promising solutions — community land trusts and an anti-flip tax — may be considered politically ambitious, but they are powerful tools for controlling speculation and distortions in the city’s real estate market that make it inaccessible to most families.

Decreasing opportunities for affordable homeownership in NYC

The Furman report’s findings paint a grim picture for working- and middle-class families seeking to own a home in a city suffering from growing economic inequality. While certain Manhattan neighborhoods have long been prohibitively expensive, today the price squeeze extends to more modest homes in neighborhoods throughout the five boroughs. It affects current homeowners, many of whom are financially overextended, as well as would-be homeowners, who are almost entirely shut out of the market. The report also raises serious questions about the future of New York City as a place where working families can afford to stay and choose to put down roots.

According to the findings of the report, the cost of New York City real estate has dramatically outpaced incomes, with home sale prices rising 200 percent over the last 25 years while real incomes have remained stagnant, decreasing 11 percent when adjusted for inflation. As a result, working- and middle-class families in New York today have been largely squeezed out of opportunities to own: for the 51 percent of New Yorkers earning less than $55,000 a year, only 9 percent of homes on the market are affordable to them.

So who can afford to buy in New York City today? In 2014, the average sales price of a coop, condo, or one-to-three family home was $575,700. According to the study’s authors, this price is affordable only to the top quarter of New Yorkers who make more than $114,000 a year, and that’s assuming they can save up for a 20 percent downpayment.

And for the New Yorkers who already own their home, nearly half are in a precarious financial position, spending 30 percent or more of their income towards mortgage and other housing costs, according to the study’s authors. Further, an alarming one in four homeowners spend 50 percent or more of their income on housing costs.

Click here to continue reading on City Limits.

Photo credit: Flickr / ryan.dowd. Used under Creative Commons license. 

read more >

Groundbreaking policies to benefit NYC homeowners at risk of foreclosure

by Caroline Nagy on 0 Comments

East New York street

New York homeowners at risk of foreclosure will benefit from two promising developments announced last week: the groundbreaking purchase of New York City mortgage notes from the Federal Housing Authority and new reforms to the federal government’s Distressed Asset Stabilization Program.

The New York City mortgage purchase initiative is notable because it is the first of its kind in the nation to purchase mortgages directly from the federal government. Known as the Community Restoration Program, it will work to keep families whose mortgages have been purchased in their homes through principal reduction and other methods aimed at lowering monthly payments. The initial pool of 24 properties comprises 41 homes, and the Community Restoration Program is actively seeking to grow the program by finding additional opportunities to acquire notes. The Center is one of the program’s non-profit partners, and will work to connect homeowners to foreclosure prevention services.

If New York City hadn’t stepped in to purchase these mortgages, they would have been sold at auction to the highest bidder through DASP. That program is administered by the FHA as a means of removing so-called “nonperforming” mortgages from its books and putting them up for auction. Loans sold through DASP have almost exclusively been purchased by large investment funds, which, critics argue, often have little interest in working with the families on the other end of the transaction.

These critics found support in a recent New York Times article examining the growing role of private equity firms in the housing market that found that private equity firms “are repeating the mistakes that banks committed throughout the housing crisis,” and that their behavior is enabled by federal government programs like DASP. For instance, the Times analyzed Loan Star Funds, a major purchaser of nonperforming notes, and found that it had acted aggressively in pushing thousands of borrowers toward foreclosure. In a previous analysis, the Times documented cases where Caliber Home Loans, the servicing firm for Lone Star Funds, refused to work with homeowners, failed to provide feasible loan modifications and rushed homes into foreclosure. Caliber is currently under investigation by New York Attorney General Eric Schneiderman for potential violations of national and state servicing rules.

Critics found further support in a study released last week by the Center for American Progress that found that the vast majority of notes sold through the program are located in communities that were hard-hit by the foreclosure crisis, particularly communities of color. The report called for better options for homeowners once their notes are sold and increased transparency of DASP, among other reforms.

Following these reports last week, the FHA announced substantial reforms to DASP. For the first time, investors must consider principal reduction as a first option for borrowers when evaluating them for a modification. The FHA will also limit interest rate increases following a five-year interest-only modification, which addresses homeowner complaints about the unsustainable modifications commonly offered by servicers like Caliber. Additionally, the FHA will prohibit DASP purchasers from abandoning lower-value homes in their pools — a major concern in communities suffering from vacant, abandoned, and blighted properties. Finally, the FHA announced several initiatives to make it easier for non-profits and local governments to purchase notes: The agency will now  allow non-profits to bid on partial note pools, provide guidance on the sale of notes directly to local governments, and conduct outreach to non-profits and local governments to encourage participation.

These welcome reforms are much-needed and will surely provide better options to homeowners whose notes are sold through DASP. In particular, the new emphasis on principal reduction is welcome, though investors are only required to consider it as an option.  (By contrast, the Community Restoration Program plans to aggressively reduce principal for underwater homeowners). However, the reforms do not apply to the over 100,000 mortgages already sold through the program. Additionally, there is much work ahead to ensure these improvements are effectively implemented and enforced.

Taken together, the New York City Community Restoration Program’s first purchase and the announcement of DASP reforms represent a major step forward for homeowners and their communities, both in New York City and nationwide.

Congratulations to our partners in the Community Restoration Program: the New York City Department of Housing Preservation and Development, MHANY Management, Inc., Neighborhood Restore Housing Development Fund Corporation, and the National Community Stabilization Trust. Thank you to the many supporters of this initial purchase, which include the New York City Council, particularly Council Members Garodnick, Richards, and Miller, Goldman Sachs Urban Investment Group, LISC, and Attorney General Schneiderman.

read more >

Big victories and one major defeat for the NY State housing agenda

by Caroline Nagy on 1 Comment

The end of New York State’s legislative session is always an action-packed time, and this year did not disappoint, with lawmakers working into the early hours of Saturday morning on June 17, while advocates labored to keep New York’s housing needs on the agenda. Ultimately, the final results include several victories and one major defeat: While homeowners and their advocates secured hard-fought solutions for “zombie” properties and streamlining the foreclosure process, the lack of a budget agreement on $2 billion in funding for long-promised housing programs is a grave disappointment. Here are how our priorities turned out.

Wins:

  • Community Restoration Fund: Legislation establishing the New York State Community Restoration Fund passed the Senate and Assembly. The Fund will play a vital role in helping communities statewide to recover from the foreclosure crisis. Administered by the State of New York Mortgage Agency, it will purchase mortgage notes of homeowners at risk of foreclosure, and work with homeowners to keep them in their home whenever possible. It will also be able to acquire and renovate foreclosed and abandoned properties, redeveloping them as affordable housing. This is a major victory for homeowners, and represents years of advocacy at the state level.  A huge thank you to Assembly Member Weinstein and Senator Savino for introducing this legislation, as well as to Senator Klein’s office for their determined advocacy.
  • Zombie Properties: In another major victory for communities affected by the foreclosure crisis, the Legislature adopted new requirements for tackling “zombie” properties as part of a package of foreclosure reforms contained within the end-of-session “Big Ugly” legislation. “Zombies” are abandoned homes that are stuck in the foreclosure process, rapidly deteriorating with no one responsible for their upkeep. While banks are responsible for maintaining properties following a foreclosure, zombie properties have remained in limbo. Fortunately, the zombie legislation fixes this problem by requiring banks and servicers to maintain vacant and abandoned properties prior to foreclosure. It builds on a previous agreement with mortgage servicers made by the New York Department of Financial Services. State Senator Klein and State Attorney General Eric Schneiderman have also served as strong advocates on this issue.
  • Improvements to the foreclosure process: A number of other key improvements were included within the “Big Ugly” to better help New York homeowners at risk of losing their homes due to foreclosure. This includes changes to the State settlement conference process that will provide homeowners with the right to submit an answer to foreclosure actions brought against them up to 30 days after their first settlement conference. The legislation will also improve the notice homeowners receive when foreclosure proceedings begin, providing better information to homeowners about their rights and where to seek help.
  • Bill of Rights for homeowners: Finally, the legislation calls on the New York Department of Financial Services to publish a Consumer Bill of Rights, detailing the rights and responsibilities of the plaintiff and the defendant in a foreclosure proceeding. This is to be developed in consultation with all stakeholders, and, as homeowner advocates, we look forward to working with DFS to ensure that the resulting Bill of Rights makes a strong stand for the fair treatment of homeowners seeking to avoid foreclosure.

Losses:

  • No funding for CRF or homeownership programs through the MOU: While we are thrilled with the above legislative reforms, the lack of an agreement on funding for the $2 billion affordable housing plan is a major disappointment. This funding was agreed upon as part of the State budget negotiations earlier this year, with the provision that the Governor, Assembly Speaker, and Senate Majority Leader would come to an agreement on the specifics of the plan, to be finalized in a Memorandum of Understanding. Unfortunately, the session ended without this agreement, though $150 million in new funding was committed for 1,200 units of supportive housing, and other funding priorities continue to be negotiated. Ultimately, we hope to see an additional funding agreement with an initial investment of $30 million for the newly-established Community Restoration Fund so that it is able to live up to its promise.

While there is significantly more work to be done on the budget front, the legislative session achieved real results for New Yorkers at risk of foreclosure and for the communities they live in. A huge congratulations to our partners in advocacy, particularly New Yorkers for Responsible Lending and the Empire Justice Center.

read more >

New federal rules neglect at risk homeowners, target the one percent

by Caroline Nagy on 0 Comments

aerial-homes-bronx-400px

The Federal government is seeking to crack down on money laundering by unmasking individuals behind large all-cash purchases of Manhattan real estate by shell companies. For the next six months, through a new pilot program, the U.S. Treasury Department will require companies to disclose the names of individuals behind all-cash purchases of more than $3 million by LLCs.

While the new transparency requirements for limited liability companies are a positive development in the face of international money laundering, the program’s focus on the highest-end real estate neglects the New Yorkers we work with at the Center: those who own, or desire to own, more modest homes, largely in boroughs outside of Manhattan. These homeowners are among those most harmed locally by the rise in the use of shell LLCs in New York City real estate deals.

According to WNYC, all-cash LLC sales now comprise more than 10 percent of all residential condo and single family home sales in the five boroughs. For would-be first-time home purchasers, who almost always require a mortgage, it is increasingly difficult to compete in such a market.

LLCs play an even more corrosive role: they are used to perpetrate foreclosure rescue and deed theft scams that harm the City’s middle- and working-class homeowners. As we documented in our report, Who Can You Trust?, scammers actively target homeowners at risk of foreclosure, relying on the anonymity of LLCs to evade detection and responsibility for their crimes. These scammers seek to defraud homeowners looking for help with their mortgage by stealing their money or even the deeds to their homes — a trend that is accelerating and becoming more sophisticated with the booming real estate market.

The New York Times, which scrutinized the role of LLCs in home scams last fall, profiled several homeowners who were tricked into signing over the deeds to their homes, including Ozella Campbell, an elderly, disabled Bedford-Stuyvesant homeowner who lost her family’s brownstone to an LLC with a Great Neck, N.Y., address. However, no company by that name exists there, and Campbell’s relatives cannot reach the company’s owners. Ms. Campbell is stuck with an overdue $529,000 mortgage and now lives in an unheated, illegally converted garage in Canarsie, Brooklyn.

When scammers hide behind the LLC structure, it becomes extremely difficult for homeowners to undo wrongs committed against their property or to seek justice. Often it is impossible to even identify the individuals affiliated with the LLC. For example, one homeowner in the Times story discovered that the deed to her home had been fraudulently transferred to an LLC that listed her home address as its address. And even when homeowners are able to take their cases to court and to win judgments against LLCs, the individuals perpetrating the scam can simply dissolve the corporation and evade liability, while continuing to operate under a new corporate entity.

The abuse of the LLC structure is not only a problem in New York: A recent CityLab piece details how LLCs in Detroit fail to pay taxes on a property and then form a new entity to repurchase the same property at auction at a fraction of the debt owed.

If the Treasury is going to take a stand against faceless LLCs dealing in luxury condos in Manhattan, they should also look out for some of our most vulnerable citizens. While there are plenty of legitimate reasons to employ the LLC structure, our government has a responsibility to take all steps necessary to increase transparency and keep out the bad actors, whether they be oligarchs from abroad or scammers from the next county over.

read more >

The NY Times Takes on Deed Theft

by Caroline Nagy on 2 Comments

Over the weekend, The New York Times published a major front-page lead story on deed theft scams that highlights the staggering losses at the hands of increasingly sophisticated criminal enterprises that seek to steal homes from vulnerable people. In Real Estate Shell Companies Scheme to Defraud Owners Out of Their Homes, the Times profiles several homeowners who were tricked into signing over the deed to their home, including Ozella Campbell, an elderly, disabled Bedford-Stuyvesant homeowner who lost her family’s brownstone and now lives in an unheated, illegally converted garage in Canarsie, Brooklyn.

The Times story cites our report on scams that target homeowners at risk of foreclosure, and quotes our long-term colleague and partner Jen Sinton, Director of the Foreclosure Prevention Program at South Brooklyn Legal Services, a Network Partner and a member of New York Attorney General Eric Schneiderman’s statewide Homeowner Protection Program.

As home values rapidly rise throughout New York City, deed theft scammers are targeting homeowners at risk of foreclosure. Like many scammers, they present themselves as offering home-saving solutions to families desperate for a way out of foreclosure, but end up taking their homes out from under them.

We applaud The New York Times for calling attention to the growing scourge of deed theft in our neighborhoods. At the Center for NYC Neighborhoods, combatting scams targeted at vulnerable homeowners is a key priority. We detailed the impact of scams in our report, Who Can You Trust?, and we are partnering with the Office of New York Attorney General Eric Schneiderman on a concerted, large-scale outreach campaign to reach homeowners FIRST, before the scammers do.

boxesThis week, as part of our scam awareness outreach campaign, we are mailing over 250,000 flyers and palm cards to elected officials and neighborhood organizations across the state.  

Please join us in getting this message out to homeowners seeking help with their mortgage: be cautious, be careful. Don’t get scammed. Get help you can trust. The Attorney General’s Homeowner Protection Program is a network of over 80 trusted nonprofits. Get connected to free help, report a scam, or check to see if the company you’re working with is government-vetted. Just go to AGScamHelp.com or call 855-HOME-456 (855-466-3456).

 

read more >

Help Us Get the Word Out About the Flood Insurance Affordability Study!

by Caroline Nagy on 0 Comments

At the Center for NYC Neighborhoods, we are keeping a close eye on changes to the flood insurance program because we are deeply concerned about the impact that rising costs are likely to have on middle and working-class homeowners. We are working to make sure that impacted communities understand how flood insurance impacts them, and to get the word out about how flood insurance rate increases can pose a significant threat to long-term affordability in many neighborhoods.

That’s why we’re proud to be a part of the City of New York’s Flood Insurance Affordability Study, which will help us better understand how flood insurance rate increases will impact New Yorkers. The information gained through this study will be critical in helping the City and other community leaders develop programs to make communities safer and improve the affordability of flood insurance. Please help us get the word out and encourage your friends and neighbors to participate!

The study team (which includes the RAND Corporation, Dewberry, the Center for NYC Neighborhoods, and other partners) will be reaching out by mail to specific participants to ensure that a broad sample of households participate. The study invitation will include a PIN number and direct the participant to complete an online questionnaire and schedule an appointment with a licensed surveyor to have the elevation of their home measured, all free of charge. The invitations are non-transferrable.

Participation is by invitation only. If your friends or neighbors receive an invitation, please encourage them to participate! Individual responses will be kept confidential and everyone who participates will receive a $50 gift card and a free FEMA Elevation Certificate prepared by a licensed surveyor, which can otherwise cost between $800 and $1,000 to prepare. If you have any questions about the study, please visit www.nyc.gov/floodmaps or contact Caroline Nagy at caroline.nagy@cnycn.org or 646-237-5921.

Want to learn more about what an elevation certificate is and why it’s something many homeowners will need? We worked with the Mayor’s Office of Recovery and Resiliency on a new video that explains just that. Take a look!

https://www.youtube.com/watch?v=VvmRkppAclk

read more >

The Future of Affordable Homeownership in NYC

by Caroline Nagy on 2 Comments

Join the Center for The Future of Affordable Homeownership in NYC conference on September 30th!

What is the state of affordable homeownership in New York City today? Come to our September 30 conference, the Future of Affordable Homeownership in NYC, to learn more about the challenges New York City homeowners are facing and hear about new and innovative ways we can help keep working families in New York.

You’ll be joined by 300 of your peers in the fields of housing, finance, academia, government, and more in discussing emerging trends and current threats to affordable homeownership in New York City, from the continuing impact of the foreclosure crisis to challenges posed by hot real estate markets.

slide-conference

The conference will feature a wide range of panelists representing State and City government, national advocates for homeowners, lenders, funders, community-based organizations, academics, and many more!

There are many challenges facing affordable homeownership in New York City today. Fortunately, there are also solutions: the conference will feature the release of an exciting policy platform developed by the Coalition for Affordable Homes, a new coalition of community groups united around a policy agenda that champions affordable homeownership.

Registration is free.
RSVP Today!
Space is limited.

WHAT  The Future of Affordable Homeownership in NYC
WHERE  New York Law School, 185 West Broadway, TriBeCa
WHEN  Wednesday, September 30, 2015, 12-4:30pm, reception to follow

read more >

Educating Homeowners on the Rezoning Plan

by Caroline Nagy on 1 Comment

Achieving Mayor de Blasio’s ambitious goal of creating 80,000 new affordable housing units within the next decade will require significant amounts of newly constructed residential buildings, as well as places to put them. To this end, the de Blasio administration has proposed the rezoning of 15 neighborhoods throughout New York City to allow for greater density. While the Housing Plan will create much-needed affordable housing, the prospect of rezoning can also cause trepidation among current neighborhood residents. To further explore how rezonings will impact homeowners, the Center held a convening with our network on August 4 to discuss homeowner involvement and education in the rezoning process.

 At the event, we heard from Emily Goldstein from the Association for Neighborhood & Housing Development (ANHD), who provided an overview of the Mayor’s newly announced mandatory inclusionary zoning proposal, while Kayla Rivera of Cypress Hills LDC discussed the lessons learned from their organizing work and their proposed alternative rezoning plan for their neighborhood. James Hong of the MinKwon Center for Community Action highlighted their recent community survey of community concerns in Flushing, and finally, Jessica Yager from the NYU Furman Center discussed the Furman Center’s research and helped to explain policy considerations and implications to give a full picture of the rezoning plan. The Center for Urban Pedagogy (CUP) also presented on their various workshops that educate and engage community members about the rezoning process and affordable housing policies.

Photo Aug 04, 2 43 16 PM

The panel was followed by discussions on topics ranging from rising property values to deed theft scams to community priorities. As we at the Center work with our network to promote and protect affordable homeownership, we hope to continue the conversation about the role of middle- and working-class homeownership in New York City’s affordable housing plan, and spread awareness to our network on the resources available for the communities they serve.

A huge thank you to all our panelists, as well as everyone who came out for an informative and thought-provoking event!

read more >

The Latest On Flood Insurance

by Caroline Nagy on 0 Comments

Last month saw three important developments in the world of flood insurance that will have a big impact on New York homeowners: first, New York City has formally appealed FEMA’s proposed flood maps; second, we rallied for proposed New York State legislation to bring justice to victims of Hurricane Sandy who were short-changed by insurance companies; and finally, a new federal rule went into effect regarding escrow payments of flood insurance.

1. New York City’s Appeal of FEMA’s Preliminary Flood Maps

On Friday June 26th, the City issued a formal appeal of FEMA’s preliminary flood maps. After conducting an outside engineering analysis of FEMA’s proposed maps, New York City argued that FEMA’s preliminary flood maps overestimated flood risk in parts of the city. FEMA now will review the City’s appeal; the resolution could take months or possibly years. While the appeal is under review, FEMA’s proposed preliminary flood maps will not go into effect for insurance purposes, though they will remain in effect for the purposes of the building code.

 If the City’s appeal is successful, fewer homeowners will be required to purchase flood insurance and the cost of that insurance will be less expensive for many homeowners in the high-risk flood zone.

 While the appeals process is underway, we encourage homeowners who are in or near the high-risk flood zone to purchase flood insurance. Many homeowners in lower-risk flood zones quality for low-cost flood insurance.

 For more information about the flood map update and the City’s appeal, visit nyc.gov/floodmaps.

2. Alliance for a Just Rebuilding for the Fair Claims Settlement Act

Though Hurricane Sandy wreaked havoc on the tri-state area nearly three years ago, thousands of New Yorkers still grapple with the cost of rebuilding homes ravaged by the storm. Even homeowners who had flood insurance when Sandy struck have continued to struggle with their insurance companies to cover their damages. In fact, after allegations of systematic underpayment of claims, FEMA announced that it would reopen over 140,000 cases.

Unfortunately, protections for New Yorkers against insurers acting in bad faith are not nearly as stringent as those in many other states, including Florida, Texas, and California, among others. Our colleagues from the Center recently joined other advocates on the steps of City Hall to support legislation that would provide compensation to homeowners who have been taken advantage of by insurance companies following disasters like Hurricane Sandy. The event was organized by Alliance for a Just Rebuilding (AJR), a coalition that advocates for equitable and sustainable recovery efforts to assist low-income victims of Hurricane Sandy.

Following Hurricane Sandy, many homeowners did not get the insurance coverage that they had paid for. And even if they were to have taken their insurer to court to get the compensation they were owed, legal fees incurred were often as costly as the settlement they received, discouraging them from pursuing claims. That’s why the Center stands with AJR and New York homeowners in calling on Albany to pass the Fair Claims Settlement Act, which would hold insurance companies accountable for delayed or denied payments to policyholders for legitimate claims.

AJR’s campaign comes at an important time for homeowners living in the floodplain. As the Center has previously written about in its report Rising Tides, Rising Costs, as well as in our blog series, recent changes in federal flood insurance regulations threaten to make homeownership far less affordable for low-, moderate-, and middle-income communities in New York City. We continue to advocate for flood insurance solutions that will promote safety and sustainability, while preserving essential affordable housing that we can’t afford to lose.

3. New Escrow Regulations Go into Effect

Finally, late last month, federal regulatory agencies adopted a new rule that applies to mortgages on homes located in the high-risk floodplain. The rule implements provisions of the Homeowner Flood Insurance Affordability Act (HFIAA), which Congress passed in 2014, and Biggert-Waters, which was passed in 2012. Among other provisions, the rule requires mortgage servicers to escrow flood insurance premiums and fees for most loans that are made after January 1, 2016. Homeowners covered by this rule will see their flood insurance payments added on top of their regular mortgage payments. Exceptions to the escrow requirement and other details are outlined in the agencies’ full news release concerning the rule. Because the take-up rate on flood insurance is generally low (when Sandy struck New York City in 2012, 33% of properties with a mortgage and 80% of properties without one did not carry flood insurance), this rule could trigger a payment shock for homeowners who were not enrolled in the insurance program.

Additionally, the Biggert-Waters Act increased the maximum civil money penalty that agencies can impose on servicers who violate the flood insurance requirement. This means that servicers will be much more likely to force-place insurance when a homeowner is uninsured. When flood insurance is force-placed, the lender purchase flood insurance on the borrower’s behalf. These new rules clarify that mortgage servicers have the authority to charge a borrower for the cost of force-placed flood insurance coverage as soon as the borrower’s coverage lapses or becomes insufficient. If a lender does this, it may add on fees, which could place greater financial stress on lower- and middle-income borrowers, or worse, lead to mortgage delinquency and foreclosure.

Unfortunately, we have seen similar negative consequences in the past with other forms of force-placed insurance, such as homeowners insurance. Given the potential impact of these changes, it is essential that their introduction is managed carefully, with significant outreach to homeowners regarding the changing requirements.

For more information on understanding flood insurance and your flood risk, visit FloodHelpNY.org. For access to free, high-quality help with flood insurance issues and other assistance for homeowners , call us at 646-786-0888.

 

read more >