State Acquires 172 Distressed Mortgages

Real Estate In-Depth | February 2018

ALBANY—Governor Andrew M. Cuomo recently announced the state’s Community Restoration Fund had purchased 172 mortgages in an effort to bring owners in targeted communities out of foreclosure and keep the homes from abandonment.

The Community Restoration Fund has helped strengthen the financial position of homeowners, bringing stability back to the housing market in neighborhoods across the state. This latest effort brings the total investment through the fund to $10 million, which has leveraged more than $111 million in private funds and enabled the purchase of 570 distressed mortgages to date.

“New York continues to fight the spread of Zombie properties by supporting homeowners seeking the American Dream and investing in at-risk neighborhoods,” Gov. Cuomo said. “Through this transformative program, New Yorkers are provided the tools they need to make critical home improvements, while helping communities grow stronger in every corner of the state.”

The Community Restoration Fund offers a second chance for homeowners with non-performing mortgages whose private servicers have been unable to assist. As the second phase of the CRF program, these 172 newly acquired mortgages are consistent with the concentrations of mortgages in the first phase of CRF, which will increase the overall impact the program has on these communities.

The governor launched the CRF in 2017 to purchase the first 378 distressed mortgages through the fund and modify them to help homeowners regain stable financial footing. To keep original owners in their homes, the CRF program works in ways that public and private servicers cannot. The program engages a network of locally based nonprofit housing organizations that provide one-on-one counseling with the owner and direct outreach to the lender to help modify the loan and provide support for necessary repairs to address deferred maintenance.

The CRF is a key component of the Governor’s unprecedented $20 billion, five-year Housing Plan to increase access to housing and help combat foreclosure, Zombie properties and homelessness, by building and preserving 112,000 units of affordable housing. The program is run by NYS Homes and Community Renewal’s State of New York Mortgage Agency subsidiary.

The 570 homes currently in the CRF program are located in nine of the state’s 10 regions: Capital Region: 47, Central New York: 13, Finger Lakes: 19, Long Island: 295, Mid-Hudson Valley: 132, Mohawk Valley: 8, North Country: 4, Southern Tier: 9 and Western New York: 43

As of January 2018, the CRF approved trial or permanent mortgage modifications for 37 homeowners, representing more than $3 million in approved debt forgiveness. A total of 22 homeowners have either become current on or fully paid off their original mortgage loan. Another 105 borrowers are working with a housing counselor in hopes of arriving at a loan modification.

In cases where a mortgage modification is not possible and the homeowner cannot financially support a reduced mortgage or no longer wants to own a home, HCR and its nonprofit partners can offer resources and support to help the owner get a fresh start. This ensures that the property is not abandoned, is quickly repaired and is resold as affordable housing to a qualified buyer.

HCR, working in partnership with New Jersey Community Capital, a nonprofit community development financial institution, and a private equity partner, completed the purchase of the delinquent, non-performing mortgage notes in communities that have high rates of foreclosure. Funding for the initiative came from settlement funds paid to New York State by Morgan Stanley.