New York to provide $100 million in zero-interest loans to prevent foreclosures
Using Goldman Sachs fine to fund expansion of Mortgage Assistance Program
Homeowners in the state of New York who are struggling to keep their homes from falling into foreclosure are about to get a lifeline – $100 million in zero-interest loans from the state of New York, and it’s all thanks to Goldman Sachs and its $5 billion toxic mortgage settlement.
In April, Goldman Sachs agreed to a $5 billion settlement over toxic mortgage bonds. Part of that settlement included $1.8 billion in consumer relief and a payout of $190 million to the state of New York, and now, New York is taking $100 million of that money and using it to expand on that consumer relief even further.
New York Attorney General Eric Schneiderman announced Wednesday that the state plans a $100 million expansion of its Mortgage Assistance Program, which provides New Yorkers with zero-interest loans that they can use to “pay off small debts that are preventing them from securing a needed mortgage modification.”
The $100 million expansion is expected to help more than 3,000 New York families avoid foreclosure and stay in their homes, Schneiderman’s office said.
Since the program began in late 2014, the state of New York handed out $18 million in zero-interest loans as part of the program, and now the program is being extended greatly using the funds from the Goldman Sachs fine.
According to Schneiderman’s office, families with reliable income streams are often denied mortgage modifications because they have a series of missed mortgage payments, delinquent second or third mortgage liens, or unpaid property tax bills which must be satisfied before a first mortgage holder will grant a modification.
New York’s Mortgage Assistance Program provides loans that fill the gaps for struggling families, empowering them to negotiate with their mortgage holders and ultimately remain in their homes, Schneiderman’s office stated.
According to Schneiderman’s office, MAP provides homeowners with small loans that are non-amortizing and carry no interest rate. The loans only come due upon sale of the home, refinance, death of the borrower, transfer of ownership, or mortgage maturity.
According to an analysis released by Schneiderman’s office, the first phase of the Mortgage Assistance Program had a “significant positive impact” on not only the families that received the money but the families that live near a MAP loan recipient, because foreclosed homes often drag down the property value of other nearby homes.
According to the analysis, every $1 in loans preserves about $8.50 in property values for homeowners within 750 feet of the MAP loan recipient, Schneiderman’s office said.
Schneiderman’s office stated that the $18 million in loans previously given preserved $153 million in property values for nearby homeowners.
And Schneiderman’s office said that it expects the new $100 million save an additional $722 million, after accounting for administrative program costs.
“Since taking office, my number one priority has been getting New Yorkers the resources they need to rebuild from the housing crisis,” Schneiderman said.
“This new investment in the MAP program will help thousands of New York families keep their homes and rebuild their communities,” Schneiderman added. “This program is already having an incredible impact in communities throughout the state and I am excited to expand it to even more families.”