The state of New York, which already has laws granting distressed homeowners a chance to stave off foreclosure in settlement conferences, is now implementing an initiative that will ensure legal representation to all distressed borrowers, The New York Times reported this week. The Times article said courts will assign lawyers by tapping into legal aid talent and seeking help from pro bono groups. If such an undertaking is imposed, it will complement the state's three-year long initiative to help borrowers by highlighting the distressed homeowner's role throughout the court process. The New York Court system says the state's foreclosure default rate fell from 90% to 20% in two years, thanks to new laws passed in 2008 and 2009 that require the legal system to hold foreclosure settlement conferences with distressed borrowers. The state's default rate measures the number of instances a homeowner either failed to answer a foreclosure petition or avoided legal proceedings altogether. As it stands, New York represents the largest contributor to the shadow inventory — mortgages facing imminent default with little hope of a long-term cure. "The shadow inventory in the New York MSA will take the longest to clear — 130 months as of fourth-quarter 2010. That is at least twice as long as it will take in any of the other top 20 MSAs and 2.7 times the average time to clear for the U.S. as a whole," an Standard &Poor's report states. "This is primarily due to very low liquidation rates in New York." Early on, the settlement conferences were for borrowers holding subprime or high-cost loans, but the court system later extended the privilege to all homeowners facing foreclosure. The foreclosure rate has declined significantly with settlement conferences taking place across the state, according to Ann Pfau, New York's chief administrative judge, who outlined the benefits of the new laws in her recent "2010 Report of the Chief Administrator of the Courts." While Pfau said New York's civil court system has been taxed with heavy caseloads since making room for borrowers, there's a benefit when considering 4,000 settlements were made last year alone. In the first 10 months of 2010, Pfau says the state held 89,093 foreclosure conferences for distressed borrowers. The only problem is 63% of the defendants showed up without lawyers. "The lack of representation in foreclosure cases continues to be one of the greatest challenges we face," Pfau concluded in her 2010 report. Write to Kerri Panchuk.