Testimony by Matthew Kutner and Ziska Anderson, Staff Attorneys of Storm Response Unit, before the New York City Council, Committee on Recovery and Resiliency: Oversight: Update on Progress of the Build it Back Program
September 18, 2014
Chairman Treyger, Council Members and staff, good afternoon and thank you for the opportunity to speak about the progress of the Build it Back program. My name is Matthew Kutner and I am a Staff Attorney at the New York Legal Assistance Group in the Storm Response Unit. I am here with my colleague, Ziska Anderson, who is also a Staff Attorney in the Storm Response Unit. NYLAG is a nonprofit law office dedicated to providing free legal services in civil law matters to low-income New Yorkers. NYLAG serves immigrants, seniors, children in need of special education, domestic violence victims, patients with chronic illness or disease, and low-income members of the LGBT community, as well as victims of natural disasters like Superstorm Sandy.
NYLAG’s Storm Response Unit was launched shortly after Sandy. We have served thousands of Sandy victims on the full spectrum of legal issue that have arisen after the storm and we continue to speak with more than 200 new clients a month, even as we approach Sandy’s two year anniversary. NYLAG has served more than 800 clients navigating the Build it Back program since its inception, including in our role as a subcontractor providing legal counseling services to applicants. As such, we are acutely aware that many New Yorkers are still struggling to recover from this devastating storm.
We commend the recent changes to Build it Back that have resulted in a marked increase in funds being distributed to applicants. However, we believe certain additional changes will result in an even more efficient, equitable program that will be better able to achieve its goal of providing impacted homeowners with the relief they desperately need. In particular, we urge the Build it Back program to reconsider its current policy on applicants in or at the risk of foreclosure.
At present, if a notice of pendency of a foreclosure action has been filed against a property, under current Build it Back rules, the homeowner is not allowed to receive repair or rebuild assistance. The notice of pendency is one of the first steps in the foreclosure process and only a fraction of notice of pendency filings actually culminate in a foreclosure auction or bank ownership of the property. The foreclosure process in New York courts is very lengthy and individual cases typically take years to resolve. There are numerous options for many homeowners to resolve a foreclosure and remain in their home. Unfortunately, Build it Back’s current policy inflicts additional harm upon these already vulnerable homeowners who are forced to suffer the additional penalty of not being eligible for funds to repair their homes. A particularly troubling scenario involves applicants who are unable to satisfactorily resolve a foreclosure or notice of pendency until their property is restored. Such applicants are trapped, unable to proceed with Build it Back because of the pending foreclosure action and unable to stop the foreclosure action because Build it Back will not provide necessary recovery funds.
NYLAG recommends that the Build it Back program develop an alternative procedure for handling applicants in foreclosure or who otherwise have issues surrounding an encumbered property. While NYLAG understands the program’s concern of potentially using disaster recovery funds for homes that may be turned over to banks, the notice of pendency stage is too early in the process to identify whether a home is truly at risk of foreclosure, leading to significant and unnecessary harm to many applicants. By waiting until a later stage in the process, such as the issuance of a judgment of foreclosure, the Build it Back program can properly allocate funds while not unnecessarily harming households that are likely to work out their foreclosure situation. The New York Rising program follows this approach and applicants can continue to receive repair or rebuild assistance until a judgment of foreclosure is issued.
These changes would impact many clients who are still struggling. Consider the following example: a 50 year old resident of Queens was current on her mortgage prior to Sandy, and was only a few years away from paying off the mortgage entirely. Sandy completely destroyed her home, and she has been paying rent for a temporary apartment ever since, while also remaining responsible for her mortgage. While the mortgage, by itself, is affordable for the applicant, there is no way for her to afford to pay both the rent and her mortgage. The forbearance offered by her bank after Sandy was for a relatively short period, and a foreclosure action was commenced against her early in 2014. Under Build it Back’s current rules, this applicant is unable to receive assistance from the program for the rebuilding of her home. However, as long as she remains out of her home and continues to pay for two residencies, she cannot receive the loan modification that would resolve the foreclosure action. The prospective, modified mortgage payment cannot be adjusted low enough to allow her to afford both rent and mortgage, so a modification to stop the foreclosure is not feasible as long as she remains displaced from her home. Under Build it Back’s current rules, this applicant will likely never be able to return and the home will be lost.
Another example is an applicant who resides in Brooklyn and who fell into foreclosure shortly before Sandy. This applicant is an excellent candidate for a loan modification, but her bank is requiring her to resolve issues involving open permits that arose after Sandy before a modification will be offered. The repairs she would theoretically receive under Build it Back would correct these issues and allow her to clear the violations, making her eligible for a modification that would save her home. However, under Build it Back’s current restrictions, she cannot get repairs done until after she receives a modification. Meanwhile, she cannot receive a modification until repairs are done. As a result of this Catch-22, this applicant is also at risk of losing her home.
We urge the Build it Back program to consider alternative approaches for handling applicants in foreclosure. The current rule barring properties with a notice of pendency from receiving repair or rebuild assistance leaves a significant number of vulnerable homeowners unable to benefit from the Build it Back program and will ultimately lead to more foreclosures and blight within communities already struggling to recovery from Sandy’s devastating effect.
Thank you for the opportunity to testify today. We would welcome the opportunity to further discuss or comment on these matters in the future.
Matthew Kutner, Staff Attorney, Storm Response Unit, NYLAG
Ziska Anderson, Staff Attorney, Storm Response Unit, NYLAG
William Friedman, Supervising Attorney, Storm Response Unit, NYLAG
Ann Dibble, Director, Storm Response Unit, NYLAG