State Senator Vows to Tackle Foreclosure ‘Injustice’ After NY Focus-Gothamist Investigation

“At minimum, we need uniformity and transparency in this foreclosure auction process,” said Myrie, a Democrat representing parts of Central Brooklyn.

Myrie’s bill would require referees — attorneys tasked with overseeing the foreclosure sale process — to detail interest calculations in a single, uniform document used in every courthouse across the state. Currently, lenders’ law firms often use their own templates and referees sign off on their calculations without making changes.

Myrie said he also wants to explicitly bar lenders from charging compound interest during the period between when a proposed judgment amount was tallied and a judge approved it – a process that can take years. Such a statute would reduce debt owed by former homeowners and potentially allow them to secure more money after a sale.

He said his bill is meant to prevent vulnerable homeowners who have fallen on hard times from “the double whammy of not just losing their home, but losing out on compounded interest that appears to be in contravention to what our current law states.”

The legislation, Myrie said, is meant to correct “an injustice in the system” revealed by Gothamist and New York Focus’ investigation.

A spokesperson for the state’s Office of Court Administration, which manages court processes across New York, did not respond to a request for comment. 

The agency has allowed two methods of interest calculation to persist simultaneously, our analysis showed.

How much a foreclosed homeowner ends up receiving or owing following a foreclosure sale usually depends on which method their lender’s attorney happens to use.

Some law firms representing lenders use a mortgage’s “unpaid principal balance” to calculate interest, the same method prescribed by a sample template for referees currently issued by the Office of Court Administration. 

Others tally interest off a higher “judgment amount,” instead of a mortgage’s unpaid balance. Lenders, mortgage servicers and law firms named in the federal lawsuits have argued that their method is legal and a matter of “judicial discretion.”

While Myrie’s legislation would standardize the process going forward, it would not address the irregularities in thousands of past New York foreclosure cases.

Myrie said he has not discussed the legislation with court officials.