New York state Sen. Zellnor Myrie has introduced new legislation to impose consistent standards on foreclosure auction sales following a Gothamist and New York Focus investigation into widespread irregularities that can cost former homeowners thousands of dollars while boosting lenders’ profits.

The investigation, which was based on interviews and an independent review of thousands of state court records, found some lenders, their attorneys and court-appointed referees routinely used a disputed calculation method to increase debts owed by former homeowners following foreclosure sales. The method, which charges interest on top of interest, contradicts state court system guidance. Former homeowners allege in federal lawsuits that the practice also violates a state law prohibiting compound interest on residential loans and has gone unchecked by judges, referees and state court officials.

“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, Gothamist and New York Focus' investigation found.

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.

The review by Gothamist and New York Focus found 14 law firms that used the disputed calculation method that increases homeowner debts about 95% of the time. Those firms handled at least 7,400 foreclosure cases that ended in an auction since 2013. In some cases, the difference in the two calculation methods exceeded $80,000.

Queens-based attorney Mark Anderson is representing former homeowners in the proposed class-action lawsuits attempting to stop the compound interest calculations and compensate them for their alleged losses.

Anderson said Myrie’s legislation was “a good first step” to codifying practices but that the bill needed plain language prohibiting compound interest before a judge’s ruling in order to align with existing state law.

He said state lawmakers should impose a single standardized form for every referee to use, and then require judges to approve the final sale report before the lender receives any proceeds.

He also said lenders’ attorneys or referees who tried to circumvent the rules should be punished.

“Attorneys should be sanctioned, because then everyone would do it correctly and no one would mess around,” he said.