While New York City hasn’t been hit as hard by the foreclosure crisis as the rest of the country, Staten Island residents are feeling a bit of pain.
That’s because while New York City foreclosures are up minimally in absolute terms — 55 more this quarter than a year ago, according to a foreclosure report recently released by PropertyShark.com, Staten Island suffered the largest percentage increase of any of the boroughs. Foreclosures in the borough were up 64.8 percent from the previous quarter.
“With a nearly 65 percent increase this quarter, Staten Island has reached three-year highs in first-time foreclosures,” according to PropertyShark.com CEO Ryan Slack.
While that’s still less than a hundred defaults, the rate is still relatively high. “With 89 foreclosures out of a total of 165,000 households, the borough also has highest number of foreclosures per household,” Slack added.
For the other boroughs, the quarter-over-quarter jumps were: Bronx foreclosures, up 17 percent; Queens foreclosures, up 2.8 percent; Brooklyn foreclosures, up 1.6 percent; and Manhattan foreclosures, down 14 percent.
Typically, borrowers are usually 60 to 90 days past due on their mortgage payments before their lender will consider them in default, the first stage in the foreclosure process. If the homeowners cannot get up to date on their payments, then they enter foreclosure. Rising delinquencies and foreclosures this year have led the mortgage industry to tighten lending standards, making it even harder for homeowners struggling to pay their mortgages.
Experts say almost all the loans going into foreclosure are subprime loans. Subprime loans, often made to consumers with spotty credit, carry higher interest rates than loans made to the best-qualified borrowers.
The majority of subprime loans are adjustable-rate loans.
While it’s hard to quantify how many Staten Islanders carry adjustable-rate mortgages, statistics show that the rate of subprime lending for home purchases and refinancing in the borough has doubled in recent years.
Staten Island’s third-quarter woes are part and parcel of a larger national issue. Over the next two years, a total of 1.8 million adjustable-rate mortgages nationwide will reset to higher interest rates.
“We can expect to see increased hardship and additional filings,” said Rick Sharga, vice president of marketing at RealtyTrac, which provides research on foreclosures. “The next wave of foreclosure activity is likely to hit next May or June, when a large batch of adjustable subprime mortgages are due to reset at higher interest rates.”
Experts attribute the high rate of defaults to more than just higher interest rates. More likely it is due to the increased rates accompanied by other economic factors such as job loss and dramatic changes in the housing market.
It’s probable that the most vulnerable homebuyers may also be the ones in these particularly risky adjustable mortgages. With the promise of being able to refinance into a fixed-rate mortgage before seeing their adjustable rate rise, many consumers in the past decade grabbed adjustable loans with low teaser interest rates.
There’s also growing concern that city homeowners’ problems are even worse than the statistics suggest. With some banks stalling as long as they can, the number of filings may not reflect the truth of the situation.
“We’re all hearing the increasing numbers, but we are not seeing a huge influx of these properties come on the market,” according to Frank Reali, owner of Safari Realty on Staten Island. He has bad news for bargain hunters: “With the properties that have, there really hasn’t been an impact on pricing, most being sold at or close to market value.”
For the first time this year, three zip codes in Staten Island made the list of New York City’s top 20 neighborhoods ranked by foreclosure frequency.
Fourteen of Staten Island’s 89 foreclosures are in the 10312 zip code, which includes upper-middle-class South Shore neighborhoods like Annadale, Huguenot and Pleasant Plains. According to Reali, “most of these foreclosures are probably due to homeowners who may have lost their jobs and are being hit by rising interest rates.”
On the North Shore of the Island, areas in the 10303 and 10304 zip codes account for 21 of the 89 foreclosures. The diverse, and generally less affluent, area includes neighborhoods like Elm Park, Graniteville, Mariners Harbor, Clifton, Grimes Hill and Stapleton.
“I would probably guess that the homeowners in trouble here are those who took out adjustable mortgages or refinancing, with a low down payment, and now find themselves with little to no equity in their home,” said Reali. “The combination of rising payments and minimal equity is a recipe for trouble.”