New foreclosure battleground in Queens

While distressed homes still more plentiful in low-income areas, middle-class communities see spike now, too

Jan.January 01, 2010 02:15 AM

126-32 144th Street

Queens has been called the “Ground Zero” of the New York foreclosure crisis, with the most filings citywide for the past three years.

But while areas like Jamaica and Queens Village have garnered the most attention because of the devastation they’ve endured due to the sheer number of foreclosures there, the community districts that have seen the greatest increase in foreclosure filings are some of the borough’s more well-off areas.

The two solidly middle-class community districts that include Fresh Meadows, Hillcrest, Sunnyside and Woodside saw the greatest spike in the average number of foreclosure filings per quarter, at 64 percent during the first three quarters of last year. In contrast, Jamaica and Queens Village saw increases of 17 percent and 32 percent, respectively.

Analysts have widely identified declining property values, along with unemployment, as the main catalysts of the current wave of foreclosures. Those factors impact higher-income neighborhoods and are replacing the subprime and exotic mortgages that started hitting southern Queens hard several years ago as the leading reason for foreclosures.

“A prime neighborhood is the first to go up and the last to fall,” explained Robert Nelson, an REO broker for Triton REO Management Corp., a firm that markets properties reclaimed by banks after unsuccessful auctions.

Declining property values will make it more difficult for homeowners to refinance or sell to avoid foreclosure. For example, a single-family home on a suburban-style street of mini mansions in Fresh Meadows, which was scheduled for foreclosure auction last month, was purchased for $850,000 in 2006. Since then, the median sales price in the community district dropped 20 percent, according to PropertyShark.

Still, Nelson said, banks are taking less of a loss selling reclaimed properties in wealthier neighborhoods than in lower-income areas like Jamaica, where the median sales price dropped 30 percent during the same time period.

“If I’m in Jamaica versus Woodside, there’s a tremendous difference because Jamaica is inundated with REOs and it’s also a lower-income neighborhood, so the number of potential buyers is limited — whereas Woodside has a very high demand,” he said.

“In Jamaica, I could have a $450,000 loan and I’m only going to get $150,000 for it right now, whereas in Woodside I might have a $600,000 loan but I could get $500,000 for it,” said Nelson.

Overall, banks took an average 41 percent loss when reselling Queens properties they acquired following unsuccessful foreclosure auctions since 2007. That was the highest percent loss of all five boroughs. That’s likely due to the sheer volume of REOs on the market there, along with inflated real estate values compared to area income, and the poor condition many of the foreclosed homes end up in.

Nelson said he’s noticed the greatest increase in his REO inventory comes from newly constructed, one- to three-family homes in Queens that were built for middle-class families.

Lewmay by the Sea, a 97-unit development consisting of two- and three-family townhouses in the Far Rockaways, is a case in point. The complex was expected to help revitalize the hardscrabble area when it was completed in 2006. Instead, roughly 60 percent of the original buyers have been foreclosed on or are currently in the foreclosure process, according to PropertyShark.

Many units are owned either by banks or by investors and are rented to Section 8 tenants. Others are boarded up and have become magnets for squatters and local gangs, neighbors say. Banged-up façades and broken windows make these townhouses — built as midmarket properties that first sold for between $450,000 and $615,000 only a few years ago — look decades older than they actually are.

Two townhouses on Lewmay Road that became REOs, both first purchased for $429,000 in 2004, were sold to investors for $260,000 in November — a 39 percent drop in value.

Paul Wong, a foreclosure specialist with LLAP Group who has orchestrated over 100 short sales to investors since 2008, said the current stream of distress is fueled by people who simply paid too much for property during the market’s peak and now are underwater on their mortgages, or who have lost their jobs.

Generally, Wong said, investors negotiating short sales want to pay 30 percent less than the current owner paid in middle-class Queens neighborhoods, or up to 60 percent less in hard-hit areas like Jamaica, which would allow them to make a profit reselling the homes at market value.

Queens’ cheapest 2009 foreclosure auctions

The following properties were the three cheapest winning foreclosure auction bids in Queens for 2009 — as documented in person by PropertyShark, the real estate data aggregator Web site that investors commonly use to research properties and track foreclosures (see Brooklyn notes in From gentrification to foreclosure: Williamsburg, Greenpoint, Fort Greene”).

1. 126-32 144th Street, Jamaica: $2,000

This two-family house was purchased in 2005 for $665,000 with two mortgages totaling the purchase price. The secondary debt of $174,926 was sold at an auction in March for $2,000. While $2,000 may seem like a steal, the buyer is still obligated to pay the first mortgage of undetermined value, and there is at least one tenant living there.

2. 8231 Country Pointe Circle, Queens Village: $19,500

Located in a middle-class gated community, this two-family row house was bought new for $210,000 in 2002 and refinanced several times. The $19,500 lien for unpaid homeowners’ association fees was auctioned in August, which still obligates the buyer to the unpaid mortgages, which city records indicate could be around $540,000, making it less of a bargain.

3. 5923 Linden Street, Ridgewood: $60,000

This two-story brick row house was purchased in 1998 and refinanced several times. There are lis pendens filed on three separate mortgages totaling $646,500. The remaining lien on one of the mortgages, worth $200,000, was auctioned for $60,000 in October, but no sale has been finalized.

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