Although it may be by a smaller margin than in the rest of the country, New York’s foreclosure rate continues to climb.
In April, 5,696 people lost the roofs over their heads, versus 4,099 in the year-ago quarter, for a 39 percent spike, according to RealtyTrac, an online database of foreclosed properties. Nationally, the increase was 65 percent, jumping to 243,353 from 147,708. Every borough in New York posted a rise of between 14 and 88 percent over the same time last year, although Manhattan experienced a slight decline from March to April.
Experts think those numbers will continue to swell as interest rates for many mortgages reset in the coming year, rising out of the reach of homeowners. The loans at risk include subprime loans taken
out by lower-wage earners, but also many Alt-A mortgages, which are generally purchased by people who earn around $150,000 a year.
Though two missed payments may
not seem like a lot if you’re dealing with student loans or the power company, with home loans, that level of slipping behind typically starts the ball rolling on a lis pendens, which is the public document the bank files against a home, calling its title into question.
Soon after, a knock will come at the door from a process server with papers. If no payments are made, a court date will come about a month later, experts say. The bank could own the home a few months after that, although in New York, unlike, say, fast-acting Nevada and California, it can take almost a year before a judge rules that a bank can seize a house.
Despite the relative length of the foreclosure process, New Yorkers are suffering. Neighborhood Housing Services, an established counseling center, handled 2,160 foreclosure-related cases in 2007, compared with 200 in 2002, according to CEO Sarah Gerecke.
In terms of solutions, it’s abundantly clear that today is not like the old days (read: the decades before the 1980s), when you could stroll into the corner bank that issued your mortgage and plead your case directly to the president.
In those days, he or she might have lowered the principal balance as a way of making your monthly payment more manageable. (Lowering interest rates was less likely; the bank was borrowing its money, too, and if it was paying 4 percent to borrow, it was unlikely to drop the rate at which it lent to you to 3 percent.)
In recent years, though, mortgages haven’t been sitting in that corner bank for long; they’ve usually been bundled and sold as securities on Wall Street. With an often unidentifiable owner, begging for lenience has not been so easy.
Since the subprime mortgage crisis erupted, though, there has been action to provide relief on the federal level.
A bill being hammered out in the
Senate at press time, after clearing the House, could result in the guarantee of 500,000 mortgages nationwide, to the tune of $300 billion.
Lenders are also making themselves more accessible. For example, Project Lifeline, which debuted in February, gives lenders more negotiating power, particularly with those who have missed three months of payments. The homeowners’ loans must be serviced by one of six
banks: Bank of America, Citigroup, Countrywide, JPMorgan, Washington Mutual or Wells Fargo.
For help from a source without an
immediate stake in the loan, New
Yorkers can turn to one of two dozen
local housing counseling centers; especially recommended are those certified by
the U.S. Department of Housing and Urban Development.
While they used to focus on tenants’ rights, the centers now regularly counsel on foreclosures, their directors say.
Neighborhood Housing Services, for example, offers free foreclosure classes
at nine offices around the city, including in the South Bronx, Bedford-Stuyvesant and Jamaica.
In June, these centers, plus about
six others in New York, got a funding boost from the newly created Center
for New York City Neighborhoods, whose $6 million first-year budget is underwritten in part by hedge-fund manager John Paulson.
Described by Michael Hickey, its executive director, as a “central nervous system,” the center itself won’t take walk-ins, but will pay for added staff counselors at places like Neighbors Helping Neighbors, an organization focused in Sunset Park, Brooklyn.
But these approaches have drawbacks. For instance, some neighborhoods whacked with foreclosures, like Brownsville, Brooklyn, don’t have existing sites that offer counseling, and Hickey’s Center won’t create them — at least initially.
Yet when it comes to quick responses, centers are much more responsive than lenders, who can wait critical months to deal with individual borrowers’ problems, Neighborhood Housing’s Gerecke said.
And the number of walk-ins also underlines a more pervasive problem than even foreclosures: homeowners who are paying their mortgages, but breaking their backs to do so.
“The real casualties are the ones who are struggling,” Gerecke noted.
And the support system is flawed because it doesn’t connect homeowners and services early enough, said Lisa Breier
Urban, a partner at Manhattan-based Breier Deutschmeister Urban & Fromme who has been practicing real-estate law for 18 years.
“Homeowners can be like ostriches sticking their heads in the sand,” Urban says. “Sometimes you know you have a problem but will look the other way.”
Still, banks have recently shown greater wiggle room, she said, showing willingness to defer interest payments until a jobless borrower is re-employed, or allowing a short sale, a situation where the property is offered for sale at a price that’s less than what’s owed to the bank.
On the other hand, some homeowners, like the elderly, have fixed incomes that won’t increase much going forward, though their mortgage payments will. In those cases, deferring payments isn’t much of a remedy, said Nicole Gelinas, a senior fellow at the Manhattan Institute, which studies urban housing issues.
New York City could also do more in the way of public-safety monitoring, keeping vacant houses that are for sale free of squatters and graffiti, so property owners nearby could have an easier time unloading their homes, Gelinas said.
As to that imminent congressional bid to guarantee 500,000 mortgages, it’s
not clear how many New Yorkers will
benefit, since it may not apply to condos
or co-ops, Gelinas said. In addition, 500,000 seems tiny compared with the 7 million mortgages in jeopardy nationwide, she said.
“The only way the government could help homeowners, really, is to give them the money,” Gelinas said. “And the country can’t afford to do that.”