If you’re interested in buying a foreclosure property, you’d better get ready to read a lot of newspapers.
New York is a judicial foreclosure state, which means that a person cannot be thrown out of his or her home without 12- to 18-months of prior notice followed by a judicial proceeding. Notice of foreclosure auctions is specified by state Real Estate Property Action law, article 14, section 1405, which says the courts must advertise upcoming foreclosure auctions through a “general distribution” newspaper.
In Queens County, according to the clerk, the courts do not maintain a list of publications, but the clerk was able to name Newsday as a significant paper for foreclosure ads, in addition to other Queens and Nassau newspapers.
In Brooklyn, however, the information may have a harder time reaching the public. Unlike in Queens, where Newsday has strong penetration, there is no one newspaper that reaches a large portion of the Brooklyn public.
As a result, Brooklyn judges and clerks are sending notices to little-known newspapers with small circulations, and in some cases the papers are not available at all, according to sources who have tried to obtain foreclosure data.
The publication troubles come to light at a time when foreclosures were up 45 percent in Brooklyn, Queens, and Staten Island in the last half of 2006 and into 2007, according to Jessica Davis, president of Profiles Publications, a service that collects and sells foreclosure data. RealtyTrac.com is another firm similar to Profiles Publications that collects data. These private lists are by subscription only, and they are costly to obtain.
Complicating the issue of rising foreclosure rates tied to the fallout in the subprime mortgage market, the foreclosure auction playing field in Kings County appears to be dominated by a handful of players.
Ryan Slack, CEO of PropertyShark.com, another real estate data reporting service, noted that PropertyShark has tried to make inroads in the foreclosure reporting business. He said that PropertyShark has had trouble collecting foreclosure data in Brooklyn because of numerous irregularities in the borough’s reporting practices.
For one, Slack said, the Brooklyn County clerk’s office doesn’t provide a single list of foreclosure newspapers, and when his firm tried to learn where the foreclosures are advertised, it had to subscribe to numerous newspapers, most of which had limited distribution.
Of those, three either declined the firm’s money, delivered the paper four weeks late or simply did not publish on time, Slack said. Some were even published in foreign languages, he said.
The others, mostly belonging to Courier-Life Publications (a small chain of newspapers in south Brooklyn and one in Downtown Brooklyn), had a combined circulation of 95,000, according to Glen Kosik, classified advertising director for the company. The combined circulation number reaches only 3.8 percent of a borough of 2.5 million people.
The foreclosures appear not to be widely advertised in larger New York papers that also reach the outer boroughs, such as the New York Daily News, which claimed an average daily circulation of 708,000 in 2006, and the New York Post, which claimed 704,000 in April 2007. Rupert Murdoch’s News Corporation, which owns the New York Post, bought the Courier-Life publications and another media imprint that distributes primarily in Queens, the Times Ledger, for a combined $16 million last September.
One New York Post employee, who lives in Brooklyn and requested anonymity, said that the Courier newspapers provided significant reach into the Brooklyn communities and were relied on by a “younger, hipper audience.”
Still, when a Real Deal reporter also attempted to get a list or the names of newspapers from two clerks at Kings County Supreme Court, the reporter was told in response that “pursuing foreclosures is a big waste of time.” When pressed for a list, the clerk said, “There is no list.”
“Then how am I supposed to know which newspapers to look in?” asked the reporter. The clerk replied, “Hence the problem.”
Two clerks who did not identify themselves said the clerks have no control over which newspapers are used for foreclosure notification. The judge determines which papers will be used for each case, they said.
Slack said that on many foreclosure actions, the names of newspapers were not indicated, leading him to believe that judges were leaving the choice of paper either to the plaintiff’s counsel or to the clerks.
“That should not be happening. It is a real disservice to the public,” said Ralph Roberts, who operates FlippingFrenzy.com, a mortgage fraud Web site based in Warren, Mich., and who recently wrote “Foreclosure Investing for Dummies.”
“It’s 2007, and the information should be electronic, accessible and not hidden from the public,” he added.
Several calls to New York State Attorney General Andrew Cuomo’s office seeking comment about the legality of using obscure newspapers that did not appear to fit the description of “general circulation” were not answered. Calls to the New York State Department of Banking also were not returned.
Kali Holloway, a spokeswoman for the New York State Office of Court Administration who was told of the problem, said that this was the first time the office had heard of the allegations. She said that although the presiding judge in a case is required to name the publication, it is up to the foreclosing bank’s lawyer to place the ad in the paper, leaving room open for abuse of the system.
There are also no checks and balances in place to verify that the judge’s order of where to place the ads is being followed by the plaintiff’s lawyers.
“Clearly there seems to be an inconsistency that we were unaware of,” said Holloway, after following up with the Brooklyn County Clerk’s office. “We will look into making the procedure for designating newspapers more uniform.”
Profiles Publications, the dominant player, receives between 75 and 100 print media a week to obtain foreclosure data, according to Davis. She also said the company might receive a newspaper for a whole year, and yet only one ad will appear during that time.
“That is why there are services like mine, because then people would spend all their time looking for notices,” said Davis, who opened her company 20 years ago. The service also validates data, she said.
While Davis would not reveal the number of subscribers to her service, both she and others said only a handful of foreclosure experts operate in Queens and Brooklyn, where most of the city’s foreclosures took place last year.
Davis attributes the small playing field to the complexity of handling a foreclosure. Yet given the complete absence of [collated] information available unless professional lists are purchased, it is clear that the process is geared to a select group and not to the public, noted Slack. Lack of public reporting would not be in the public interest and could be a violation of antitrust law and indicative of collusion and fraud.
Attorney Frank Loscalzo, who practices on Long Island and in Brooklyn, said he once tried to become more active in foreclosures but gave up because of stiff competition. LoScalzo said he would be surprised if judges were colluding with plaintiff’s counsels, publications or investor experts to narrow the playing field.
If such a scheme were uncovered, “that opens them up to having the sale voided,” he noted.