Sunday, November 25, 2007

Recycling -- Including News of Falling Sky

As they say, there's nothing new under the Sun. Today fear and anxiety are running through the economy, confirming for millions that indeed, this time, the sky is really falling. Really. It is.

Homes lost through default, foreclosure and eviction; dollar falling against other major currencies; war straining national finances, anti-Americanism surging around the world; an approaching presidential election that may see two controversial candidates battle for votes; China threatening; newspapers fading; GM, Ford and Chrysler on the brink; Google on top. Sounds like just another moment in the history of the US. Never dull; always controversial.

Read at least the first five paragraphs of the following NY Times article. Then skip to the last line of the post. After that, resume reading where you left off.

November 15

Surge in Home Foreclosures and Evictions Shattering Families


The number of homes in foreclosure in New York, New Jersey and Connecticut has almost doubled since the middle of last year, rising to levels not seen in decades.

The sudden surge in foreclosures, after a steady climb since the late 1980's, reflects the region's job losses, falling real-estate values and a growing backlog of cases that have clogged the courts, delaying some foreclosures for months and even years, lenders and lawyers say.

Moreover, these experts say, some lenders, facing closer scrutiny from Federal regulators, have become quicker to foreclose, or begin legal proceedings to take property, particularly in areas where home sales have rebounded. "They are clearing the books as soon as they can," said Doug Duncan, an economist with the Mortgage Bankers Association in Washington.

On the front lines, the impact is huge. "We used to have 10 foreclosure sales a year -- now we have 10 a week," said Capt. Mary A. Tierney, who handles the sales for the Hudson County Sheriff's Department in New Jersey.

Evictions 6 Days a Week

Foreclosure-related evictions are also rising. In Hudson County, there were 217 by Nov. 5, compared to 189 for all 1991 and about 15 a year in the 1980's.

"I am scheduling evictions for March and April right now -- that's how backlogged we are," said Deputy Sheriff Michael Geerlof of Hudson County. "We also started doing them six days a week."

The emotional trauma for the families who lose their homes to foreclosure is incalculable. "It's devastating," said the owner of a three-bedroom condominium in Secaucus, N.J., who was evicted Monday.

The owner, who spoke on the condition that his name not be used, said that he bought his apartment for $350,000 in June 1989 and six months later lost his $300,000-a-year job with a corporate relocation firm. His monthly mortgage payment, including maintenance and taxes, was $3,500. "At the time, with the money I was making, $3,500 a month was nothing," he said. "But things change."

Now, at age 53, he makes $14,000 a year running his own small moving company; his wife is paid about $30,000 a year working for an airline. The couple is renting a two-bedroom apartment for $1,000 a month in the same complex where they owned a condominium.

Their former home will probably be sold by the Fortune Bank of Clearwater, Fla., which held the mortgage on it and bought it back for a nominal fee at a foreclosure auction earlier this year. The bank's asking price, according to a broker familiar with the property, may be "under $200,000."

A Glimmer of Good News

"I got taken for a ride," the former owner said about his original purchase, adding that he hoped to relocate to the South. "Now, I just want to be a nice quiet old man."

Some economists see in the foreclosure data a glimmer of evidence that the worst of the recession may be behind New York, New Jersey and Connecticut. They note that the percentage of home loans that went into foreclosure in the three states dropped between the first and second quarters of 1992, as did the percentage of loans that were delinquent for 90 days or more.

"Foreclosure rates lag the economy," said Rae D. Rosen, the vice president of the Federal Home Loan Bank of New York. She noted however that bottoming out should not be equated with a quick upturn. "Our economy may just be hitting bottom, though it's more likely that it will happen next year," she said.

The foreclosures involve everything from million-dollar suburban properties to low-priced condominium units. "We are talking about the middle class, even bankers -- people that have never been in this position before," said Leanor Clarke, a counselor at Westchester Residential Opportunities in White Plains, a nonprofit organization that advises people in financial distress.
"They are slow to react to problems, and when they do it is often too late," she added. "They can't accept that they are living in a different income class. They don't take it well."

Ms. Clarke said her organization's caseload of foreclosed mortgages has increased from about 50 in 1987 to about 500 today. "That's all I do nowadays," she added, "people in trouble with their mortgage."

New Jersey Has Worst Rate

Figures from the National Mortgage Bankers Association for the quarter ending June 30 show that New Jersey had the nation's highest proportion of mortgages in foreclosure, 2.36 percent. That means that one in every 42 home loans was in foreclosure. A year earlier, the figure was 1.40, or one in every 71. For the second quarter of 1987, just before the stock market crash, the figure was 0.71, or one in every 141.

In Connecticut, which was surpassed only by New Jersey, Massachusetts and Oklahoma, the second quarter foreclosure rate was 1.59 percent, or one in every 63 loans. The rate for the same period in 1991 was 0.86, or one in every 116. For the second quarter in 1987, it was 0.20, or one in every 500.

In New York, which ranked eighth nationally, behind New Hampshire, Florida and Kansas, the figure was 1.43 percent, or one in every 70 loans. The rate for the same period a year earlier was 0.85, or one in every 118. For the second quarter of 1987, it was 0.46, or one in every 217.
Nationally, 1.04 percent of mortgage loans, or one in every 96, were in foreclosure in the second quarter, and that figure has deviated little since 1986.

Court Is Bank's Last Resort

The statistics do not include foreclosures on cooperative apartments, which exist throughout the region but are concentrated in New York City. Co-op loans, which finance the purchase of stock rather than real estate, are subject to different regulations than mortgages and are not tallied by court clerks, bankers or bar associations.

The region's foreclosure figures -- which are more than double those recorded in the recessions of 1981-82 and 1973-74 -- also do not include loans that are more than 90 days delinquent but are not in foreclosure because lenders have worked out repayment agreements with the borrowers.

"Every bank is different, but, generally, going to court is the last thing you want to do," said Theodore J. Doll, the president of Washington Savings Bank in Hoboken, N.J., where 50 of its 2,000 home loans, or 2.5 percent, are in foreclosure and an additional 24, or 1.2 percent, are being repaid under "work-out" agreements.

Bank foreclosure policies vary widely, but usually the process does not begin until a borrower is at least 90 days delinquent. Once foreclosure is started, it may take several months before a judgment is reached in court. Then it may take several more months before the home can be seized or sold. These days, the property is usually sold at auction to the bank that made the mortgage, which usually pays only a nominal fee. Other bidders, if they succeed, are required to pay off the borrower's mortgage.

6 Months Before Summons

The process is so lengthy that only one in seven loans that go into foreclosure result in judgments. And of those, only about one in seven result in evictions.

Most borrowers who are subject to foreclosure sell their homes, especially if they have equity in the properties. If they cannot sell, a common problem these days, or if they have little or no equity, they often seek revised payment schedules or obtain stays through legal motions or bankruptcy protection.

"In New Jersey, it takes six months just to get a sheriff to issue a summons and two years before you can evict," said Dr. Paul S. Nadler, a professor of finance at Rutgers University in Newark. "There are judges out there who say, 'I don't want to make someone homeless.' "
In some cases, the length and complexity of foreclosure is an incentive for delinquent borrowers to remain in foreclosure; they can often continue to live in their homes free for months -- even years -- before they are evicted. "For those who have no intention of paying, they are getting a nice long free ride," said Sheila R. Shemtoz, the foreclosure clerk for the Sheriff's Department in Monmouth County, N.J.

When the foreclosed property is an apartment building, the tenants may have no knowledge of their landlord's problems. In late October, the Hudson County Sheriff evicted four tenants from an apartment building in Union City, N.J. The owner was still collecting rents, Deputy Sheriff Geerlof said, though the property had been in foreclosure since February. "One tenant even paid his November rent two days ago."

Vicious Circle With Taxes

Job losses are a critical factor in foreclosures, lenders and lawyers say, because many borrowers in the mid-1980's who bought at inflated prices and had high-interest mortgages needed two incomes to make their payments. When one income disappeared through a job loss or divorce, they were unable to continue.

Some struggling borrowers also faced higher property taxes, sometimes as a result of a decline in a town's total assessed value. "It's not only killer mortgage payments some of these people face, it's killer taxes," said David M. Fleisher, a lawyer in White Plains who has represented lenders. On Long Island, for example, the total assessed value of property is declining because of lower home-sale prices, a wave of challenges to assessments and new rules removing some property from the tax rolls.

The impetus to foreclose may also be greater these days because in many parts of the region it is easier than it was in the late 1980's for a bank to sell a foreclosed home, largely because of the lower interest rates and appraised prices.

Some lenders have also been delaying foreclosures in the hope that the economy would improve and bail out delinquent borrowers. Today, though, many of those lenders say they see little economic improvement soon.

'Disaster for Everyone'

Bankers also say that borrowers who made very low down payments and whose properties have lost value have little or no equity in their homes. In many instances, particularly involving condominiums and low-priced urban properties, the owners simply abandon them, lenders say.
Whatever the owner's attitude, foreclosure is "really a disaster for everyone involved," said Douglas Panetta, the owner of Bids-for-Barristers, an 18-month-old company in Tenafly, N.J., that has represented banks and lawyers in bidding at 2,500 foreclosure auctions. "Everyone loses -- the lender, the owner."

"Everyone but me," he added. "I'm thinking about franchising."

This article was published November 15, 1992 -- 15 years ago


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