Real estate values dropping faster than unsupported beams.



Foreclosure pain spreading in Lower Hudson Valley
http://www.nyjournalnews.com/apps/pbcs.dll/article?
AID=/20070408/BUSINESS01/704080332/1066
Published: Apr 9, 2007
Author: ALLAN DRURY


A home foreclosure would rank on anyone's list of most traumatic financial
experiences, right up there with a job loss, sky-high medical bills or an
IRS notice for back taxes.

The pain of losing a home is hitting hundreds of people in the Lower Hudson
Valley, as lenders seek to recover what they can from customers who fell
behind on payments.

In Westchester, lenders began foreclosure proceedings on 527 homes during
the first three months of the year. That's a 39 percent increase over the
first quarter of last year.

In Putnam County, the number rose 91 percent from 68 last year to 130 this
year.

In Rockland County, the clerk's office reports 200 foreclosure initiations
through the first two months of the year, a 33 percent rise over the 150
filed in January and February of 2006. March comparisons were not available
for Rockland last week.

Not everyone who receives a foreclosure notice will forfeit their home. Some
will make payments to stave foreclosure at least temporarily, some will get
their lenders to agree to new payment schedules and others will leverage the
equity they have to sell.

But those who do lose their homes face a humiliating, costly and traumatic
experience. It usually means moving into a less desirable home, intimidating
calls from creditors and a blotch on the credit report.

An elderly couple in Rockland County is preparing to give up the spacious
home where they raised their two children to move into a one-bedroom,
state-subsidized apartment because the husband's manufacturing business got
crushed by foreign competition and they were unable to keep up with the
payments on $778,000 worth of loans they took out on their house in October
2005.

"I was a tiger in business. This thing has taken the drive out of me," said
the man.

Their dreams of a comfortable retirement travelling to visit friends,
venturing into New York for Broadway plays and maybe even buying a place in
Florida to escape Northeastern winters is gone. It's replaced by a life in
which they rarely go out and the man seeks out menial jobs to supplement his
Social Security checks.

"It's a total lack of happiness or anything to look forward to," the man
said. "You get up in the morning and you're in a depression because you say
to yourself, 'What am I going to do today?' ''

The man and his wife asked that their names not be used because of the
humiliation they feel. But their story is supported by public records.

They took out the loans on the house to try and keep the man's business
afloat. The husband said he now realizes he and his partner should have shut
the business sooner than they did, rather than take the risk, but he felt an
obligation to the remaining employees to try and keep the company alive.

He said globalization took its toll on the company, which tried to stay in
business by lowering its prices and selling to foreign customers. But sales
declined from their peak of $22 million in the 1980s to less than $1 million
and the company shrank from 200 workers to about 30.

Cash flow also became a problem, he said. Whereas U.S. customers paid the
man's company within 30 to 60 days, foreign companies often took as long as
90 days.

The big blow was the loss of two customers who were worth about $2 million
in revenue, he said. Meanwhile, the monthly payments on the loans crept up a
bit and they became unaffordable.

"We're sitting in a house we've owned for (decades) and we're going to lose
it," he said. "It's bitter."

On the national level, there were more than 266,899 foreclosure filings the
first two months of the year, 19 percent more than the first two months of
2006, according to RealtyTrac.com, an online publisher of foreclosure
information. RealtyTrac.com predicts foreclosure activity will increase by
33 percent for the year.

In one way, the rise in foreclosures is surprising. The economy is growing
and unemployment is low. That's a sure indication that the great majority of
the people losing their homes are not in that position because of an
unexpected drop in income.

Instead, industry observers point to a number of other factors driving the
trend, including an explosion of subprime mortgage lending that started
early this decade and lax underwriting standards in the mainstream mortgage
market. The subprime mortgages - which are generally defined as loans to
buyers who wouldn't qualify for mortgages from traditional lenders like
banks - and other overly aggressive mortgage lending helped fuel an
unprecedented home-ownership boom but at a large cost.

"A lot of people bought homes they had no business buying," said Kenneth
Polin, president of Banner Mortgage Group Inc. of Scarsdale. "That's number
one. Many of those homeowners were introduced to what you would call
'gimmick' mortgage products. They had low introductory rates and basically
were timebombs waiting to go off."

Wall Street played a role, too, Polin said. Firms gobbled up mortgages,
buying them in bulk from lenders. The lenders, knowing there was a lucrative
market for their portfolios, pushed hard to make as many loans as possible,
often giving money to people without checking their income or without
requiring any money down, Polin said.

Many people realized the American dream of home ownership by taking
advantage of adjustable rates. Now those rates have risen and so have the
monthly payments.

"Those rates are adjusting and people cannot tolerate the adjustments,"
Polin said.

Rick Sharga, the vice president of marketing for RealtyTrac in Irvine,
Calif., said subprime and other types of non-traditional mortgages are
intended for times when the housing market is hot - like just a couple of
years ago. But once the market cools and prices flatten or drop, many
homeowners are left with little or no equity in their home, making it
impossible to sell.

Many lenders have responded by tightening their underwriting standards, he
said. That makes it hard for people to refinance their homes to lower their
monthly payments.

Sharga said he expects mortgage brokers to face the most scrutiny from
regulators and the public. Unlike the borrower and the lender, they assume
little risk when they place a loan.

"They secure the loan, they get their commission and they move on," he said.
"If you're the lender, you're now stuck with a loan you probably shouldn't
have written or you've securitized the loan and now you're sitting with a
portfolio of underperforming assets. The homeowner is getting it on one side
and the lender is getting it on the other side and the broker has done his
deal and has moved on to the next case."

John Sauro, the president of North Atlantic Mortgage Corp., which is in
Stamford, Conn., but does business in the Lower Hudson Valley, said he
believes that the foreclosure issue is getting too much attention. The
press, political leaders, regulators and consumer advocate groups have all
weighed in on the topic.

He said it's important to note that the increase in foreclosures follows a
boom in housing sales. It's logical to expect that more housing sales is
going to mean more foreclosures, he said.

Sauro, a Pound Ridge resident, said he does not believe the greater New York
area will be harmed as badly by foreclosures as other regions of the
country. Unemployment rates are lower and income levels are higher in the
region, providing a buffer against the foreclosures and other economic
trends, he said.