Friday, 02 December 2011 00:00
One of the saddest parts of the economic downturn over the past three years is the number of families who have lost their homes. Most homes have been lost because the owners have been unable to make mortgage payments!
New York State Comptroller issued a statement last year entitled, “Long Island Hit Hard by Foreclosures.” He, properly, placed a great deal of the blame on “subprime mortgage lending practices …” Mr. DiNapoli went on to say that Suffolk and Nassau Counties had the second and third highest foreclosure rates during the first quarter of 2011.
In my judgment, at the heart of the high foreclosure rates on Long Island, are two issues. First, as stated above, banks were forced to make loans to individuals who ended up over their heads financially. The second issue has to be the failure to provide financial counseling.
How do I come to that conclusion? I was involved, for many years, with the Long Island Housing Partnership, an organization which builds and sponsors the building of affordable housing for working Long Islanders. Here are some facts which will amaze you. The Housing Partnership has built or sponsored the building of some 4,200 homes on Long Island. In each sale, financial planning advice is rendered. The result is that only 12 homes have been foreclosed! Yes, only one in 350 homes! Financial counseling does work and makes a difference.
Statistics show that throughout the country, in 2010, 2.87 million properties got default notices. And it is expected that 2011 will see a 20 percent increase in the number of defaults. Interestingly some three million homes have been repossessed since the end of the housing boom in 2006.
Going further, it is estimated that there are around 5 million more homes which are seriously delinquent and not yet in foreclosure. The story has not ended.
This sad story is really about your government in action. Banks were forced to deliver mortgages to folks who were on the edge financially. Then, Freddie Mac and Fannie Mae stepped in and assumed the mortgages from the banks causing both organizations to almost go bankrupt. If it had not been for bailouts by the Federal Government, they would have been finished.
My question is whether we, the government and banks have learned anything from the lessons of the last five years. It will still be several years for the real estate market to recover, because the sale of so many foreclosed homes will further depresses the market. We are still facing a rocky road ahead, and I hope the next five years will show attitude changes in how mortgages are granted.