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The foreclosure crisis worsens but the victims are fighting it and struggling to continue to stay in the houses that are their homes. The Government together with the mortgage industry is going all out to address the problem that has gone beyond the boundaries of the playing fields of the lenders and borrowers. All are adversely affected. Recently two initiatives have been taken that will help the foreclosure victims.

A plan was launched in Detroit by the HUD (Housing and Urban Development) meant for borrowers with loans that have been insured with FHA (Federal Housing Administration). It is meant for those who have bought a house for the first time. It will permit the lender to submit an insurance claim on the mortgage when it arrears, but before it starts to fail. HUD has the task of overseeing the work of FHA. It now transfers the mortgage to be serviced by another company. The borrower then comes into the picture and the loan is restructured to affordable levels.

Steven Preston of HUD said that the plan would serve a double purpose of helping the borrower as well as the neighbourhood. One foreclosure alone has the power to depress the entire locality by bringing down the value of the houses not in foreclosure. Buyers are attracted to the foreclosed houses as theseare sold at a heavy discount. Moreover empty houses attract crime and disease causing damage to the law and order of the area.

In New Jersey another kind of step is being taken with the lead being given by the Federal Home Loan Bank of New York. It lends money to about 300 local banks in places like New York, New Jersey, United States Virgin Islands and Puerto Rico for the purpose of financing mortgages. This programme is termed Housing Assistance and Recovery Programme (HARP). The Magyar Bank of New Brunswick (New Jersey) was lent $6 million. Magyar Bank works in tandem with the First Baptist Church of Lincoln Gardens in Somerset, New Jersey. The latter has a network of counseling services and locates the house owners who are at risk from foreclosures. Then negotiations start with the lender to pull off foreclosures in place of a viable affordable solution. The lender is asked to buy out the loan. Magyar bank pumps in 70% on the assumption that the lender will write off the remaining 30%.

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Statistical evidence shows that over half of all Black borrowers who refinance in 2006 were made to swallow sub-prime mortgages. Latino borrowers faced a similar situation. Together they will suffer a loss ranging from $164 billion to $213 billion in the surging tide of foreclosures that have been wrecking havoc since that time.

Each family has a tragic tale to tell – individual and personal that is far more damaging than figures and numbers. The agony cannot be gauged by statistics alone.
A staggering number of people were sold sub-prime loans.

One woman whose literacy level did not permit her to understand the nitty-gritty of mortgage ins and outs. An agent sold her a string of refinancing loans that summed up to more than $100,000. Now the house she bought in the 70’s is going to be lost.

The unethical brokers sniffed out people who for generations never had the chance to build up a good credit record. They were told that a godsend chance had come for them to turn their equity to advantage. Some people are skeptical about the high talk of banks and lenders. But many others tended to trust them and the image they represent. They believed that the lending institutions have the best interests of the borrowers uppermost in their minds. It is this trust betrayed of the Hispanic and Afro-American neighbourhoods that the lenders betrayed.

Many who rose to the bait are now in the foreclosure net. They continue to have a guilty feeling of having done something wrong. This negative bent of mind is very important to the lender community because it prevents the victims from retaliating.
The foreclosure victims are traumatized into inaction.

To Afro-Americans the equity on the house is a very important thing – it is part of real wealth. There is no denying that a huge wealth gap exists between the black and while Americans. The lenders steered the minorities into high-risk loans in a very subtle way with the Judases among the Blacks who captured their prey in Black churches and meets.

Although the Afro-Americans and Hispanics will absorb about half the economic loss due to foreclosures they are definitely not half of all those who borrowed. The Black borrowers ranging from all economic levels were two to three times more likely to be saddled with sub-prime loans than the Whites.

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This summer has been the winter of despair for the million-dollar Hampton Mansion that has been caught in the foreclosure net. It is an 18,000 square foot wonder on Bridgehampton. Foreclosure has reduced its value from $27 million to a mere $19.5 million!

The mansion had been constructed by Burns Development on a sprawling 4 acres. It has hosted top shows like the Hamptons Designer Showhouse in 2006. It is an annul exercise wherein the latest trends in house designing and home decoration are highlighted. The mansion boasts of a pool, an elevator than can accommodate five persons and a unit known as ‘a flower –cutting room.’ As soon as the exhibition was over the mansion went into the market but ultimately came to be foreclosed towards the end of the year for lagging behind on a mortgage worth $4.4 million.

The Corcoran Group of New York holds the mortgage for this 8 bed roomed mansion with 9 and ½ bathrooms. Corcoran representatives were not available for comments. Jacob Benaroya is the president and manager of Biltmore Capital Group based in New York. He commented that of late the tentacles of foreclosure have caught many million-dollar-plus houses but not one is so grand and costly as Hamptons Mansion. Biltmore has no direct dealings with the mansion in question but the firm deals with other properties in the locality. He added that these special houses pose special problems when it comes to selling.

During the first quarter of 2008 banks initiated foreclosures against a record number of borrowers (12) in East Hampton and South Hampton according to New York Post. Among the other Hampton high-ended houses is the home of Janice Becker. His multi million-dollar estate on Wyandanch Lane is being foreclosed upon. Another giant in the advertising field, Ransel Potter is defaulting for $1.8 million mortgage on his unit. Previously it had been thought that the grime of foreclosures could never stain these exclusive properties. But the impossible has become possible. It proves that the wealthy too can be stupid while managing their wealth.

There is a feeling of vicarious pleasure among many who think that the Hampton rich lot deserves this foreclosure stigma. They walked in and made proud mansions emerge on fertile farm lands trading ridiculous fund raising parties and nothing more. The hope is that soon another wannabe will take this as an opportunity and snap it up for a song.

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With the surging waves showing no signs of receding, New Yorkers continue to be hemmed in by foreclosure crisis. It is alleged that fraudulent sub-prime mortgage lending has led to this meltdown. Each single foreclosure has a snowballing effect and affects the surrounding neighbourhood – its environment and property values.

Foreclosures are a costly judicial process. It is more profitable for the lenders, in this critical situation, to keep the borrowers in the houses that are their homes, so that they can continue to pay monthly dues. Abandoned properties become a headache for municipalities as these attract crime and disease.

The State Legislature has come forth with specific plans to help the foreclosure victims in New York. Last year there were about 3,000 foreclosure postings in Erie County. The findings of The Western New York Law Center show that 20% of these postings are related to the sub-prime adjustable rate mortgages. To see that that the laws are finally passed the two parties must be jointly committed rising above petty politics. The governor’s plan has a good framework that should be acceptable to all. It entails the sending of timely foreclosure notice to the borrowers, who are then to contact housing counselors. The latter will be able to guide them through the negotiating process. The new law will make it mandatory for lenders and borrowers to sit across the table in the initial stages of the process.

So far it has often been the case that the proper authority with whom negotiation can be done remains unidentified. But now it becomes compulsory that the appropriate person or authorized persons must do the talking without prevaricating. Lenders have complained that the foreclosure operation is too lengthy and a quicker way out would be welcomes. In Erie County the foreclosure process takes 135 days to run through its full course. The governor’s bill addresses all the issues in detail

A Wall Street Journal reports that by the latter end of 2006, about 61% of the sub-prime loans had gone into foreclosure. But most of the borrowers had enough credit scores to enable them to opt for conventional loans having better terms. It is generally understood that the lender will consider the repayment ability of the borrower after the expiry of the ‘teaser’ rates. It is the duty of the lender to see to the interests of the borrower and not to try to trip him or her anyhow and somehow.

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The increasing numbers of foreclosures, defaults and delinquencies have broken past records in the first quarter of 2008. The apprehension is that this trend will continue causing damage to the real estate market and the economy in general.

According to latest figures that proportion of loans that slipped into foreclosures increased by 0.99% through this quarter. It exceeded the previous record of 0.83 during the last quarter of 2007. The Mortgage Bankers Association noted that during this period more numbers of defaults and delinquencies have been recorded. The delinquency numbers jumped from 5.82% of the last quarter to 6.35% in the first quarter of the current year. The combined numbers of new foreclosures and late payments have beaten the last record of 1979.

Jay Brinkman of the Association analyzed that the fall in the real estate market has mired the situation and is today the biggest factor in the debacle. If the value of houses do not pick up then foreclosures are inevitable and will continue to rise in the forthcoming months.

Those who had weak credit history availed of the sub-prime loans. They are now the worst affected. Their loans are contributing to the increase in number. It was the sub-prime mortgages that initially triggered off the crisis. But the proportion of prime loans today has risen to 6.35%. In the last quarter it was 5.29%. Late payments jumped from 20.02% to 22.07%. The latter was the last record holding number. The Association has surveyed 45 million loans.

The trend that is being observed now is that foreclosures are now spreading its tentacles to those with prime conventional loans. The number of these loan going into foreclosure have increased from 0.41% in the last quarter of 2007 to 0.54% during the first quarter of the current year. Late payment numbers increase from 3.24% to 3.71%. In fact the compared to the ARM the number of prime borrowers going into foreclosure is higher. It jumped from 1.55% to 1.06%. The delinquency numbers jumped from 5.51% to 6.78%.

Brinkman stresses that the most important thing is to see that that real estate market returns to its level. The regions where new development had taken place are the worst hit. Problems are aggravated by unemployment, illness and divorce. Previously one could sell the house and get out of the net but today falling house prices is making that impossibility.

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The gloomy apprehension is that soon one in 32 house owners in New York will be cursed with foreclosures within two years or so. The story of this debacle started with the taking of sub-prime loans. These large numbers of foreclosures will cause a loss of about $65 billion to the state and local administration. This is according to a report of The Pew Charitable Trusts.

Across the county the tax loss will amount to $365 billion. This calculates to New York bearing 18% of the net tax loss. Of all those who own houses in New York nearly 52% will lose $18,334 on the value of their properties. Nationally the figure is 43.5% of house owners having to bear with a median loss of $8,771.

The manager of Pew’s, Kil Huh has written a boom ‘Defaulting on the Dream’. He analyses that the focus is on New York because real estate values are astronomical with a high concentration of buildings. Thus more houses are affected when one in the locality suffers foreclosure.

According to the survey conducted by Pew’s, across US one out of every 33 house owners will be gobbled up by foreclosure in the forthcoming two years. Marks were allotted in which New York state did not fare too badly as regards severity of the challenge and its response to it. Its plus points are that New York has refinancing and scam protection programmes as well as arrangements for counseling and legal penalty clauses against predatory lending. But so far it has not come to an understanding with lenders regarding modification of loans so as to cover a large section. Also it has not been explicit about mortgage brokers following some rules regarding its attitude towards the borrowers – more transparency, more granting of time and arranging for counseling. Nine other states have initiated such steps.

However it cannot be denied that New York state has been very proactive in measures taken to tackle the foreclosure menace. But lots more has yet to be done to reach the affected house owners in New York city and the entire metropolitan area. These and other factors puts New York high amongst those states that have taken positive effective measures against foreclosures.

It has been so far difficult to get a clear accurate picture of the foreclosure crisis because of conflicting data. The area to be covered is vast – ranging from house prices to first hiccups in payment defaults.

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On Monday 24th March, at Philadelphia, New York Senator Hillary Clinton (Democrat) talked about a new four point plan to tackling the growing national problem of foreclosures She wanted more to be done for loans that are threatening foreclosures as well as the creation of a panel to study the problem from all angles.

She is involved in a tussle with Senator Barrack Obama for the presidential nomination by the Democrat party. She wants ‘aggressive action’ to be immediately taken against foreclosures. Clinton blamed foreclosures to be one of the main causes for the present economic crisis.
Clinton reiterated that her solution is sensible and reasonable for taking into its gambit, the lenders, investors and mortgage companies together with the borrowers. All should share the responsibility for what is happening today. The target is to keep the people in the houses that are their homes and thus stabilize the community as well as the national economy.

Her plans includes expanding the capacity of the federal government to allow for more broad-based mortgage modification for those who could not afford spiked rates This was to be done by private auction of large numbers of mortgages so as to free the credit market constraints by allowing it to be an incentive to the lenders to refinance the troubled loans. More categorically she wants Federal Housing Administration or any other government body to be prepared to buy and modify as well as re-sell the at-risk mortgages if the plan about the private auction does not work.

She wants President Bush to set up an expert panel led by any impartial group of leaders like former Federal Reserve Chairman Alan Greenspan or former Federal Chairman Paul Volcker and or Bob Rubin the former Treasury Secretary, “each of whom supports one of the remaining candidates in the presidential race.” Within three weeks this group should report to the Congress as well as the Bush administration on the best way or ways to resolve the foreclosure crisis.

Clinton wants legislation to be passed that would clarify the legal issues.
She wants to enforce and go ahead with her initial plan for creating $30 billion Emergency Housing Fund to aid state as well as community programmes to help avoidance of foreclosures It would enable groups to buy foreclosed units and put them back to productive use as well as allow groups to work for modification of loans.

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Considering the big hand of small time lenders fraudulent maneuvers in mortgage loans, New York state has made it a law that all those originating mortgages from here must be checked for criminal backgrounds and their fingerprints taken to prevent a repeat of the foreclosure crisis that is raging.

Many like Elizabeth Giammarino who had been cheated in 2006 by lenders sigh and wish that the law had been effective few years back. Two men had cheated her and those same two have been lately arrested for drug trafficking recently. One of them, Joseph Crapanzano was a criminal record holder related to mortgage scams even before he duped Elizabeth’s mother about preventing foreclosure. The old lady sunk further into debt after she could not manage the interest only mortgage taken in 2006. Several mortgage companies were involved in her complicated case. A widow of 9/11, Roxann Giordano had made a legal loan to Mrs. Giammarino that helped to stop the foreclosure on her house. The argument is that Mrs. Giammarino suffered investment losses that made it impossible for her to carry on with the mortgage. Mrs. Giordano claims that she never met the criminal Crapanzano or the other person LaMassa who are supposed to have brought the parties together for a solution. Shortly after being arrested LaMassa claimed that he was a loan officer representing E-Island mortgage. It is the same company that dealt with the Mrs. Giammarino. The name of Crapanzano still pops up in the E-Island website. Both the men are now out on bail. When Crapanzano had dealings with Elizabeth and her mother he had already served 21 months sentence in a federal prison regarding shady real estate matters in Florida. He had forged income proof to lay hands on loan amounts. It did not deter him from continuing with his criminal habit.

The banking department of New York state is optimistic that by this new law unsavoury elements will be weeded out. Previously such types of people worked under license brokers. It is estimated that 40,000 such applications will be screened and processed by 2010. The names will be made available to 40 states that are participating in the programme. It will automatically apply to Summit Investments Loan Corp. based in California. Their attorney remained non committal. Crapanzano’s criminal lawyer too remained silent. It was just blatant profiteering without a veneer of excuse.

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