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Flood of Foreclosures Expected Just as Funding to Help Homeowners Dries Up

Sign Of The Times - Foreclosure

Image by respres via Flickr

Foreclosure Tsunami Will Hit New York Soon – Just as State’s Foreclosure Prevention Funding Runs Out

New analysis of data from the Federal Reserve of New York shows that the foreclosure crisis in New York is far from over – and without legislative action to provide funding for the state’s “Foreclosure Prevention Services Program,” thousands of homeowners will have little help in saving their homes when foreclosure strikes.  Funding for the program, which provides access to housing counseling and legal assistance, is scheduled to run out December 31, 2011.  Without restoration programs will not be able to accept any new cases and will need to wind down their current caseload immediately in order to close the program by the end of the year.

“Our report shows that while New York has been aggressive in funding services and passing laws to help homeowners save their homes, we can’t let up.  We are not even halfway through the foreclosure crisis and it’s gaining on us,” said Ruhi Maker, Senior Attorney at Empire Justice Center.  “We have been a national leader – we are now at risk of falling behind.”

The report, which includes maps of several upstate regions, shows that in September, 2010 in all but one of New York’s 62 counties, more loans are at imminent risk of foreclosure than are currently in foreclosure.  “The foreclosure process has slowed substantially because of the robo signing scandal.  Banks are still figuring out how to comply with the new rules put in place by the Office of Court Administration.  Once they are able to do that, that’s when the tsunami will hit,” said Maker.  

“We have seen the crisis shift to a new population of New Yorkers.  Over half of the loans – both in foreclosure and at imminent risk – are now prime, not subprime loans.  This tells us that increasingly, it’s families that were financially stable when they took out their loans and have fallen on hard times – they’ve lost their jobs, they are working fewer hours –  and they just can’t stay current in their payments and fall into foreclosure,” said Barb VanKerkhove, Ph. D, principal author of the report.

This has broad implications for the economic recovery as well as the overall fiscal well being of the state.  As foreclosed homes came on the market during the recession they led to sharp declines in housing prices.   A number of economists are predicting continued declines.  And as the report notes, homes in foreclosure adversely impact the local property tax base, further depressing local communities.

The flood of foreclosures is expected to hit this fall, just as contracts with non-profit service providers are ending, leaving very few services for homeowners – particularly in upstate areas where in many cases the “Foreclosure Prevention Services Program” is the only source of funding dedicated to foreclosure prevention.  If funding is not included in the budget about to be adopted, programs will need to start winding down services immediately in order to close out existing cases and not accept new case responsibilities.

The program has provided essential housing counseling and legal services resources in every county of the state.  The majority of clients attempt to work with their lender for almost a year before seeking assistance, receiving repeated requests for the same information and improper denials of the modification applications.  Without the assistance of well trained, experienced advocates, many clients of the funded providers would have ended up losing their home.

The program helps families like the Wachalas, who live in Saratoga County and the Acevedo family who live in Staten Island:

“My husband and I were small business owners and fell behind on our payments. We had been in the foreclosure process for a year before we found Albany County Rural Housing Alliance.  We were at our wits end and we were sure we would lose our home.   Thanks to them, we received our final loan modification in the mail yesterday and we are elated. It’s essential that homeowner like us have access to these services,” said Joyce Wachala.

“The bank had been giving me the run-around for months, and told me I didn’t qualify for a loan modification. That’s when Staten Island Legal Services got involved, and that was the turning point.  They got on the phone with the bank and all of a sudden I was eligible.  I now have a permanent modification. Without help from Staten Island Legal Services, I would have lost my home,” noted Michael Acevedo.

Foreclosure fighters from dozens of organizations from all over the state and the homeowners they have helped are calling on the Governor and the Legislature to continue funding for the program and not leave homeowners in the lurch.

Jennifer Ching, Project Director at Queens Legal Services said, “The impact of this funding cut will reach far beyond individual clients.  Many of the communities we work in have multiple foreclosures on their block.  Without assistance, most of these families will be unable to obtain affordable modifications and as a result lose their long time homes, continuing the cycle of declining neighborhoods and decreasing property values.  Continued funding is essential to neighborhood stabilization and New York’s economic recovery. “

Stephanie Riley, Housing Counseling Program Manager at Albany County Rural Housing Alliance shared a rural/suburban perspective.  “We have seen the number of clients requesting foreclosure counseling increase 1.6 times over the last year in the five counties we serve.  People come to us scared, hopeless, and helpless needing assistance with a complex and intimidating maze of lender contacts, attorneys, daunting legal processes, and endless paperwork.  My question is: WHO will help them if we lose this funding and are forced to close our foreclosure services?”

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