Subprime Crisis Hits Local Homeowners
The subprime mortgage crisis has thousands of homeowners in New York City questioning whether or not they will be able to keep their homes, especially in Far Rockaway, a community which has some of the highest foreclosure numbers in the borough of Queens.
A report recently released by the Association of Community Organizations
ACORN) shows that 199 high-cost subprime mortgages were provided in this community, and that 43 Far Rockaway homeowners are in danger of foreclosure once the mortgage rates on these loans adjust and increase their loan payments.
Now, however, there might be some help for those Rockaway residents about to lose their homes.
Far Rockaway residents can get that help from Councilmember James Sanders, who is offering a free foreclosure prevention service that will advise homeowners on how to manage a subprime mortgage. Sanders says that the program will be offered at his Laurelton office, located at 226-18 Merrick Boulevard, and will cover topics such as foreclosure prevention, predatory scams and the legal rights of borrowers victimized by adjustable rate mortgages.
Most subprime mortgages have a clause that triggers an increase in the monthly payments a set number of years after the mortgage is granted.
The numbers in the ACORN report place Rockaway as the fifth-highest foreclosure risk neighborhood in Queens.
According to RealtyTrac, a consumerbased foreclosure database, there were 52,046 foreclosure filings in New York State in 2006, an increase of 40 percent from the previous year. The numbers are expected to rise even more, as the mortgage rates balloon and force many into foreclosure, starting in January, 2008. Far Rockaway, near the top of the list in New York City, is in danger of losing a large number of homeowners when rates start resetting next year.
Many officials have indicated that the problems with subprime mortgages rest largely in the hands of the lenders, as they have provided mortgages to borrowers who really can't afford to make the payments. Some borrowers have said that their arms were twisted and they were assured that they could carry the loans. They now find that they can't.
Many subprime loans are introduced with an affordable "teaser rate" that increases with time. Therefore, when the federal mortgage rates increase, so do monthly payments, leaving many people incapable of making the necessary payments to keep their homes.
Subprime mortgages are typically provided to people with below-average credit who don't qualify for a firstclass, fixed rate mortgage.
The federal government has recently acknowledged the problems regarding subprime mortgages and has a plan to alleviate the crisis. The core of President Bush's plan encourages lenders to freeze subprime adjustable interest rates for five years, which would protect many homeowners with adjustable rate mortgages from foreclosure.
Governor Eliot Spitzer, however, refuses to believe that Bush's plan provides any immediate or long-term solution. Spitzer argues that the plan goes in the right direction, but it does nothing to help thousands of homeowners who are already in default on their mortgages for more than 30 days, have been foreclosed upon, or are in the foreclosure process.
Spitzer wants the lenders to collaborate with New York State to prevent more foreclosures. Many critics and Spitzer agree that thousands in desperate need of the rate freeze will not qualify, due to the strict government regulations and qualifications. According to a recent Spitzer press release, only about 20 percent of homeowners with subprime mortgages will qualify for President Bush's relief.
In the meantime, Spitzer is working with the New York State Banking Department and Attorney General Andrew Cuomo on a multi-state effort that will focus on identifying and developing a better means of assisting homeowners in danger of foreclosure.