Subprime Crisis A 'Slow Moving Disaster'
More than six years after City Councilman James Sanders predicted its coming, Sanders says, the subprime mortgage crisis has become a near-disaster for many on the Rockaway peninsula.
Sanders, a strong advocate in his opposition to predatory lenders since he took office in 2002, believes that New York City had the power to limit the damage now wracking local homeowners who are caught in the subprime mortgage crisis.
"The chickens have come home to roost." Sanders says. "In 2002 I helped pass one of the strongest laws ever against predatory lenders."
Sanders refers to Local Law 32 of 2002 which would have prohibited New York City from doing business with institutions that engages and deals, either directly or indirectly, with predatory lenders.
The bill was vetoed by Mayor Bloomberg, Sanders points out, or it might have helped stem the present crisis.
The Mayor's veto didn't stop Sanders and the rest of the city council, however. They took their case to the State Supreme Court, but lost and the proposed law was never came to fruition.
"[City officials] fought me the whole way on this," stated Sanders. "We really needed to get that law passed."
As a result, the Councilmember believes that Far Rockaway has become the epicenter of the subprime mortgage crisis here.
"Some people of Far Rockaway were lent money that they cannot pay back," Sanders continued. "The mortgage brokers were making so much money that they didn't care about whether or not they would be able to pay it back."
Sanders points to Far Rockaway as the epicenter of the crisis because the latest published reports have shown that nearly one-third of the 180 homes currently for sale on the peninsula are being sold by banks as a result of foreclosures.
However, he says, it is the predatory lenders that are the root of the problem. These lenders prey on the low income and below average credit buyers who are convinced by the lender that they can afford a home.
Much to the dismay of many borrow- ers the loans are plagued with countless terms and hidden conditions that are exposed years after buying the home and increase the monthly payments beyond affordability. Officials say this is the major cause of the increased foreclosure numbers throughout the country.
Many subprimes are introduced with an affordable "teaser rate" that increases with time. Therefore, when the federal mortgage rates increase, so do monthly payments. This leaves many people incapable of making the necessary payments to keep their homes.
Although the mortgage crisis is a federal problem, Sanders feels that there could have been more done on a local level to minimize the damage. He thinks it would help if the State of New York Mortgage Agency (SONYMA) got involved with other lenders to provide more options to buyers.
"I think New York City needs to get into the mix," Sanders said. "SONYMA must start dealing with other lenders."
Despite the foreclosure problems facing Far Rockaway, one real estate agent feels there is no better time to buy, even if economic forecasters believe the country is on the brink of a recession.
"The time to buy is now," Century 21 proprietor, Andrew Langer says. "Interest rates are low, but some people are still waiting for them to drop even more."
Langer, who's been in Far Rockaway since 1983 and has sold over 1,300 homes, also says that the subprime crisis is a result of mismanagement by lenders and brokers. He claims they never cared about the buyers' future and misled them with subprime mortgages in order to make hefty commissions.
"I think you have to care about people and their needs," Langer says. "They didn't care if people wouldn't be able to keep the homes after they bought them."
Eddie O'Hare, president of the Broad Channel Civic Association, says that the problem stems from the lenders but also from the property appraisers who inaccurately appraise many homes on the peninsula.
"An appraiser should work for the federal government," O'Hare says. "These appraisers work for the realtors and that is a big reason why we are in this mess."
O'Hare is referring to the appraisal values of realtors that typically increase the price of a home past the point of its worth. This results in refinancing and resale difficulties years later.
Appraisers work for realtors and are often pressured to give a high value for a home. O'Hare thinks the inconsistency of the housing market could be eliminated with federal regulations on appraisers.
"All appraisers should be federally licensed by the government," O'Hare said. "It would make them responsible for their appraisals."
O'Hare continued to say that unless the government steps in and regulates the appraisers' activities, they will continue to control the housing market's ups and downs.
The federal government has only recently acknowledged the problems regarding subprime mortgages and has outlined 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.
Locally, Sanders is trying to do everything he can for his Far Rockaway constituents who are suffering with adjustable rate loans.
"I have someone who specializes in subprime issues at my office," Sanders says. "I encourage anyone who needs help to come down to my office and we'll see what can be done."
Far Rockaway residents and anyone with a subprime mortgage 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 victimized borrowers.