Local Foreclosure Focus

The Capital region in New York sustained a significant amount of damage in 2007, but during the first quarter of 2008 it has become one of the hardest hit areas in the nation. Sadly, foreclosure prevention efforts and bankruptcy courts are not providing any assistance.

Realtytrac reports that the number of properties in foreclosure has increase by 500 percent compared to the first quarter of 2007.

In Q1 2008, there were 608 foreclosure filings; in Q1 2007, there were 111.

Including the counties of Schoharie, Schenectady, Rensselaer, Saratoga, and Albany, there was one foreclosure for every 622 properties. The Capital area is faring better than Stockton, California with one foreclosure for every 30 homes; nationwide, there is one foreclosure for every 194 households.

Realtytrac shows that New York has the 30th highest foreclosure rate in the nation with Nevada being number one.

New York Department of Banking Superintendent Robert Neiman said that it is a “clear indicator that we are not near the end of the crisis.” Experts say that the crisis will get worse as rates on adjustable rate mortgages will go up over the next 18 months. According to Bank of America, $514 billion in ARM’s will reset in 2008, followed by $398 billion in 2009.

New York’s Foreclosure Prevention Working Group reported that seven out of ten homeowners facing foreclosure did not take any loss mitigation actions or sought any assistance in the matter. The group was formed in July of 2007 and consists of representatives from the Attorney Generals office, state bank regulators, and mortgage regulators.

Since most homeowners are not attempting to negotiate with their mortgage companies, many may think that bankruptcy is the only option. Therefore, homeowners have been declaring bankruptcy with the intention of stopping the foreclosure.

Comparing the first quarters of 2007 and 2008, chapter 13 filings in Albany have increased by 13 percent. Oddly, chapter 7 filings had decreased by 3.5 percent.

Francis Brennan, an Albany Bankruptcy attorney and former President of the Capital Region Bankruptcy Bar Association, said, “It’s certainly possible there could be a lag between the commencement of foreclosures and the bankruptcy filings.”

However, experts say that the first quarter is not a strong period for bankruptcy because many consumers are still feeling the effects of the holidays. Also, since Congress revamped bankruptcy laws in 2006, it has become significantly more difficult to obtain assistance through bankruptcy courts.

As an example, consumers wishing to declare bankruptcy must provide six months worth of pay stubs, and court fees have become higher. Such requirements make bankruptcy an option not available to many homeowners due to rising food and fuel prices and high mortgage payments.

According to the U.S. Bureau of Labor Statistics, the inflation rate has grown to 4 percent while wage growth is only 3.6 percent.

Capital Region Bankruptcy Bar Association President and Saratoga Bankruptcy Attorney James Doern, said, “People are literally making the choice between feeding their children, getting to work and paying their mortgage.”

Also, the foreclosure crisis is not solely affecting the Capital regions low-income neighborhoods. Comparing Q1 of 2007 and 2008, Saratoga county foreclosure filings rose from 6 to 137. Albany County rose from 40 to 305. Schenectady County rose from 17 to 101.

In the Capital area, lenders have repurchased 177 properties. Experts say that many homeowners are choosing to let their homes go into foreclosure because the value of the property is below the amount that they still owe on it.

Barbara Whipple, President-elect of the Capital Region Bankruptcy Bar Association and Latham Bankruptcy Attorney, says, “A lot of people are just walking away from their house because they’re finding they are just so under water.”

However people walking away from homes has not affected the Capital region like other areas because home values have remained steady. Comparing Q1 of 2007 and 2008, average home prices have risen 3 percent in the capital region, while nationwide they have tumbled 8.3 percent.

Experts warn that homeowners who walk away from their homes may be sued by lenders for funds not recouped from the resale of repossessed properties.

The most viable solutions for most homeowners would be to seek the assistance of a third party negotiation company.

For more information, please see, stopforeclosurecenter.com or foreclosure-solutions.biz or lewisstates.com

This article submitted by Jack Cukjati.