The Long Island Foreclosure Crisis

The Long Island Foreclosure Crisis For release April 15, 2013 Stabilizing the communities most impacted by foreclosures in Nassau and Suffolk Countie...
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The Long Island Foreclosure Crisis For release April 15, 2013

Stabilizing the communities most impacted by foreclosures in Nassau and Suffolk Counties

© 2013, Empire Justice Center

Purpose of Analysis 

Pinpoint communities affected by ongoing foreclosure crisis, particularly at risk of . . .   



lost wealth lost tax base destabilization

Lay out strategies to address threats to stability in these communities

This Long Island foreclosure report… 

Starts with an executive summary noting main findings and recommendations



Maps the foreclosure crisis in New York and on Long Island



Examines home purchase lending historically and currently



Shows overlays of foreclosures, lending and minority communities at zip code and census tract data levels



Identifies the hardest hit communities as determined by our ―Impact Score‖



Concludes with three broad strategy recommendations

FINDING: Foreclosures are widespread but many communities have disproportionate concentrations 

Foreclosures occur in all of Long Island‘s cities, towns, villages and hamlets, but . . .



Both Nassau and Suffolk Counties have numerous areas with concentrations of foreclosures -- much higher than the rest of each county.



We especially need to take steps to stabilize these

impacted areas

FINDING: The most impacted areas have seen reduced lending, threatening economic recovery 

The areas that can be identified as ―impact areas‖ from the foreclosure crisis have also seen large declines in home purchase lending from 2006 to 2010.



Although foreclosures have increased the need for more home purchase financing, less financing is available.



The result? A “double-whammy.”

FINDING: Foreclosures are disproportionately hurting Long Island‟s minority communities 

Areas with high foreclosure concentrations and low lending levels are most often areas of high African American and Latino homeownership.



The crisis is not only impacting the households actually in foreclosure, but also the majority of African American and Latino homeowners in each county.



The foreclosure crisis raises a significant threat to “asset wealth” and economic vitality of these minority communities.

RECOMMENDATIONS: Limit the damages to communities from concentrated foreclosures by… 1.

Keeping owners in their homes or keeping properties otherwise continuously occupied.

2.

Assuring maintenance of properties in order to preserve the tax base and mitigate damage to municipalities.

3.

Ensuring economic justice for minority communities by acknowledging disparate impact and taking steps to preserve ―asset wealth.‖

Sources of Data Analyzed 

NYS Dept. of Financial Services 90-day Pre-Foreclosure Filing Notices (―90-day PFF Notices‖)



Home Mortgage Disclosure Act (HMDA) home purchase lending data  

From 2006 - 2011 for the charts From 2006 & 2010 for the maps



2010 Census homeowner data by race and ethnicity



NY Federal Reserve Bank delinquency and foreclosure data



Sales price data from City-Data.com

Reliability of Data Sources and Methodology NY Fed and NYS DFS Data are Consistent with Each Other at Zip Code Levels

Each Database Separately Provides the Same Picture of Areas of Foreclosure Concentrations

Current Status of New York‟s Foreclosure Crisis 

NY is not yet near the end of its foreclosure crisis (differing from other areas of the country) 



Our current crisis is due more to economic downturn and loss of income, rather than the housing boom and subprime bust

Foreclosures are slow to make their way through the legal system 

Lenders are not triggering settlement conferences, adhering to conference requirements or prosecuting cases post-settlement conference to judgment and sale

Most “90-Day Pre-Foreclosure Filing (PFF) Notices” are Concentrated in New York‟s Urban and Population Centers (January – June 2012)

Buffalo

Rochester

Syracuse

Albany

NYC Metro Area and Long Island

90-Day PFF Notice totals are presented by zip code and are calculated from month by month datasets provided by the New York State Department of Financial Services. Map © Empire Justice Center, 2012.

Over 25% of NY Homeowners at Risk of Foreclosure Live on Long Island 

159,357 90-day PFF Notices were sent in the state in the first half of 2012: 

25.7% (40,915) of those were from Long Island: 

10.2 % were from Nassau County (16,175)



15.5 % were from Suffolk County (24,740)



27.1% were from New York City



47.2% were from the rest of the state

“90-Day PFF Notices” Distribution in the NYC Metro Area, Including Long Island (January – June 2012)

90-Day Notice totals are presented by zip code and are calculated from month by month datasets provided by the New York State Department of Financial Services. Map © Empire Justice Center, 2012.

Long Island Foreclosures: The Most Impacted Areas:

To see the relationship of lending to foreclosures and the impact on minority communities, we’ll first take a look at how declines in lending relate to areas with high numbers of foreclosures.

In the slides that follow, we’ll describe how we use an “impact score” to identify and rank the areas hardest hit by foreclosures (shown in red) in each county and then compare each zip code’s race and ethnicity demographics.

Home Purchase Lending – Current low levels indicate difficulties in absorbing foreclosed properties as they come onto the market From 2006 to 2011, home purchase lending declined by 60% in Nassau County. . .

. . . and by 70% in Suffolk County

Home Purchase Lending Declined Much More in Some Communities Than in Others 

Declines occurred in many of the same communities targeted by predatory lenders which resulted in high levels of high-cost or subprime loans. 



These communities were disproportionately impacted by the first, as well as the second, wave of foreclosures.

We‘ll see this in detail in our comparisons of 

Home purchase lending by census tract for 2006 to 2010 in Nassau and Suffolk



Lending declines and the distribution of 90 Day PFF Notices

HIGH COST HOME PURCHASE LENDING WAS PREVALENT IN SEVERAL SOUTHWESTERN NASSAU COUNTY COMMUNITIES IN 2006

In parts of central and western Hempstead, over 60% of conventional home purchase loans made were highcost loans (see circled areas).

MANY NASSAU COUNTY COMMUNITIES HAD SUBSTANTIALLY LOWER LEVELS OF HOME PURCHASE LENDING IN 2010 THAN IN 2006 Home purchase lending was between 51-100% lower in 2010 than in 2006 in many neighborhoods. Several areas with high levels of high cost lending in 2006 had substantially lower levels of lending (see circled areas).

Green tracts = lending

.

Red and dark reddish-brown tracts = greatest lending .

Zip codes with high densities of pre-foreclosure notices closely coincide with census tracts having the highest declines in home purchase lending.

Yellow dots are 90-Day PFF Notices dispersed by zip code (one dot = one notice) Red and dark reddish-brown = tracts with greatest lending decreases.

90-Day Notice totals are presented by zip code and are calculated from month by month datasets provided by the New York State Department of Financial Services. Map © Empire Justice Center, 2012.

Albertson

A CLOSER LOOK AT SOUTHWEST PORTION OF NASSAU COUNTY

Little Neck

H

Williston Park Westbury Carle Place

Mineola

New Hyde Park

Garden City Floral Park Queens Village

Notice that many of the census tracts showing the greatest declines in lending are also those with the highest density of 90-Day PFF Notices.

Elmont

East Meadow

Franklin Square West Hempstead

Hempstead

Uniondale

Roosevelt Valley Stream

Malverne

Bellm Rockville Centre

Lynbrook

Rosedale Hewlett Woodmere Cedarhurst

Baldwin

Merrick

Freeport

East Rockaway Oceanside

Inwood Far Rockaway Lawrence Island Park

Atlantic Beach

Long Beach

90-Day Notice totals are presented by zip code and are calculated from month by month datasets provided by the New York State Department of Financial Services. Map © Empire Justice Center, 2012.

USING AN “IMPACT SCORE” TO IDENTIFY THE COMMUNITIES MOST AFFECTED You can’t compare the impact on neighborhoods simply by looking at the number of foreclosure notices in a zip code because zip codes vary too much in size and housing types.

COMPARING ZIP CODES To compare zip codes, we looked at three key factors:



VOLUME – What was the number of 90 Day PFF notices in the zip code?



RATE – How many PFF notices were there per 1000 housing units? (looking at owner-occupied units with mortgages)



CONCENTRATION – How close are the imminent foreclosures to each other? That is, what is the number of notices per square mile in each zip code? Using these three factors we derived an “IMPACT SCORE” for each zip code. That score gives us an “apples to apples” measure to compare one zip code to another.

Identifying and Describing Disproportionate Impact 

In the analysis that follows we apply measures frequently used in disproportionate impact litigation including identification of areas that are 

“majority-minority” -- more than half minority, or



“disproportionately minority” -- a greater minority population than the county as a whole

Nassau County – 11 of the Top 15 „Most Impacted‟ Areas Are Disproportionately Minority “MajorityMinority” zip codes are shown in red. Other disproportionately minority zip codes - above the county’s overall minority percentage (20.7%) - are shown in pink.

These 15 zip codes, out of all 66 zip codes in the county, account for 53.7% of the 90Day PFF Notices sent in Nassau County in the first half of 2012.

Rank By Impact Score

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Locality

Hempstead -- 11550 Elmont -- 11003 Roosevelt -- 11575 Valley Stream (north) -- 11580 Freeport -- 11520 Uniondale -- 11553 Baldwin -- 11510 Levittown --11756 Westbury -- 11590 West Hempstead -- 11552 Valley Stream (south) -- 11581 Hicksville -- 11801 Long Beach --11561 Oceanside -- 11572 Franklin Square -- 11010 TOTAL:

# 90-Day Notices 1034 926 506 793 903 579 730 706 700 441 290 483 429 405

% of County’s Notices in Zip Code 6.0% 5.4% 3.0% 4.6% 5.3% 3.4% 4.3% 4.1% 4.1% 2.6% 1.7% 2.8% 2.5% 2.4%

276

1.6%

9,201

53.7%

Conversely, only 4 of the 15 Most Impacted Have a Minority Concentration Below that of the County :“MajorityMinority” zip codes are shown in red.

Zip codes with a minority population below the county’s overall minority percentage (20.7%) are shown with a blue background – only FOUR of the FIFTEEN most impacted.

Rank By Impact Score

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Locality Hempstead -- 11550 Elmont -- 11003 Roosevelt -- 11575 Valley Stream (north) -- 11580 Freeport -- 11520 Uniondale -- 11553 Baldwin -- 11510 Levittown --11756 Westbury -- 11590 West Hempstead -- 11552 Valley Stream (south) -- 11581 Hicksville -- 11801 Long Beach --11561 Oceanside -- 11572 Franklin Square -- 11010 TOTAL:

# 90-Day Notices

1034 926 506 793 903 579 730 706 700 441 290 483 429 405 276 9,201

% Owners Who Are Minority [County Overall = 20.7%]

79.4% 65.6% 94.5% 48.6% 54.9% 81.8% 40.4% 13.7% 39.0% 32.2% 27.1% 22.4% 8.8% 7.0% 12.4%

Foreclosures Are A Problem Everywhere With The Top 15 Impacted Areas Mostly in Southern and Southwestern Nassau County

Rankings are based upon an ―Impact Score‖

Map © Empire Justice Center, 2012.

RACE AND ETHNICITY OF ALL COUNTY HOMEOWNERS Black and Latino = 14.7%

Nassau County: White – Black – Latino – Asian –

79.0% 7.7% 7.0% 6.3%

NASSAU COUNTY

Based on 357,412 total homeowners

White

Suffolk County: White – Black – Latino – Asian –

Black and Latino = 12.9 %

Black

84.6% 4.6% 8.3% 2.6%

Based on 393,616 total homeowners

Asian

SUFFOLK COUNTY

Hispanic

Nassau County – Disparate Impact on Minority Communities To identify the areas of minority concentration in relation to the area with the highest impact scores, we switched from a ―dot dispersion‖ map to this map showing the top 15 impacted areas in red, and added ―pies‖ to show homeowner race and ethnicity.

Zip Code Impact Rankings: Most Impacted 2nd Most Impacted 2nd Least Impacted Least Impacted

Pie Slices Legend: Hispanic (any race) White, non-Hispanic Black, non-Hispanic Asian, non- Hispanic

Nassau County – Disparate Impact: Most Notices are in Minority Communities 

17,119 90-Day PFF Notices were sent in Nassau County in the first half of 2012



15 of 66 zip codes account for 53.7% of those notices 



74.5% of all of the county‘s Black and Hispanic homeowners reside in those Top 15 most impacted zip codes In contrast, only 26.8% of the White, non-Hispanic homeowners live in those zip codes

Nassau County – Disparate Impact: “Majority-Minority” Zip Codes Are Impacted the Most 



The top six impact areas are also the top six zip codes when ranked by the percentages of minorities in the whole county. Five of the top six most impacted zip codes are ―majority-minority‖  

 

That‘s ALL of the “majority-minority” zip codes in the entire county. The sixth is nearly a majority-minority zip code (with 48.6% minority).

Four of the top six zip codes are 65% to 94.5% ―minority.‖ We estimate that nearly 90% (88.8%) of the Black and Latino households in Nassau County that received 90-Day PFF notices live in these six zip codes.

NEARLY HALF OF ALL OF NASSAU COUNTY‟S AFRICAN-AMERICAN AND LATINO HOMEOWNERS LIVE IN THE MOST IMPACTED AREAS

Nassau County – Disparate Impact: Nearly ALL Black Homeowners Live in Impacted Areas 

Looking at Black Homeowners alone . . . 

87.1% of all Black homeowners in Nassau County live in only 10 of the top 11 impacted zip codes.



In contrast, only 11.9% of the White, non-Hispanic homeowners live in those same ten zip codes.



A Black homeowner is over 7 times more likely than a White, non-Hispanic homeowner to live in one of these ten zip codes.

Sales Prices: Foreclosure Impact in Nassau County The “Majority-Minority” Zip Codes (shown in red) have the greatest declines in prices.

The price decline in Nassau County was only 12% countywide. All 15 of the most impacted zip codes saw declines exceeding the countywide level. Ten zip codes saw declines over twice that rate.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Zip Code

Post Office Name

11550 11003 11575 11580 11520 11553 11510 11756 11590 11552 11581 11801 11561 11572 11010

Hempstead Elmont Roosevelt Valley Stream (north) [48.6% minority] Freeport Uniondale Baldwin Levittown Westbury West Hempstead Valley Stream (south) Hicksville Long Beach Oceanside Franklin Square

% Decline in % Owners Who Sales Price Are Minority [2nd Qtr 2007 to 2nd Qtr 2012]

37.4 % 32.6 % 33.6 % 27.0 % 33.6 % 38.1 % 28.8 % 21.6 % 27.2 % 23.2 % 27.6 % 21.3 % 25.5 % 18.3 % 20.2 %

[County Overall = 20.7%]

79.4% 65.6% 94.5% 48.6% 54.9% 81.8% 40.4% 13.7% 39.0% 32.2% 27.1% 22.4% 8.8% 7.0% 12.4%

Zip Codes with a minority population below the county overall minority percentage are shown with a blue background – generally the smallest declines in sales prices of the top 15.

Nassau County – Declines in Sales Prices Parallel Impact Scores, Not Number of Notices 100

% Decline in Sales Price

90

"Raw" Impact Score

80 70

Number of Notices (scaled)

60

50 37.4% 40 30 20 10 0

32.6%

33.6%

33.6% 27%

38.1% 28.8%

27.2% 21.6%

23.2%

27.6% 21.3%

25.5% 18.3%

20.2%

Taking a look at Suffolk County . . .

Distribution of “90-Day PFF Notices” in the NYC Metro Area, including Long Island (January through June 2012)

90-Day Notice totals are presented by zip code and are calculated from month by month datasets provided by the New York State Department of Financial Services. Map © Empire Justice Center, 2012.

The slides that follow identify Suffolk County‟s most impacted zip codes and then examine each zip code‟s race and ethnicity demographics. Here, we see both Nassau and Suffolk counties. The most impacted zip codes are shown in red, and the next most impacted zip codes are in pink.

To appreciate the conditions that accompanied the rise in foreclosures we’ll once again take a look at how declines in lending relate to the areas with the highest foreclosure impact . . .

HIGH COST HOME PURCHASE LENDING WAS PREVALENT IN SEVERAL SOUTHWESTERN SUFFOLK COUNTY COMMUNITIES IN 2006 In the central parts of the Town of Islip and in two areas of the Town of Babylon, over 60% of the conventional home purchase loans made in 2006 were high-cost loans.

MOST SUFFOLK COUNTY NEIGHBORHOODS SAW 51-100% FEWER HOME PURCHASE LOANS IN 2010 THAN IN 2006 Only five areas, in green, had the same or more lending in 2010 than in 2006, and only 13 had 1-25% fewer loans. The bright red and dark reddish-brown tracts had the greatest lending . Note by the yellow circles that the three areas with high levels of high cost lending in 2006 had dramatically lower levels of lending in 2010.

Many Neighborhoods With High Numbers of Foreclosures in 2012 Saw Declines in Total Home Purchase Lending Between 2006 and 2010

Yellow dots are 90-Day PFF Notices dispersed by zip code (one dot = one notice)

High foreclosure zip codes largely coincide with the census tracts with substantial declines in total home purchase lending shown in bright red and dark red. (The pattern is somewhat less pronounced in the eastern parts of the county).

90-Day PFF Notice totals are presented by zip code and are calculated from month by month datasets provided by the New York State Department of Financial Services. Map © Empire Justice Center, 2012.

Here the dots show the volume of 90-Day PFF notices in first half of 2012 and the ―pies‖ show the race and ethnicity of the homeowners in each zip code. There are only three “majority-minority” zip codes in Suffolk County. They score as the top three most impacted zip codes by a significant margin.

1

2

Pie Slice Legend White, Non-Hisp. Homeowners Black, Non-Hisp. Homeowners Asian, Non-Hisp. Homeowners

3

Hispanic Homeowners

5

Number rankings are based upon an ―Impact Score‖.

Also, note the high percentages of Latino Owners in THREE of the TOP FIVE zip codes.

PICTURE OF A NEIGHBORHOOD DEALING WITH FORECLOSURES: (Satellite image of a single census tract in the Brentwood area of Suffolk County)

All of the houses shown in yellow are homes that were actually in foreclosure and proceeded to the critical stage of “Judicial Intervention” (triggering settlement conferences) between May 3, 2010 and March 22, 2013.

Suffolk County – Disparate Impact ALL „Minority‟ Zip Codes Are Highly Impacted To identify the areas of minority concentration in relation to the highest impact areas, we switched from the ―dot dispersion‖ maps to this map showing the top impacted areas in red and then added ―pies‖ to show homeowner race and ethnicity . . .

Zip Code Impact Rankings: .

Pie Slices Legend:

Most Impacted

Hispanic (any race)

2nd Most Impacted

White, non-Hispanic

2nd Least Impacted

Black, non-Hispanic

Least Impacted

Asian, non- Hispanic

Suffolk County – Disparate Impact Half of Minority Owners Are in the 10 Most Impacted Areas 

26,186 90-Day PFF Notices were sent in Suffolk County in the first half of 2012 



10 of 94 zip codes in the county account for 34.5% of those notices

Those ―top 10‖ zip codes (ranked using the race-neutral ―impact score‖) include: 

49.3% of all Black and Hispanic homeowners in the county, but in contrast only



10.9% of the White, non-Hispanic homeowners

Suffolk County – Disparate Impact Top 3 “Minority” = Top 3 Most Impacted



Central Islip, Brentwood and Wyandanch are the only three zip codes in Suffolk County that are ―majority-minority‖



Those three zip codes rank as the TOP THREE most impacted zip codes using the race-neutral ―impact score‖



Two thirds of all Black and Latino homeowners in Suffolk County live in the top 19 zip codes (out of 94) ranked for foreclosure impact.

Suffolk County – Disparate Impact Black vs. White Homeowners: 27% vs. 1.5% 

Looking at Black Homeowners alone . . . 

27% of all Black homeowners in Suffolk County live in the top 3 (out of 94) zip codes



In contrast, only 1.5% of the White, non-Hispanic homeowners live in those same three zip codes



A Black homeowner is 18 times more likely than a White, nonHispanic homeowner to live in one of these top three impacted areas.

Suffolk County – The 19 Zip Codes (out of all 94) with the greatest foreclosure impact account for nearly half (48.7%) of the 90-Day PFF Notices sent in the first half of 2012: Rank by Impact Score 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 TOTAL

Zip Code 11722 11717 11798 11967 11706 11950 11951 11701 11729 11726 11763 11727 11757 11704 11784 11772 11720 11789 11703

Post Office Name Central Islip Brentwood Wyandanch Shirley Bay Shore Mastic Mastic Beach Amityville Deer Park Copiague Medford Coram Lindenhurst West Babylon Selden Patchogue Centereach Sound Beach North Babylon

# of 90 Day Notices 931 1326 489 822 1354 526 472 555 581 366 714 645 804 714 524 809 570 209 337 12,748

% County’s Notices in Zip 3.6% 5.1% 1.9% 3.1% 5.2% 2.0% 1.8% 2.1% 2.2% 1.4% 2.7% 2.5% 3.1% 2.7% 2.0% 3.1% 2.2% 0.8% 1.3% 48.7%

Suffolk County – The Highest Impact Zip Codes Suffered the Largest Declines in Sales Prices The price decline in Suffolk County was 20% countywide. All 19 of the most impacted zip codes saw declines exceeding the county level. Seven of these zip codes saw declines over twice that amount.

Rank by Impact Score 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

Zip Code 11722 11717 11798 11967 11706 11950 11951 11701 11729 11726 11763 11727 11757 11704 11784 11772 11720 11789 11703

Post Office Name Central Islip Brentwood Wyandanch Shirley Bay Shore Mastic Mastic Beach Amityville Deer Park Copiague Medford Coram Lindenhurst West Babylon Selden Patchogue Centereach Sound Beach North Babylon

% Decline in Sales Price

% Owners Who Are Minority

[2nd Qtr 2007 to 2nd Qtr 2012]

[County Overall = 15.3%]

42.6% 43.3% 66.7% 33.2% 31.2% 63.6% 48.7% 40.0% 25.0% 38.7% 30.3% 30.3% 26.1% 25.4% 54.3% 25.6% 35.0% GAIN: 37.5% 26.7%

63.0% 73.9% 82.5% 16.4% 38.0% 20.4% 15.0% 43.9% 22.0% 33.4% 21.2% 20.1% 9.8% 20.8% 14.0% 14.2% 14.1% 5.1% 15.2%

[County Overall: 20%]

The continuing threat of the foreclosure crisis. . .

NUMBERS OF HOMES AT RISK OF DISTRESS AS A RESULT OF FORECLOSURE

Two Scenarios of “At Risk” Properties: 

We estimated the number of homes at risk for distress and even potential vacancy for Nassau and Suffolk Counties using two different hypothetical scenarios.



Even in the best case scenarios, loan modifications alone will not solve the problem of vacant or distressed properties in the future.

Scenarios after homeowner receives 90-day PFF notice: 

Loan modified, homeowner remains  



Home sold and occupied (private sale/short sale or deed in lieu) 



The top scenario assumes mods for 50% of homeowners The bottom scenario assumes mods for 30% of homeowners

Both scenarios assume 50% of home purchase loans made in 2011 were for these types of sales

Home remains at risk of distress (i.e. foreclosure filed/pending, owner walks away, cash investor buys but does not maintain)

In these scenarios, Nassau County will have between 12,500 – 19,000 properties in jeopardy of vacancy or other forms of distress

These predictions are based on Empire Justice Center’s estimate that 32,400 90-day PFF notices were sent out in Nassau County in 2012.

For Suffolk County, the outlook is even more grim – in these scenarios, there will be between 21,000 – 31,000 properties in jeopardy of vacancy or other forms of distress

These predications are based on Empire Justice Center’s estimate that 49,480 90-day PFF notices were sent out in Suffolk County in 2012.

CLIENT STORIES The following are four stories of Long Island homeowners at risk of foreclosure and their struggles with servicers as they try to keep their homes.

1. Bank Gets Benefit Under Settlement but Roosevelt Homeowner Still Risks Losing Home Ms. B, a single mom who has lived in her Roosevelt home for over fifteen years, was sold two high cost mortgage loans from a now defunct subprime lender. Both loans are serviced by Bank of America, a party to the Attorneys General National Mortgage Settlement (NMS), settled in February 2012. To get credit under the settlement for principal forgiveness, Bank of America proactively forgave Ms. B‘s second lien—a loan already 100 percent unsecured, as the value of her home has declined 33 percent since June 2007. Bank of America, however, is refusing to follow HAMP Guidelines and give Ms. B an affordable loan modification on her primary loan, stating its denial is due to ―excessive forbearance.‖ The bank did not, as required under the HAMP Waterfall calculations, drop the interest rate all the way to 2 percent before examining principal forbearance. Instead, Bank of America calculated a modification with a floor of 5 percent rather than 2 percent, resulting in a higher forbearance amount. If Bank of America followed the Waterfall requirements, the modification would be approved. If Bank of America ultimately refuses to properly modify her first mortgage per HAMP requirements, Ms. B will lose her home, while Bank of America still receives credit for forgiving the completely unsecured second loan.

2. Patchogue Homeowner Almost Lost His Home Because of His Bank’s Repeated Mistakes Mr. C is 58 years old and has lived in his home in Patchogue with his wife for over 10 years. Mr. C lost his job in 2009 and though he is re-employed, he earns less than one third of his previous salary. With his lower salary, Mr. C fell behind in 2012 and applied for a loan modification with his mortgage servicer, Bank of America. Mr. C was informed of the denial via a letter that violated regulations by failing to list a reason for the denial. Mr. C was referred to a legal services lawyer who determined that the servicer had actually improperly denied the loan modification application. First, Bank of America did not deem Mr. C in ―imminent risk‖ of default and thus, he was not eligible for consideration. Then, when evaluating him, Bank of America calculated his income incorrectly. With the assistance and persistence of his legal services lawyer, Mr. C was ultimately approved for a loan modification. Mr. C, however, still has to pay for the additional interest and fees that accrued on his account as a result of the delays caused by Bank of America‘s mistakes.

3. Bank Should Consider Cost Benefit Analysis for Brentwood Foreclosure Ms. L is a Hispanic woman who has owned her home for fifteen years in one of the hardest hit areas of Long Island, Brentwood. After going through a divorce over three years ago, M&T Bank approved Ms. L for a loan modification that temporarily reduced her interest rate to 3 percent. Ms. L was able to make all her payments on time. However, the rate was only good for two years; Ms. L‘s payments increased again when her rate went back up to the original 6.625 percent. Ms. L started to fall behind in June 2012 and contacted a housing counseling agency for assistance. In the meantime, home values in Brentwood have dropped approximately 44 percent, and Mrs. L‘s once $335,000 house is now worth only about $200,000. With a loan balance of $255,000, Mrs. L is clearly underwater.

M&T approved Ms. L for a new loan modification; however, the bank would only reduce the interest rate to 5.12 percent for five years, with no principal reduction. Ms. L can‘t afford the payments at that interest rate and is in real jeopardy of losing her home. M&T has since asked Ms. L to reapply for a new loan modification. It would make sense for M&T to do a cost-benefit analysis of an interest rate reduction to 3 percent for at least three years. While this proposal would cost investors about $25,000, foreclosure and ultimate sale of the home would cost investors upwards of $55,000 in lost market value and foreclosure costs. At the current principal balance, Ms. L could afford this loan modification.

4. Bayshore Widow May Lose Her Home Because of Irrational Red Tape Ms. A is a senior and widow who lives in Bayshore in a home she inherited from her father. Her name is on the title to the home. However, when she and her husband refinanced, only her husband‘s name was included on the new loan note. After Ms. A‘s husband passed away, she fell behind on the payments. As Ms. A works full-time, she can afford a mortgage payment of 31 percent of her monthly gross income, which is customary under HAMP. However, the mortgage servicer, IndyMac, is refusing to negotiate with Ms. A because she is not on the note. This sort of scenario is all too typical, homeowners being denied relief because of unreasonable red tape.

We cannot ignore the problem any longer . . . 

Thousands more foreclosures are in the pipeline. Tens of thousands of delinquencies and foreclosures were predicted, that’s what we’re seeing, but the end is not yet in sight.



Costs, especially in impacted areas, will be enormous. The damage is everywhere but exponential in “impacted areas.” Lost property values alone will be in billions, not millions, of dollars.



The harm to African American and Latino communities is devastating African Americans and Latinos overwhelmingly live in impacted areas, so the crisis threatens to decimate their asset wealth and economic stability.

Each dimension of the problem needs appropriate strategies: 1.

Across all areas of Long Island -- Additional measures and assistance are needed to keep families in their homes and housing occupied.

2.

In impacted areas -- Targeted actions must be taken to stabilize neighborhoods and preserve value.

3.

In African American and Latino communities -Homeowners and other residents must be assured effective compliance with fair housing and fair lending laws.

1. Keep owners in their homes 

Increase and expedite loan modifications 

Allow principal write-downs



Improve servicing and reduce application timelines







Prosecute foreclosure cases, keep properties out of ―legal limbo‖ and negotiate settlement conferences in good faith Ensure that direct services (counseling/legal) match the scale of foreclosures, particularly in areas with high concentrations

Develop strategies to keep families in their homes during, and after, the foreclosure process 

Public awareness around foreclosure



―Continued Occupancy‖ initiatives

2. Limit damage to communities and preserve tax base 



Be pro-active on vacancies; develop strategies to . . . 

Address inventory of current vacancies



Prevent numbers from growing

Improve ongoing property maintenance by developing . . . 

―Property control‖ strategies for foreclosures in ―legal limbo‖



Enforcement tools for municipalities



Regulations for non-occupant investor purchases



Make credit available to all qualified buyers



Advocate for adequate CRA funding and investments



Monitor and address displacement and homelessness

3. Ensure economic justice in minority communities and protect their “asset wealth.” 

Hold banks accountable – use fair lending and fair housing laws, especially in light of HUD‘s new ―disparate impact‖ rule (February 2013)



Increase Community Reinvestment Act (CRA) investments to stabilize low and moderate income communities disparately impacted



Design strategies to meet needs of minority communities



Develop policies to address racial and ethnic disparities (including proactive monitoring to ‗affirmatively further‘ fair housing)

GLOSSARY 90-Day PFF notices. 90-day Pre-Foreclosure Filing Notices – Pursuant to NY RPAPL 1304, mortgage servicers must send a notice to homeowners in default on a residential home loan at least 90 days prior to the filing of a foreclosure complaint. The notice is prescribed in the statute and warns the homeowner that they are in default and that legal action may be taken if the loan is not current. The notice must list information regarding where the homeowner can get assistance including a toll-free number for the NYS Department of Financial Services and provide contact information for at least five non-profit housing counseling agencies designated by NYS Homes and Community Renewal (HCR) in the geographic region of the homeowner. CRA. The Community Reinvestment Act, enacted by Congress in 1977 (12 U.S.C. 2901) and implemented by Regulation 12 CFR parts 25, 228, 345, and 563e, is intended to encourage depository institutions (banks) to help meet the credit needs of the communities in which they operate, including low and moderate income communities. Deed in Lieu of Foreclosure. If a homeowner can‘t make the mortgage payments, can‘t find a buyer and a loan modification is not possible, the lender may accept ownership of the property in place of the money owed on the mortgage via a ―deed in lieu,‖ an instrument transferring title to a mortgage lender without the necessity of going through the foreclosure process.

GLOSSARY (continued) “High-cost” loans. A term used with the HMDA data to distinguish the loans that exceed certain high-cost thresholds. As of 2006, if the difference (―spread‖) between the loan‘s APR and the interest rate on the Treasury securities is three percentage points or more (for a firstlien loan), then the spread for that loan must be reported in the lender‘s HMDA data. ―Highcost‖ loans are a subset of subprime loans, as there are many subprime loans whose interest rates and/or fees are greater than those of prime loans but whose APRs are below the HMDAreporting threshold used to identify high-cost loans. Most predatory lending occurred in the subprime lending market. High-cost lending is one of the best indicators we have of predatory lending in publicly available data. HMDA. The Home Mortgage Disclosure Act was enacted by Congress in 1975 and was implemented by the Federal Reserve Board's Regulation C. On July 21, 2011, the rule-writing authority of Regulation C was transferred to the Consumer Financial Protection Bureau (CFPB). Regulation C requires lending institutions to publicly report data on their mortgage lending, which then can be used to determine if lenders are serving the housing and credit needs of their communities or to identify possible discriminatory lending patterns. Judgment. Final order issued by the judge in a foreclosure action describing who won the case. A default judgment may be entered by the court if the defendant fails to respond to the complaint, file an answer or appear for the mandatory settlement conference. Following the issuance of the judgment, the plaintiff can move for the home to be sold or auctioned.

GLOSSARY (continued) New York Federal Reserve Bank Delinquency and Foreclosure Data. The New York Federal Reserve Bank (NYFRB) made publicly available maps providing the delinquency and foreclosure rates by zip code for a representative sample of 1 to 4 family homes on Long Island. For this report, we used the rates shown in the FRBNY July 2009 and December 2011 maps to calculate an estimate of the foreclosures in each zip code by applying those rates to 2010 census data for the number of owner-occupied homes with mortgages in each zip code. Totals are based on data downloaded from the NYFRB website on June 1-3, 2012. Settlement Conference. Pursuant to NY CPLR 3408, a mandatory settlement conference must be held within 60 days of the filing of proof of service in all mortgage foreclosure actions involving a residential home loan in which the defendant resides in the property. The stated purpose of the settlement conference is ―for the purpose of holding settlement discussions pertaining to the relative rights and obligations of the parties under the mortgage loan documents, including, but not limited to determining whether the parties can reach a mutually agreeable resolution to help the defendant avoid losing his or her home, and evaluating the potential for a resolution in which payment schedules or amounts may be modified or other workout options may be agreed to, and for whatever other purposes the court deems appropriate.‖ The parties are required to ―negotiate in good faith to reach a mutually agreeable resolution, including a loan modification, if possible.‖ Short Sale. In a short sale, the lender agrees to release its lien upon the property so that the property can be sold, even though the sale price will not generate enough money to pay off the loan. Many times, the lender will agree to forgive the balance of the mortgage debt.

Contributors/Acknowledgments: Michael L. Hanley, Esq. [email protected] Ruhi Maker, Esq. [email protected] Barbara Van Kerkhove, Ph.D. [email protected] Funded through the New York State Attorney General Homeownership Protection Program