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Effects are personal: Losing a home

BY RANDI F. MARSHALL | randi.marshall@newsday.com

November 11, 2007

In a Nassau County courtroom, dozens of foreclosed homes are auctioned. In Middle Island, a family tries all it can to hold onto their home.

These are two scenes from the national subprime lending crisis, playing out here on Long Island.

Yesterday, Newsday reported how in 2006, $8.5 billion in subprime mortgages originated on the Island - a third of all mortgages issued that year. These loans, experts say, are more likely to default. On top of that, there were more than 5,000 lis pendens filings - the first proceeding in a foreclosure process - in the first six months of this year, doubled from the first six months of 2005.

Today, Newsday continues its examination of the local effects of the crisis on homeowners and the small businesses that rely on their money.

A Mineola courtroom was crowded on a recent weekday morning, filled with court referees, bank representatives, law office employees and investors, many of whom knew one another well enough to ask after family and friends, or talk about the baseball game the night before.

But once the proceedings began, it was all business in the wood-paneled room at Nassau County's Supreme Court.

It was the scene of the court's weekly foreclosure auction, an event that used to take place on the steps of the courthouse and still does at some town halls and courts across the Island and across the state. In Mineola, every Tuesday, the auctions take place inside the court building, in a striking, large room called the Calendar Control Part courtroom.

As the gathering came to order, a court official called out the first property, a home on Covert Street in Hempstead. The representative of the bank that held the mortgage on the property and a court referee rose from their seats and came to the front. With a quick glance at the file in front of him, the bank representative announced his opening bid - $284,596.08.

"Any advance on that?" the court officer asked the room, in a request for more bids. His question was met with silence.

"Fair warning," came the officer's last call for additional bids.

"Sold."

And with that, the house became the property of the bank. The homeowners were nowhere to be seen and weren't represented at the sale, and in just a few minutes no longer owned their home.

A half hour later, 17 houses in Nassau County had been sold. In some cases, prices came close to $500,000. Some attracted the attention of bidders, gathered in the back of the room, and urged the house price up in $1,000 or $5,000 increments. Some were investors, others were representatives of other banks - all were known to the crowd only by their first names.

When a house on Ripple Lane in Levittown was called, it began at just over $181,000. "Peter, 182," called a voice from the back of the room. "Chris, 183," said another.

And it went on and on, as seven men vied for the property. Ultimately, it sold to "Keith" for $310,000.

Most houses sold at the starting price the foreclosing bank was offering.

On average, it takes 10 months to a year before a foreclosed property ends up in this courtroom. Many never make it there, as the homeowners declare bankruptcy or get the lender to modify the terms of the loan.

The last property of the morning was a house in Freeport. The owner was Alberto Chavez, 77, who had gotten a subprime mortgage a year and a half ago, a $419,000 loan - the full value of the house - that carried an interest rate of 9 percent, leaving a monthly payment of $4,400, according to Chavez's son, Immar, who lives in the house and attended the auction.

Chavez never made a payment, his son said. Immar Chavez hoped to stop the foreclosure proceeding, explaining that his father had filed for bankruptcy in an online application the night before.

When his house was announced, Immar Chavez rose from his seat and explained what his father had done. Referees and bank representatives conferred, but found no official bankruptcy had been filed. The sale proceeded and the house was sold for its opening bid price of $362,278.21.