Long Island: a third of state subprime foreclosures

BY ELLEN YAN | ellen.yan@newsday.com

8:51 PM EDT, March 26, 2008

Suffolk and Nassau counties accounted for 33 percent of subprime loans that were made in 2006 in New York State and that are now in foreclosure, according to a report to be released Friday by the Empire Justice Center, a nonprofit law firm that advocates for low-income families.

The analysis, based on data from the Federal Reserve Bank of New York, shows Long Island at the top of the mortgage crisis in the state, the Albany-based center said. The group will publicize the 80-page report, which will show foreclosure and default rates across the state and talk about solutions and the impact on minority communities.

Long Island's one-third foreclosure rate equates to 12,936 subprime loans, the report said.

At the same time, Long Island has 30 percent of all subprime loans scheduled to be reset before October 2009, according to the study of subprime loans given out in 2006.

Long Island's dubious top position can be blamed partly on "aggressive" mortgage sales here, including to borrowers who clearly could not pay, and home buyers' "overinflated" prices because they thought property values would go on rising, said Adrian Fassett, chief executive of the Economic Opportunity Council of Suffolk, a Housing and Urban Development-approved housing counselor based in Patchogue.

"When you drove around two or three years ago, on every corner there was a new mortgage broker or a new mortgage banker," he said.

Nassau and Suffolk were especially susceptible to problems because they have more homes on the market than New York City, Fassett said. When the economy weakened, the city's housing values generally did not fall as much as those on the Island, he said.

Now, many troubled borrowers want to sell their homes to pay off their mortgages, but have problems getting offers that would cover all their loan payments, housing advocates said.

Michael McHugh, vice president of the Empire State Mortgage Bankers Association, said he doesn't think Long Island's subprime foreclosure rate is unexpected, considering that the region accounts for many of the state's subprime loans.

He said Long Island's home prices went up much faster than the rest of the state, then fell faster. "When you have a larger decline, you're going to have more foreclosures quicker," said McHugh, chief executive of Continental Home Loans, a Melville-based mortgage banker.