Foreclosure filings fall on Long Island

Foreclosure-related filings on Long Island fell last month from September and a year ago, a new report said, amid continued fallout from lenders' foreclosure documentation problems.

The decline signals a prolonged road to recovery for the housing market, because it suggests a longer process for settling problems with homeowners and putting foreclosures on the market. Delays in resolving cases can cause debt and penalties to mount up on homeowners, dimming their chances of saving their homes.

RealtyTrac, a foreclosure data provider, said the Island's 497 filings -- new cases, auction notices and repossessions -- represented a 27 percent drop from the previous month and 51 percent from last year. Of those, 418 new foreclosure cases were started on the Island last month, a 49 percent drop from 815 a year ago.

Paul Lewis, chief of staff for New York State's top administrative judge, said "circumstantial evidence" suggests the slowdown stems partly from a state court order requiring lenders' attorneys to sign statements saying they've checked the accuracy of documents. Before the order was imposed in October 2010, Lewis said, an average of 3,500 new cases came in monthly.

One of the people caught in the foreclosure mess is Ismael Gonzalez, of Wantagh, who said he couldn't pay bills after he was laid off for a few months in 2008 and his wife, a master hair colorist, lost most of her income.

He now works as a computer circuits designer. But a year after applying for mortgage relief, he was more than $18,000 behind with Bank of America, he said. Now, he's three years and $54,000 behind, he said.

He doesn't think he'll ever earn enough to fully pay his debt: "Hell no, not in today's economy and not without a raise."

A Bank of America spokeswoman said Gonzalez is still being considered for a loan modification.

With so many cases in limbo, the Island has a huge "shadow inventory" of foreclosures in the wings, homes that could start hitting the market by the end of the year, said Marisa DiNatale, director of research for Moody's Analytics, part of Moody's credit rating agency.

About 28,000 local homeowners are at least 120 days late on mortgages but are not yet in foreclosure courts, she said.

DiNatale predicted home prices could, as a result, fall 6 percent in the next 12 months. With that level of decrease, data from mortgage tracker CoreLogic indicate more than 10,000 homeowners would lose the equity they have now.