Lifting of foreclosure halts could benefit LI housing market

The decision by two banks to lift their temporary halt to foreclosures while they dealt with sloppy documentation could prevent damage to Long Island neighborhoods and the local housing market, say those involved in the process.

The practical effect of the suspension on Long Island's market is that some houses will be boarded up for a little longer, extending the process.

"That's great," said David Guzzetta, a Port Jefferson broker specializing in foreclosures at American Way Real Estate. "For the month that it was shut down, it's not going to make a huge difference."

Three banks - Ally Financial Inc.'s GMAC Mortgage Unit, Bank of America and J.P. Morgan Chase - had announced they were suspending foreclosures after revelations that much of the paperwork behind them was handled by "robo-signers," poorly paid and trained employees who didn't always know what they were doing. But on Monday both Bank of America and GMAC lifted their suspensions.

As a result of sloppy documentation, banks foreclosed on some homes that didn't even have mortgages. Judges in some states have halted cases. And attorneys general in all 50 states are investigating the banks' practices. On Tuesday, the Obama administration said a federal multiagency group is investigating the mess and will hold accountable any bank that has violated the law.

It already took two or three years for a house to move through the foreclosure process from seizure to sale, Guzzetta said. Now the process is delayed further as new cases pile up behind the ones that were temporarily stuck in the pipeline.

The banks refused to say how many homes they had in foreclosure on Long Island, but a review of court records in Nassau and Suffolk shows the three banks in question had almost 1,500 homes in foreclosure. More than 1,000 are Bank of America's.

Susan Vincennie of Long Island Profiles, a foreclosure data provider, said it was unclear what it meant when the banks said they halted foreclosures. It could mean that they stopped filing new claims or it could have been even more drastic - that they would have pulled pending cases out of court.

Locally based banks, meanwhile, say they don't have the same problem with their paperwork, for two reasons. One is that because they handle fewer mortgages and tend to keep them instead of selling them on the market, they keep tighter control of their loans.

"We keep them ourselves," said Monte Redman, president and chief operating officer of Lake Success-based Astoria Federal Savings and Loan Association.

The other is that their lending standards were generally more stringent, so they have many fewer loans in default.

"We have only one residential foreclosure going on," said Michael Vittorio, president and chief executive of Glen Head-based First National Bank of Long Island. "We really aren't part of this situation."