Testifying on Capitol Hill about foreclosures, New York State Supreme Court Justice F. Dana Winslow Thursday touched on a Catch-22 that's delaying the economic and housing recovery.
"Many people need to move from one community to another for a job," Winslow, who usually rules from the bench in Mineola, told House lawmakers. "They can't move to get employment because they can't sell the house that they're in and move to another area."
He was one of four witnesses questioned by the House Judiciary Committee during a four-hour hearing on "Foreclosed Justice," an attempt to pinpoint why more homeowners weren't being diverted from foreclosures and what to do about the problems. It's the latest of several congressional hearings after the recent "robo-signing" scandal, in which employees of three major lenders admitted to signing thousands of foreclosure-related documents without verifying their accuracy.
In testifying about sloppy documentation, the judge said he sees on a "regular basis" many lenders who can't prove they own the mortgage. They can't produce the loan note and show a complete chain of title on the mortgage, he said.
To help resolve the crisis, Winslow suggested what he called "equitable predictability." Whatever the borrower can pay monthly, say $2,000, should be the modified loan term, he said. That way, both sides know what to expect and can avoid costly foreclosure proceedings, he said.
Not shy about jumping in first to answer questions, Winslow said foreclosure moratoriums and filing for bankruptcy were of limited use in rescuing borrowers.
His note about the home getting in the way of borrowers' job opportunities was not far from the truth, said some Long Island real estate brokers.
"It's been more and more prevalent over the last six or eight months," said Robert Satter, owner of Showcase of Long Island Realty in Holbrook. "They can't relocate, and they're missing job opportunities."
About 35 percent of his sellers already have job offers waiting, he said. Satter said he advises one parent to make the move and rent while the other waits for a sale or for the family to move and do the best they can to carry the old home.
"I've had some people lose job offers because their house didn't move," Satter said.
Some strapped homeowners privately decide to "walk away" from their homes, said Joan Gorta, broker owner of Carriage House Realty in Bohemia.
"There are actually people who have been offered better jobs, and they need to go for their families," she said. "What are these people to do? They're not slackers. They've had jobs for years, and they're forced to look elsewhere."