Foreclosures in Long Island Stay Above National Average

According to a recent article in Newsday, new foreclosure cases on Long Island are spiking, even as the mortgage crisis fades in the rest of the United States.

The article states that although home values are on the rise — suggesting a housing rebound on the Island — lenders filed 12,271 initial foreclosure cases in the first eight months of this year, an increase of 53% compared with the same period last year.”

In fact, the number of Long Island mortgages in distress is more than double the national average, according to Lender Processing Services. In July 2013, 8.2% of all homes with mortgages in Suffolk County and 6.1% of homes with mortgages in Nassau County were in the foreclosure pipeline, compared with 2.8% of homes with mortgages nationwide, LPS reported.

The startling statistics raise questions as to what is attributing to Long Islanders’ struggle to get out of the foreclosure pipeline. The Newsday article points to three major factors: loan modification problems, risky loans, and Long Island’s inability to recapture higher-paying jobs.

Many Long Islanders who have fallen on hard times turn to loan modification as a way to negotiate with banks. However, in New York, the foreclosure process can take up to three years, which is tied with New Jersey for the longest in the nation. Aside from the actual foreclosure process, four out of the five major banks — Bank of America, Citibank, JPMorgan Chase and Wells Fargo — have previously failed to notify homeowners of missing documents in a timely manner.

Long Island’s “riskier-than-average” mortgage loans were an issue prior to the 2008 housing market collapse. In 2006, seventy-four out of every 1,000 homes on Long Island had a mortgage that was considered risky, or classified as either subprime or a borderline category (known as Alt-A), as compared to 56 out of 1,000 homes across the country. In accepting a risky loan, homeowners are given more money than they are able to pay back.

Lastly, The Island’s failure to bring back high-paying jobs has made it even more difficult for families to recover from their housing woes. According to U.S. Census data, Nassau County’s median household income was $93,214 last year, a decline of nearly 7% since 2008, and Suffolk’s median income of $86,334, a reported 5.7% drop since 2008.

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