Foreclosure data in New York criticized as inaccurate
RealtyTrac’s methods are flawed, critics say
State banking regulators are warning of a significant pickup in foreclosure filings in upstate New York, including Erie County — but they rely on a faulty comparison using incomplete data.
The issue demonstrates the danger that the banking industry, regulators, politicians and others nationwide face in being dependent on a single research firm that is still ironing out deficiencies in its data collection.
Data from RealtyTrac shows the number of foreclosure filings in Erie County more than tripled in the third quarter from a year ago, ranking the county fourth in the state.
Erie is one of eight counties in New York with high levels of foreclosures — all upstate — where filings more than doubled, and one of six where they tripled, according to the data.
Total filings in the county rose 247.2 percent to 1,229 in the three-month period, from 354 a year ago, according to the California-based research firm. That ranks Erie County No. 4 in the state for the quarter, behind Queens, Suffolk and Brooklyn counties.
The tally more than doubled from the second quarter, when there were 492 filings. Through September of this year, 2,184 notices were filed in the county, ranking Erie eighth.
And the data show that the Buffalo area, together with Poughkeepsie, Rochester, Albany and Syracuse, are among the 100 metropolitan areas most affected by foreclosures nationwide.
“It appears that the conditions are continuing to have a negative impact on borrowers’ ability to keep pace with their mortgages,” Banking Superintendent Richard H. Neiman said. “Buffalo is still suffering from economic issues and labor issues, and issues around vacant properties and property flipping.”
The problem is that the trend doesn’t appear to be true, raising questions not only about RealtyTrac but also about state officials’ new conclusions.
“That makes no sense to us,” said Kathleen Lynch, staff attorney at the Western New York Law Center, which has been tracking foreclosure filings here. Lynch and her staff said their records show filings in the third quarter were down significantly from a year ago and the second quarter, to 539 from 727 and 593, respectively.
The issue concerns the type of data RealtyTrac collects, and how. The firm’s data consists of three sources: “lis pendens,” which are the initial
foreclosure filings in a court; “notices of sale”; and lender records of bank-owned real estate.
Erie County’s total includes 629 “lis pendens,” 343 “notices of sale” and 257 properties listed as bank-owned real estate.
Getting lis pendens filings in New York often requires going to a court. RealtyTrac uses a network of independent contractors, but its network doesn’t cover the entire state.
In fact, RealtyTrac currently collects lis pendens filings for only 35 of the state’s 62 counties, and that’s up from the second quarter. Until now, it didn’t monitor Erie County.
It wasn’t until the Western New York Law Center complained in June that the firm made the change, even posting a cautionary note on its Web site about the Buffalo data. And it still only has notice of sale data for 51 New York counties.
As a result, RealtyTrac’s numbers for prior quarters are artificially low when compared to the third quarter. That means it understated the level of foreclosures in Erie County in the past, and overstated the growth.
“We’ve had issues with RealtyTrac all along. We don’t know if it’s apples and oranges,” Lynch said.
The problem also occurs in other states, though to a lesser degree, RealtyTrac said. “There are some limitations to our data,” admitted spokesman Daren Blomquist.
However, state officials say statewide and national data are more dependable than a single county because errors are less significant in larger samples.
Statewide, New York’s filings rose 19 percent from a year ago, but fell 10 percent compared to the second quarter, to 14,477, according to the Realty- Trac data. That ranked New York 37th among all states, up from its No. 29 ranking a year ago. Nationally, filings rose 71 percent from a year ago and 3 percent from the second quarter.
State officials credited the drop on the state’s new subprime lending reform bill, which was signed in August. The law requires that lenders send a notice to borrowers at least 90 days before starting foreclosure, to encourage dialogue towards a loan modification.
However, the law was only in effect for one month during the quarter, so Neiman said he is “interested to see fourth-quarter numbers to review the full impact the bill will have when in effect for a longer period.”
Neiman and others have called for a more systemic approach to loan modifications, rather than taking them one by one. And they’ve criticized the industry’s voluntary efforts to date.
HOPE NOW, the private-sector alliance of mortgage servicers, counselors and investors, said this week that lenders helped 2.47 million homeowners avoid foreclosures since July 2007, including 212,000 in September.
But only 98,000 of those in September — and just 59 percent of all subprime borrowers who received help from lenders — had loans modified to make them more affordable instead of getting a repayment plan.
And a recent report by the State Foreclosure Prevention Working Group — a group of state attorneys general and state banking regulators, including those from New York — called industry efforts “disappointing.”
The report, based on data from February through May 2008, said nearly eight out of 10 seriously delinquent borrowers are not getting loan workout or loss mitigation help.
“We must continue to aggressively address the need for systemic and sustainable loan modifications in order to avoid unnecessary foreclosures,” Neiman said.
