High-rate loans hurt Erie County
All municipalities suffered foreclosures
One in four foreclosure starts in Erie County in 2007 and 2008 were on subprime loans and one in five were on loans with adjustable rates, according to what may be the most exhaustive study of local foreclosure patterns.
The study by the Western New York Law Center found that the Buffalo area still has a significant problem with high-cost subprime loans and foreclosures, even though the area never experienced the rapid home price run-up of California, Arizona, Nevada and Florida.
Indeed, Western New York’s chronic foreclosure problem was even worse than that in New York City for the three years prior to 2007. But it’s been widely underreported by two national research firms whose data for counties across the country is most commonly cited by government officials and industry representatives.
“Subprime and high-cost loans do exist in Erie County, and have resulted in foreclosure,” said Kathleen Lynch, senior litigation attorney at the center, who directed the study.
The report found most of the foreclosures here in 2007 and 2008 involved fixed-rate loans, but nearly 60 percent had rates of at least 7.5 percent. And all municipalities and ZIP codes, even the richest, had high-cost loans that led to foreclosures.
Finally, while more than 55 percent of the adjustable-rate loans started at rates between 7.5 percent and 9.5 percent, nearly 20 percent of them started at as much 12.5 percent. And more than 40 percent of their maximum rates topped out between 15 percent and 17.5 percent, with another 9 percent of the loans going even higher.
“No one could sustain that kind of interest rate,” Lynch said. “It’s not a big surprise.”
The Western New York Law Center on Thursday unveiled the new report,
“Foreclosing Erie County,” to examine precisely how many homes have gone into foreclosure in Erie County, and what loans the borrowers had.
The goal of the report was to address what Lynch called the lack of complete and accurate information about foreclosures in the county. And she called for consistent and uniform reporting requirements for loan originations and foreclosures nationwide, and urged that it be collected from the start.
“If this information is collected at the beginning, when every loan is originated, we wouldn’t have to do something like this,” she said. “We would have this information and would be able to catch these trends earlier and prevent a national crisis.”
At the same time, the report points up the faults of the data providers most commonly used nationwide. Lynch noted there’s no comprehensive source for mortgage or foreclosure data on either the state or national level, and private companies — such as RealtyTrac or First American CoreLogic — report incomplete data or use inconsistent measures to compare foreclosures nationwide.
“It’s very difficult to put apples and oranges together and get accurate numbers,” said data analyst Holly Lindstrom.
RealtyTrac could not be reached to comment, but a spokeswoman for First American said their data represents about 97 percent of all properties nationwide and includes data from both lenders and servicers, as well as public records. She said the company’s foreclosure rate covers all properties in some stage of foreclosure, not just new filings, and it’s compared against outstanding mortgages instead of households, as RealtyTrac does.
CoreLogic this week said 1 percent of mortgages in Buffalo Niagara are in some stage of foreclosure, with 2,392 filings in the past 12 months. The Erie County Clerk’s office reported 1,276 lis pendens filings for the first half of 2009, down 19.1 percent from a year ago.
The 80-page report was researched with four WNY AmeriCorps VISTA volunteers, who spent 2,000 hours analyzing 5,000 foreclosures from 2007 and 2008. “To our knowledge, there is nothing like it anywhere else in the country,” Lynch said. The report found:
• Erie County averaged 248 percent more foreclosures started from 2004 to 2007 than all five boroughs of New York City.
• There were 2,710 unique lis pendens filings in Erie County in 2007 and 2,313 in 2008. But while that’s a drop, New York’s subprime mortgage law went into effect in September 2008, including a 90-day moratorium on new filings. So the last quarter is artificially low.
• Buffalo had 40 percent of the filings, or 1,110, in 2007, and 39 percent or 894 in 2008. Cheektowaga was second, followed by either Amherst or the Town of Tonawanda. But all municipalities had foreclosures.
• All ZIP codes had filings. The 14215 code was tops, with more than 10 percent of filings. Seven of the top eight ZIP codes were the same both years, including 14215, 14211 and 14225, which are adjacent in northeast Buffalo and Cheektowaga.
• HSBC Mortgage Corp. originated the most loans that wound up in foreclosure, but they’re also the biggest mortgage lender in the county. The top 10 lenders originated a quarter of all loans entering foreclosure both years.
• Similarly, half the foreclosures were started by 10 plaintiffs.
• About half of all loans originated since 2003 that went into foreclosure were subprime or “high-cost” loans.
The report can be found by going to http:// www.buffaloflipping.com and clicking on “Foreclosure Study.”
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