Report: Monroe County has most foreclosures in upstate

Joseph Spector
Albany bureau

ALBANY — Monroe County has the worst home foreclosure problem of any upstate county, the state Commission of Investigation said Thursday in a report that called for tougher state laws regulating the mortgage business.

The commission said foreclosures in the state continue to be concentrated in the New York City metropolitan area, but it singled out Monroe among upstate counties as having a large number of people who have lost their homes or are in danger of losing them.

The report, titled "A Perfect Storm: Easy Money and the Mortgage Meltdown," said foreclosures have risen 14 percent statewide in recent months.

"We are seeing foreclosures among New York's subprime mortgage holders at alarming rates, a situation made far worse by unscrupulous appraisers and brokers," said commission Chairman Alfred Lerner.

As has been the case across the country, the problem stems from home buyers entering into risky subprime loans with variable interest rates, which can reset to higher levels that make it impossible for homeowners to keep up with their monthly payments.

In 2007, the report found, 59 percent of all foreclosure filings in New York involved subprime loans, which often are given to people whose shaky credit records make it difficult to obtain prime loans at lower rates.

The commission also said, however, that African-American and Hispanic borrowers were frequently steered into subprime loans even though they had incomes high enough to qualify for prime loans.

Indeed, a second report issued Thursday dovetailed with the commission's assertion that people of color are disproportionately affected. The National Community Reinvestment Coalition released a report in Washington, D.C., that listed Rochester among the 20 U.S. areas with the largest racial disparities in lending.

The nonprofit coalition found that subprime woes are pounding minority borrowers, no matter what their income. "Middle-class or upper-class status does not shield minorities from receiving high-cost loans," the report said.

The Commission of Investigation said Monroe County ranked fifth in the state in foreclosures in the first quarter of 2008, trailing only Queens, Suffolk, Kings (Brooklyn) and Nassau counties. The report said Monroe had 815 foreclosure filings in the January-to-March period.

A check of Monroe County Clerk's Office records Thursday showed that the problem has been serious over a longer period, with 2,958 foreclosures in the past 12 months. Statewide, there have been about 50,000 foreclosures in that period, and state officials estimate that 38,000 more homes could be in foreclosure this year.

Mortgage experts in Rochester offered varied reasons for the problem, including having an affordable housing stock and moderate household incomes that put homeownership within reach of more people than in other parts of New York.

That greater pool of prospective home buyers also creates more risk for predatory lending practices, said Ruhi Maker, senior attorney with the Empire Justice Center in Rochester.

"Monroe County has a fairly decent working base of people who you can put into mortgages — who, if done right, could be (prime) mortgage holders but because it's done wrong become subprime mortgage holders," she said.

Gov. David Paterson is expected to sign into law soon a package of measures to deal with the state's housing problems.

The Legislature and Paterson agreed last month to create a 90-day safety period for homeowners who face foreclosure, allowing them to work with banks. The new laws also make more types of unscrupulous loan practices illegal; lenders who coax borrowers into adjustable-rate mortgages they are clearly unable to afford, for example, may face criminal charges.

"The law that the governor is going to sign is landmark legislation," said Sarah Ludwig, co-executive director of the Neighborhood Economic Development Advocacy Project in New York City. "But it's going to be very important to have enforcement of the law."

The commission report called for more action by the state. Among the recommendations: