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Queens Housing Market, Like Much of NYC, Is Headed for a Crash


Banks are delaying a collapse in home prices, but at this point it can't be prevented.

Editor's note: Keith Jurow is the author of the MVP Housing Market Report.

In June, I warned that a home price collapse in the New York borough of Queens was almost certain. Let's take another look at Queens to see if there's any new evidence to support this assertion.

90-Day Pre-Foreclosure Notices

Last December, Governor Paterson of New York signed legislation that requires all lenders as well as loan assignees to send a 90-day pre-foreclosure notice to all delinquent homeowners. This notice must be sent at least 90 days before the lender commences any foreclosure proceedings against a seriously delinquent borrower.

To aid owner-occupants, the notice informs the borrower of steps that can be taken to avoid foreclosure, especially counseling services. It also states clearly that if the borrower doesn't become current on the mortgage within 90 days of receiving this notice, the lender has a right to file a notice of default, which is the start of formal foreclosure proceedings.

On October 7, the New York State (NYS) Banking Department reported that between mid-February and the end of August, more than 400 bank servicers sent 134,000 pre-foreclosure notices to delinquent NYS homeowners. That's more than 20,000 per month.

Suffolk County on eastern Long Island led the state with 19,990 notices during this six-month period. Queens County had the second-highest number of new defaults: 15,184.

Do we finally have accurate and complete figures for serious delinquencies in Queens and all of New York State? Not really. The notice is required only for owner-occupied properties. Queens has almost as many two- to four-family units owned by investors as it has single-family homes.

In addition, the servicer isn't required to file this pre-foreclosure notice for any property that it knows has been abandoned by the owner. Finally, pre-foreclosure notice information was pouring into the Department of Banking at a rate of 25,000 per month between June and August. Clearly, the final tally isn't in and there are lots more to come.

Do we learn anything from the Banking Department's October report? Yes, though not for Queens specifically. More than 70,000 of the 134,000 pre-foreclosure notices were sent out to homeowners for loans originated in 2005-2007 during the height of the bubble. No big surprise there, though one more useful confirmation that the bubble mortgage loans are the epicenter of the crisis.

Another useful piece of information is that nearly 42% of the notices were sent to homeowners who were seriously delinquent by 60 or more days. We know from CoreLogic's cure rate statistics that nearly all of these seriously delinquent properties will hit the market as distressed sales within the next two years or so.

Are Banks Finally Moving Against Defaulted Homeowners in Queens?

In my previous article, I pointed out that in mid-June, slightly more than 9,000 Queens properties had been placed into default by the servicing banks. A mere 1,400 homes had been repossessed and placed into their REO inventory.

Has this situation changed since then?

We must keep in mind that according to the OCC and OTS Mortgage Metric Report, 90% of loans serviced by the major banks are owned by others -- by Fannie Mae, Freddie Mac, smaller banks, pension funds, credit unions, thrifts, Federal Home Loan banks, individual investors, foreigners, and others. The vast majority of these loans sit in mortgage-backed securities.
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