New data published by the Federal Reserve Bank of New York show that the Empire State may have a longer road ahead than other states in weaning itself off the negative impact of subprime mortgages.
Between January and June, New York trailed only New Jersey for an increase in the median ratio of subprime loan amount to the value of a property at the time the loan was originated.
In short, that indicates homeowners in New York are still more “leveraged” with little equity in their homes compared to subprime mortgage holders in other states, increasing the possibility of a default.
The lower Hudson Valley has a mixed record on that front, with loan-to-value (LTV) ratios worsening in Dutchess and Orange counties and holding steady in Westchester, Rockland, Putnam and Ulster counties.
What”™s more, save for Putnam County, homeowners in the region suffered worsening credit-risk scores, which in addition to making loans more expensive also is an indicator of increased risk of default.
The Fed has yet to release specific county and municipal-level figures, only providing data on whether conditions are improving or worsening.
Between January and June, New York had the sixth highest increase in the ratio of homes under foreclosure proceedings per 1,000 units, with Florida leading the nation followed by California, Arizona, Nevada, New Jersey and Hawaii.
In the first quarter, Westchester County already had the sixth highest number of foreclosure filings in the first quarter in New York with 730, according to RealtyTrac.
In late June, the Federal Reserve Board approved new rules for October 2009 intended to end what the Fed termed unfair and abusive lending practices.
In the first half of 2008, the entire region had a worsening rate of homeowners who are at least 90 days behind in their mortgage payments, but on the positive side, New York had a smaller increase than many neighboring states on that front.
Perhaps most importantly, the entire lower Hudson Valley region has a smaller share of adjustable-rate mortgages scheduled to reset to higher interest rates in the next 12 months than back in January.
In late June, the Federal Reserve Board revealed four protections on “higher-priced” mortgage loans secured by a consumer”™s principal dwelling. The Fed defines such loans as first-lien mortgages at least 1.5 percent above an average prime offer rate published by Freddie Mac, or 3.5 percent above a subordinate-lien mortgage.
A lender will be prohibited from making loans unless it has determined a borrower can repay based on the highest scheduled payment in the first seven years of the loan, and the lender must verify borrowers”™ assets and sources of income.
If a home-loan payment can change in the initial four years, lenders are banned from imposing prepayment penalties; and on all other higher-price mortgages, such penalty periods cannot last more than two years.
Creditors must also establish escrow accounts for property taxes and homeowners insurance for all first-lien mortgage loans.
Days earlier, New York had already taken steps to address the crisis in June, cobbling together an emergency bill that requires lenders to send a pre-foreclosure notice to borrowers at least 90 days before foreclosure proceedings may be initiated, along with a list of government-approved housing counselors.
Last month in Connecticut, a task force issued a report that suggested lenders at several large banks were working with borrowers in just one of 10 cases to modify terms of their loans to help them make payments, with Countrywide Financial Corp. accounting for roughly half of the activity, a strong performance relative to the other lenders that were scrutinized.
The force indicated it expects lender modification activities to increase as more of those mortgages reset to higher rates this year and next.
The New York bill also:
Ӣ establishes a mandatory settlement conference for some foreclosure proceedings.
Ӣ allows courts to appoint attorneys for homeowners who cannot afford one.
Ӣ creates minimum underwriting standards.
Ӣ establishes an ability-to-pay standard.
Ӣ requires brokers to act in a borrowerӪs interest by presenting loans most appropriate for the borrower.
Ӣ requires mortgage service companies to register with the Banking Department.
Ӣ classifies mortgage fraud as a crime, making it easier for prosecutors to pursue cases.
