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New York Report Blames Adjustable Subprime Loans

January 19th, 2009

A new report from the New York State Governor’s Task Force to Halt Abusive Lending Transactions (HALT) is out. It shows just how toxic the subprime adjustable rate mortage has been, relative to other mortgage products.

New York is not among the hardest hit states in terms of foreclosures. As of the third quarter of 2008, 45,000 New York homes were in the foreclosure process. Still that's a 43% increase from 2007. The report found that subprime adjustable rate loans were the primary driver of the foreclosures, with nearly one-third of such loans past due. That compares to just 1.3% of all prime fixed rate loans in the state, 5.5% of all prime adjustable rate loans and 10% of subprime fixed-rate loans.

The report also illustrates how geographically concentrated the foreclosure problem is. Queens, Brooklyn and Long Island account for 45% of the entire state’s foreclosure filings.

A new state law passed in July should help some. It requires that lenders send home owners in trouble pre-foreclosure notices that direct them to local foreclosure prevention services. It also requires settlement conferences, in court, between lenders and homeowners for all owner-occupied properties, so the two sides can try to reach an agreement before foreclosure.

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