Greed is no longer good. Americans have been blinded by bling, and nowhere more so than in Queens, the borough hardest hit in the city’s subprime mortgage crisis.
According to the mortgage-tracking Web site propertyshark.com, August foreclosures in Queens rose by almost 45% over the month of July, while foreclosures in Brooklyn, Manhattan, Staten Island and the Bronx dropped by as much as 29%.
Queens is winning the race to the bottom.
The news from the Neighborhood Economic Development Advocacy Project that mortgage defaults in the borough are concentrated in South Jamaica, Cambria Heights, Springfield Gardens, Woodhaven and part of Corona has fueled speculation among politicians that minorities have been especially affected by the mortgage fallout.
“This could be the single greatest loss of black wealth since the Great Depression; the greatest loss of Asian wealth since the Japanese internment,” City Councilman James Sanders (D-Laurelton) said recently.
Last year, Rep. Gregory Meeks (D-Queens) said, “Many individuals have been misled, and some exploited in their pursuit to obtain a home for their families.”
If one believes the politicians, then low-income, minority buyers were bamboozled into signing on for homes they could never afford. That’s a grim fairy tale unsupported by hard facts.
According to the U.S. Census Bureau, after Staten Island, Queens has the fewest number of people living below the poverty line in New York City. And only Staten Island has a higher percentage of homeowners. If the number of homeowners living in Queens is relatively high, it makes sense that there would be more foreclosures in the borough. It could simply be the law of averages. And with 15% of people in Queens living in poverty, politicians’ cries that poor people served as targets to unscrupulous lenders don’t hold up.
The race allegations must be investigated, but until there is clear evidence of wrongdoing, legislators should focus on helping homeowners figure out how to get out of a bad situation.
It’s true that some buyers were lied to, but the issue of personal accountability cannot be ignored. How could anyone be persuaded to buy a home with no money down? This is New York City. You can’t even get a pack of gum without paying for it. Offering to sell the Brooklyn Bridge used to be a joke. In this environment, there could be more than a few takers. And no doubt most of them live in Queens.
Down payments of 20% were designed as a risk control. Unfortunately, lenders decided to change the rules. Twenty years ago, subprime mortgages didn’t exist. That’s because they’re a bad idea.
Still, the story goes that poor first-time homeowners unable to make the mortgage payments are the typical subprime borrowers. That’s a myth.
Instead, it was serial financing that fed the subprime gluttons. In the late 1990s and early 2000s, interest rates were low and housing prices were rising. Like other places in the nation, many Queens homeowners took advantage of refinancing deals that provided larger loans than the value embedded in the first mortgages. Then borrowers pocketed the difference.
But to lure a larger number of clients, mortgage brokers changed the rules, abandoning the risk controls that protect against default. Brokers took chances on risky borrowers. Many borrowers had blemished credit histories. Some refinanced three times. Borrowers offered the no-down-payment loans that had low rates. The numbers were affordable, and that “tease” grabbed many into the fold. But those low rates would later adjust, and most applicants faced a rate that floated much higher, putting them at greater risk of default.
Some people were never told that the mortgage would reset at a higher rate. That’s criminal. But there are many more who signed on believing the American Dream would take care of them. Let’s be clear: The American Dream is available to everyone, but no one is entitled to it. No one. You have to work for it. There are rules. Common sense does apply.
The New York State court system is offering free legal and financial advice to struggling homeowners. That’s a good start. This, coupled with increased financial literacy, will help Queens homeowners get to where they need to be. For more information, homeowners can go to the state Banking Department Web site, banking.state.ny.us, or call (877) 226-5697.
Until there is solid proof that lenders targeted minorities for bad loans, citing racism in the subprime crisis is a knee-jerk reaction from people who played the role of mark in a real estate version of three-card monte. With better financial education and help from the state, there’s some hope everyone can emerge a little smarter.
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