New York Foreclosures Fall 10% – But Just Wait!

In the midst of the biggest increase in foreclosures in many years, New York foreclosures fell 10% during the third quarter of 2008.  Does this mean that the foreclosure crisis is over, at least in New York?  Not at all.  The thrid quarter decline in foreclosures is due to a new law that went into effect on September 1 which requires lenders to wait 90 days before starting foreclosure proceedings.  The result is that for the last month of the quarter, and probably for at least a few weeks before that, foreclosures that were scheduled to start, did not.  Likewise, the foreclosures slated to begin in October and November, will be put on hold for 90 days.

But what will happen beginning in December when the 90 day moratorium on foreclosures that were originally slated to be filed in September?  Perhaps some of them will be avoided because the homeowners were able to work out some solutions with the mortgage holders.  For the rest, however, the foreclosures will start up again.  That is exactly what happened in other states that implemented similar laws where dramatic increases in foreclosures began when the initial grace periods expired.  In Massachusetts, when a similar 90 day waiting period went into effect last summer, the foreclosure rate leveled off.  But after the initial period expired, the foreclosure rate spiked 465 percent, according to Rick Sharga, senior vice president at RealtyTrac Inc., who was quoted in an Associated Press article today.  “The likelihood is the majority of people are still going to wind up in foreclosure” Sharga said.

One of the most effective solutions to the foreclosure crisis will only happen when Congress allows homeowners to modify their home mortgages in the context of a Chapter 13 bankruptcy case, just like farmers can now modify their mortgages in Chapter 12’s.

Related posts:

1. Prosperous Georgia County Sees Double Digit Rise in Foreclosures
2. New California Law Extends Time Periods For Foreclosures
3. Connecticut Requires Mediation In All Residential Foreclosures