When it comes to the alarming incidence of foreclosures, it appears the worst is still to come. A major spike in borrowers unable to pay their mortgage is looming, with 2007 likely to be the worst year ever for Queens residents losing their homes. Politicians and banks are scrambling for solutions, but unless drastic measures are taken, the remedies will be too little, too late.
The numbers are deeply troubling. With 1,223 foreclosure filings recorded in Queens as of March 19, this year is well on its way to eclipsing the record 3,625 foreclosures that haunted the borough last year. Compared with the last quarter of 2006, foreclosures in Queens are up by a whopping 91 percent.
What these numbers fail to show is the world of heartbreak and pain that foreclosure entails. With their credit ruined, many of those now entering foreclosure will never have another chance at homeownership. Spiking foreclosures also take a toll on communities, rending their social fabric, uprooting families and targeting seniors who had hoped to live out their years in peace.
Not surprisingly, the foreclosures are concentrated in Southeast Queens, in African-American neighborhoods like Jamaica, St. Albans, Cambria Heights —areas that have long been
victimized by predatory lending. It’s a sorry state of affairs, with more than enough blame to go around, from the borrowers to the brokers, banks and Wall Street corporations that bought up thousands of subprime mortgages on the wholesale market.
No one can deny that the homebuyers themselves played a role in their downfall. Many of those now facing foreclosure simply bit off more than they could chew, borrowing huge sums that far exceeded their ability to pay them back. Yet to lay the blame entirely at the feet of borrowers is to ignore the more fundamental injustice behind the current crisis. The root of the problem lies with subprime lenders, who over the last five years engaged in a frenzy of reckless and loosely regulated lending while the real estate market boomed. With interest rates low and property values soaring, these lenders could not say no to any borrower, no matter how low their income or spotty their credit history.
Their agents of destruction were unscrupulous mortgage brokers, who often falsified borrowers’ incomes and inflated their assets to secure big loans for their clients — and big fees and commissions for themselves. The vast majority of brokers are honest, but enough have participated to create the present crisis.
This kind of behavior had always been kept in check by the rigorous vetting of applications by banks, which knew that they would be on the hook for any loans that went bad. Yet the creativity of Wall Street financiers changed all that. With mortgages traded back and forth from bank to bank and investor to investor, the accountability that once rested with the bank that originated the mortgage disappeared like the fizz bubbling off a glass of champagne.
Now the scheme is unravelling from the bottom up and the top down, and no one — not the banks, nor our elected officials — is exactly sure how much damage will eventually be done. U.S. Sen. Chuck Schumer has called for establishing a fund to bail out families facing imminent foreclosure. St. Albans Congressman Gregory Meeks is pushing for legislation that would prohibit banks from charging outrageous fees and interest rates, and force lenders to confirm the ability of borrowers to pay back their loans, or face stiff penalties.
It’s a good start. For far too long, subprime lenders have avoided accountability, preying on the American dream of homeownership to pad their corporate bottom line. Help should be given to those who have been victimized, and strong measures put in place to prevent future abuses.