By George Joseph, THE CITY
The fate of 302 Berriman Street, a pink, two-family home in East New York, Brooklyn, was decided on in a matter of minutes.
On a drizzly March morning, a dozen people, mostly men in black rain coats, huddled together on the steps of Brooklyn’s Supreme Court building, shouting out their bids for the foreclosed property: “SEVEN TWENTY!”… “SEVEN TWENTY-ONE!”…”SEVEN TWENTY-THREE!”
Soon, a clean-shaven man with black glasses was handing an envelope to the auctioneer. He had secured the house for $775,000. The family, which had fought to stave off the sale of their home since 2012, did not attend.
In the coming months, foreclosures like this one in East New York are likely to ramp up across the five boroughs. During the height of the COVID-19 pandemic, struggling homeowners were temporarily shielded by New York’s foreclosure moratorium. But in January, state officials let the last of those protections expire.
Now, with foreclosure courts and mortgage servicers ramping back up to full capacity, data suggests that the city’s Black neighborhoods, devastated by the economic shocks of the pandemic and decades of prior predatory lending, are most at risk.
According to mortgage delinquency numbers compiled by the Center for New York City Neighborhoods, an affordable homeownership advocacy group, as of last September, the city’s majority-Black ZIP codes had an average of 8.48% of homeowners who had fallen behind on their payments for more than 30 days.
That percentage is four times that of the majority white ZIP code average and one-and-a-half times that of the majority Hispanic ZIP code average from September.
Those city figures echo racial disparities across the state. According to the latest U.S. Census Household Pulse Survey, 3.4% of white homeowners in New York said they were very likely to leave their homes due to foreclosure in the next two months and 4.4% said they were not at all confident or only slightly confident that they could make next month’s mortgage payment.
By contrast, 9.4% of Black homeowners expressed fears of being kicked out of their homes and 17.4% voiced the same mortgage payment concerns.
Elected officials and homeowner advocates say the numbers point to a crisis on the horizon.
“The numbers are clear, many Black homeowners across New York City are once again facing an uncertain housing future,” said City Councilmember Mercedes Narcisse, who represents Canarsie, one of the majority Black neighborhoods suffering high levels of mortgage distress. “All levels of government must do all they can to intervene and help preserve Black home ownership.”
Christina Wiley, executive director of the New York Mortgage Bankers Association, argued that the resumption of foreclosure proceedings could actually help some struggling homeowners.
“Some folks need to move forward,” she said, noting that foreclosure sales could help distressed residents “get out from underneath the situation that they’re in.”
While the mortgage industry is concerned about the heightened potential for foreclosures, Wiley said, it does not anticipate a sudden surge in displacement because foreclosure courts take months to process cases.
“We don’t see any crisis looming in the foreseeable future,” she said.
Job Losses and Historic Burdens
Ivy Perez, senior policy and research manager for the Center for New York City Neighborhoods, argues the disparate numbers are, in part, a reflection of the disproportionate job losses Black and other non-white communities faced during the pandemic.
“The mortgage distress numbers are absolutely connected to the effects of the pandemic,” she said. “We’re seeing high levels of mortgage distress in the same areas that we know have high unemployment rates and we know that homeowners in many of these areas were already perhaps struggling to pay their mortgages.”
But the distress concentrations also point to longer histories of segregation and racist exploitation going back generations. Most of the Black neighborhoods with high concentrations of struggling homeowners are in eastern Brooklyn and southeast Queens, areas that lenders had previously targeted with subprime loans in the run up to the 2008 financial crisis.
After the Great Recession, some homeowners in these areas benefited from an Obama-era program that encouraged loan modifications, but most did not receive large-scale principal reductions and remained in precarious positions, noted Shabnam Faruki, director of the Neighborhood Economic Justice Project at Brooklyn Legal Services.
“These are neighborhoods that have never really been compensated for the kinds of financial discrimination that they faced, and continue to face,” she said.
In January, the same month that the home foreclosure moratorium ended, Gov. Kathy Hochul announced the launch of the Homeowner Assistance Fund, a federally funded program that is supposed to disburse $539 million to homeowners struggling due to hardships caused by the pandemic. The funds are going to residents behind on their mortgages as well as those who have struggled to keep up with property taxes, water bills, and condo fees.
Successful applicants can receive as much as $50,000 in the form of a no-interest loan, which will be forgiven for those who manage to stay in their homes for five years.
Fifty thousand dollars could go a long way for Emerson and Maria Ison, who have lived in their elegant, one-story brick home in Canarsie, a majority-Black neighborhood in Brooklyn, for more than a decade. In February, Pale Horse Realty, an asset management company, launched a foreclosure proceeding against the family alleging they had failed to make their monthly payments for years. But the principal the Isons owe is relatively small, just shy of $58,000, according to the company’s court complaint.
In a brief conversation on the Ison’s porch, an elderly Caribbean woman told THE CITY that the family had applied to the Homeowner Assistance Fund, but was still waiting to hear back.
After the launch of the program, the Division of Homes and Community Renewal, the state agency in charge of the money, received over 13,000 applications from New York City residents. Thus far, 5,057 have been conditionally approved for the program, according to the agency.
But housing attorneys and mortgage industry representatives note that the fund may not be enough for many struggling homeowners in New York City, who tend to have far larger arrears than their upstate counterparts due to the city’s higher property values.
Because of this, advocates argue that what many city homeowners need in the short term are loan modifications from mortgage servicers, who could reduce interest rates and lengthen loan terms to make residents’ monthly installments more feasible. Officials from DHCR and the Office of the Attorney General say they are pushing servicers to agree to loan modifications, but their leverage is limited, especially for loans not backed by the federal government.
“Although negotiations have gone better than expected, they’re still not perfect,” said Dina Levy, senior vice president of Single Family and Community Development at DHCR.
Wiley, the industry representative, said that servicers, who manage loans on behalf of lenders and collect fees when borrowers fall behind on payments, are not the problem. “They’re doing what they can to help New Yorkers stay in their homes,” she said.
Michelle Lopez, another Black homeowner facing foreclosure in Canarsie, has sought a loan modification for more than a year without success.
Lopez and her two siblings bought their two-story, wood-paneled house more than two decades ago. They liked the giant park next door, and the neighborhood was far quieter than their native Flatbush, so far east you could feel the breeze from Jamaica Bay.
Her son and niece had fun growing up there, she says, running around the house making noise and shooting videos of their WWE toys fighting before Sunday dinners.
But some things were out of their control.
In 2012, the house, close to the coastline, was pummeled by Superstorm Sandy. She and her sister fled for their mother’s in Flatbush, but her brother stayed behind on the top floor to protect the home.
When the family returned, the basement where her sister lived was destroyed. Insurance covered most of the remodeling and lost appliances, Lopez said, but the family had to pay out of pocket for the mold and her sister’s clothes and other belongings.
In the years that followed, the family saw its income streams dry up one by one. In 2014, Lopez was laid off from her underwriter position at an insurance company. It took her two years to get another job — at far lower pay. Around the same time, her brother, a former Marine, lost his security gig and started driving for Uber. They started to fall behind on their payments.
One day in 2018, a package arrived at their house with court papers attached. The loan servicing company was initiating foreclosure proceedings, noting that the family owed more than $300,000 on the house.
Lopez tried to negotiate for a loan modification with little success. One time, she recalls, she called the company explaining she had collected her brother’s paystubs in the hopes that it might improve her chances. But the company representative on the line brushed her off, she remembers.
“She just didn’t even hear,” Lopez said. “She says, ‘It’s not like it’s going to make much of a difference.’ I just didn’t even know what to say. You just felt helpless.”
The company listed as the official plaintiff in the case against Lopez filed for bankruptcy a year after the proceedings began. Thus far, the new mortgage servicer handling Lopez’s loan has been unwilling to grant her a modification. It did not respond to repeated requests for comment.
Hopes for Relief
Despite homeowner advocates’ concerns, some industry experts argue the flurry of post-pandemic foreclosure filings won’t be nearly as damaging as they were in the years after the 2008 recession. Today’s high home prices mean that even many of those struggling will have built up equity over the years, shielding them from financial disaster.
Perez points out, however, that when residents are forced to sell out of desperation, they often get a raw deal.
Recent research suggests that a significant part of the country’s racial wealth gap can be attributed to the smaller returns on home sales that Black residents receive due to elevated rates of foreclosures and short sales, compelled by bouts of economic distress.
And advocates note that any homeowner displacement, even if on relatively favorable financial terms, could have ripple effects on non-owners, exacerbating gentrification.
“The new buyer who probably bought the home at an inflated price or at a higher price than the existing homeowner landlord is going to want to raise the rents on the tenant,” said Perez. “So if you have a huge turnover of the homeowners in the neighborhood, you’re actually also having a huge turnover in the tenants in the neighborhood because homeowner landlords are a huge source of affordable rent.”
More relief could be on the way, though. Democrats in the state legislature are pushing for hundreds of millions more in funding in the upcoming state budget, due April 1, to supplement the Homeowner Assistance Fund.
“We need to do everything we can to keep people in their homes and help protect the wealth they’ve built, sometimes over generations,” said State Sen. Zellnor Myrie (D-Brooklyn). “Homeowners in my district have been hit hard by the pandemic — our budget needs to provide real relief.”
This story was originally published on [March 22, 2022] by THE CITY.”