Housing Crisis Hits City Hard

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Economists are still trying to fathom the extent of global financial turmoil sparked by the credit crunch. But these widescale problems had their beginnings at the lowest end of the US housing market where many now face an uncertain future and the prospect of foreclosure.

Foreclosure patterns, 2006

REPORTER: James LeSure worked hard all his life.

LESURE: “In the beginning, you know, we were dirt farmers

REPORTER: Whereabouts were you a farmer?

LESURE: Alabama, we moved to New York and I got married that’s when the kids started ….”

REPORTER: He bought a smart limestone apartment building on Bushwick Avenue in Brooklyn and spent a lifetime paying off the mortgage. Its solid walls represent his family’s entire fortune.

LESURE: “Everything I worked for all my course of years is tied up here. In other words, this is it. This go, then, hey, you know then I got nothing.”

REPORTER: When his wife died in 2004 and he suffered a stroke, medical bills got a bit out of hand. and Mr LeSure, who is 64, refinanced his mortgage because he thought it would make things easier. But today his debts are even bigger than ever, his house is in foreclosure and this elderly amputee faces losing everything his family struggled for a generation to build.

LESURE: “You know you think you doing something to help yourself out and you find out you are messing around and you got yourself caught up in a deep dark hole, one you could never even if you lived 150 years, you could never get out of..”

REPORTER: And Mr LeSure is not alone. Homeowners in New York are defaulting on their mortgages in record numbers as the nationwide housing crisis has hit the city harder than anyone predicted. Data suggests that foreclosures will reach at least 15,000 by the end of the year, more than double those filed in the city in 2005. And as the number of new cases continues to increase.

LUDWIG: “I wish I could say that the worst is over but the projections for NYC are not good.”

REPORTER: Sarah Ludwig is the director of Neighborhood Economic Development Advocacy Project, or NEDAP, one of the only organizations that tracks foreclosures in New York.

LUDWIG: “It seems that this quarter, the last three months of 2007, we really need to brace ourselves because we already thought we were in the worst crisis we could imagine and that foreclosure numbers had peaked as much as they could, but it is expected that they are going to go up another quantum or two.”

REPORTER: Nedap’s data also shows a disturbing trend among victims of the housing crisis in New York. Like Mr LeSure, many of them are elderly or disabled, and the majority are African American or Latino.

LUDWIG: “It is really disturbing what we have here”

REPORTER: On Ms Ludwig’s computer screen, a map of the five boroughs is shown awash with a sea of tightly packed red dots, concentrated on the areas of Central Brooklyn, Queens, The Bronx and parts of Staten Island. Each red dot is a foreclosure.

LUDWIG: “One of the things that the map shows is that neighborhoods where the population is more than half black or Latino. That is shown by these diagonal lines. What you see is that the foreclosure actions filed are overwhelmingly concentrated in New York’s neighborhoods of color ….”

REPORTER: These newly vulnerable areas have traditionally been the backbone of New York’s middle class minority communities. But for decades they have been underserved by traditional banking institutions, which opened the door to independent brokers and loan sharks.

LUDWIG: “So these are areas where there has been a credit void, a vacuum and into that vacuum step the subprime lenders.”

REPORTER: As the real estate boom pushed house prices to stratospheric levels, it seemed to some that cashing out thousands of dollars of equity was a sure thing. Some went too far and became over extended. And the result is that these neighborhoods and the families within them are falling apart.

The current wave of foreclosures and defaults has also been fuelled by massive increases in real estate crime, and James LeSure believes he is a victim of one of the most common. He says he was cold called by an independent broker who offered to magically lower his monthly payments by consolidating his debts into one lump sum.

LESURE: “They got in touch with me, a fellow called Mark he called me and told me he could help me and all that you know, he said he knew about the trouble I was having.”

REPORTER: The broker promised he would provide a lawyer, a home inspector, everything he needed. The broker also agreed to take care of the mortgage payments while Mr LeSure got back on his feet. After a few months, the broker promised, the expensive subprime variable rate loan would be refinanced into a cheaper fixed rate loan.

It all seemed too good to be true.

And it was.

The mortgage payments were never made, the house fell into foreclosure and the broker was left holding the deed before Mr Le Sure knew what had happened.

LESURE: “I was ripped off.”

REPORTER: Sarah Gereke, the chief executive of New York Neighborhood Housing Services, believes mortgage fraud has reached record levels in the city.

GEREKE: “It is actually the FBI that has jurisdiction over mortgage fraud and I understand the number of complaints and successful prosecutions that the FBI has undertaken has quadrupled from 2006 to 2007”

REPORTER: Ms Gereke says she has seen countless cases just like Mr LeSure’s but she is equally concerned about the devastating effect the current crisis could have on whole neighborhoods, not just individuals.

GEREKE: “We are beginning to see serious neighborhood stress and dislocation and it begins to paint a very bleak picture if it is not stopped. One study we did in Bedford Stuyvesant showed that almost every other house on the block had risky loans that were likely to default.”

REPORTER: As for Mr LeSure, he must rely on the courts to save his home and his future. But the law is far from clear-cut and the case ahead of him is expected to be long and complex. His claim that he was targeted by a predatory lender is notoriously difficult to prove.

LESURE: “Like I told you before, I don’t much know about how the law works but I do know one thing something was done to me wrong….it has got to stop somewhere because too many people getting hurt with these crooked people.

REPORTER: On a quiet block in Brooklyn, not so far from Mr LeSure’s house, for Sale signs and foreclosure notices are shooting up in front yards like weeds. On some blocks you see one or two, on others maybe half a dozen, fuelling fears that a housing crisis, far from being almost over as many believe, is only just beginning here in New York City.

For WNYC I’m James Doran.