Since the housing crash of 2008, lenders have learned the lesson of what happens when you flood the market with foreclosed properties: prices crater as they did in the Great Recession.
The lesson of the covid moratorium on foreclosures is the converse: when distressed properties virtually disappear from the market, values tend to climb. This is especially so when the inventory is low. And these day it is quite low. As I have written before, the foreclosure moratorium ended in 2021. It’s February of 2024 as I write this, so where are all the foreclosures? And if you are behind on your mortgage, is time still on your side?
I’ll answer the first question first: Because New York is what they call a judicial state where foreclosures must go through the courts, when the moratorium ended the hourglass on many delinquent mortgages was put upside down again. The backlog of homes behind on their payments is considerably more than the New York courts can expedite, and even if they could, the lenders would be reticent to list in high numbers for fear of adversely affecting values.
These homes, both owned by the bank but not yet listed, and those homes not yet owned by the lender but at risk of foreclosure, make up what we call the shadow inventory. And they are everywhere: Westchester, Rockland, Dutchess, Putnam, you name the county. That goes also for Mt Vernon, Mt Kisco, Pelham and Peekskill. Distress properties are all around us.
The homes still owned by the borrowers who are behind on their payments are indeed on borrowed time. There is no rhyme or reason to the cadence or sequence of what gets listed when; our REO department had listings in what is called pre marketing for years sometimes before they went up for sale, as well as listings that went active on the market almost the week after the lender took them back over.
For anyone who is behind on their payments, the odds of being in a home tied up in red tape and years away from repossession or being foreclosed on and evicted are hard to calculate, but the risk is not insignificant. So if you are behind on your mortgage and banking (sorry) on having more time due to the sluggish nature of the New York courts, you are taking a big risk.
I don’t say this to make anyone break their piggy bank and start making mortgage payments they can’t actually afford; I do say this because the best way to buy time is to get in action and contact your lender for hardship assistance. The red tape of courts cannot be considered a reliable means of delaying the loss of the property. We can help with a free discussion of the property value, the status of the mortgage, and an assessment of what your options are once we collect the facts. Once that is done, the homeowner can sleep a little better at least, knowing that a plan can be executed with our network of resources for either a dignified exit or a modification arrangement.
If you are in that shadow inventory, come to the light.
