RISMEDIA, Oct. 30, 2007-(MCT)-Homeowners and neighborhoods nationwide will lose more than $100 billion in real estate value and states will be out more than $917 million in property tax revenue by 2009 due to an escalation in foreclosures, a new congressional report has found.
Released by the Joint Economic Committee, the report estimates these losses will occur because 2 million homeowners with subprime mortgages will enter foreclosure by the end of next year. Sen. Charles Schumer (D-N.Y.), who heads the committee, also outlined several proposals that he has been pushing for weeks to mitigate the problem.
In New York State, $9.4 billion in property value will disappear, while property tax revenues would decline by $102 million, according to the study. Though the report does not break down the impact by county, Schumer said Long Islanders would be greatly affected.
“It’s crystal-clear that the scope of the financial damage caused by skyrocketing foreclosures extends far beyond the affected homeowners, infecting entire neighborhoods on Long Island by depreciating property values,” Schumer said. “To ensure that Nassau and Suffolk neighborhoods retain their value and that homeowners, who already pay some of the nation’s highest property taxes, aren’t further financially strained … my plan will regulate this renegade industry in an attempt to mitigate its detrimental effect on our neighborhoods.”
About $71 billion in housing wealth nationwide and $5.1 billion in New York State would be lost by those facing foreclosure. But the neighbors of those facing foreclosure would collectively see a decline of an additional $32 billion in housing value nationwide and $4.3 billion in the state.
Among the measures Schumer advocates are increasing funding to foreclosure prevention counselors, encouraging lenders to modify terms or refinance those struggling to pay, increasing the Federal Housing Administration’s ability to refinance subprime mortgages, and amending the bankruptcy code to allow judges to modify loans.
Not everyone, however, agrees with the report. Jay Brinkmann, financial economist with the Mortgage Bankers Association, said he disagrees with the report’s premise that home values will decline 20% and that 2 million homeowners will face foreclosure. He estimates the figure is closer to 1.1 million to 1.2 million people facing foreclosure. The declines in home values will also be centered in areas with large numbers of subprime loans.
“If you have foreclosures clustered in an area, it certainly will reduce home values and property taxes,” Brinkmann said. “But it’s probably not as high as what they are saying.” The report also overlooks the economic impact of having families lose their homes, said Pat McPherron, an economist with Moody’s economy.com.
“That’s a real problem,” he said.
Copyright © 2007, Newsday, Melville, N.Y.
Distributed by McClatchy-Tribune Information Services.
