Mortgage meltdown hits renters

PHOTOGRAPHER: Sara Foss

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Omonike Akinyemi pays her rent each month, and yet she’s facing eviction.

The problem is her landlord.

Last month, Akinyemi and the other tenants in her building received a letter from HSBC Bank informing them that their landlord had just 20 days to pay the outstanding balance on her mortgage; if the landlord failed to do this, foreclosure proceedings would go forward.

“I was very surprised,” said Akinyemi, a filmmaker who runs a production company, Image Quilt Productions, out of her home. “There were rumors about a month ago that she wasn’t paying the mortgage, but I was surprised she let it go this far.” Akinyemi’s efforts to reach her landlord have been unsuccessful, and so the exact reason why her landlord stopped paying her mortgage is unknown. What she does know is that she has to move.

“It’s inconvenient,” Akinyemi, 35, said. “I’m starting to prepare. I’m figuring out the next step.” She got in touch with United Tenants of Albany, a nonprofit organization that assists renters, and was advised to stop paying rent and write to her landlord explaining why. “I didn’t know this was a problem in this area,” she said. “I knew it was a nationwide issue.”

Rising foreclosure rates are affecting a growing number of renters in the Capital Region, many of whom are caught off guard by orders to vacate the property. And not all of them are lucky enough to receive a letter from the lender explaining what is going on.

At United Tenants, calls from panicked tenants whose landlords are in foreclosure are on the upswing; in the last six months, the group has received about 50 such calls, said Maria Markovics, the organization’s founder. That might not seem like a lot, but until recently, United Tenants didn’t even track these types of calls — they were simply classified as “other.” “But then we began to notice that we were getting calls from tenants in foreclosure, and then tenants started coming in and asking for help,” she said. “We’re just beginning to get into this.”

desperate renters

“Most of these people are desperate because they’ve lived there a long time,” Markovics continued. “People are really getting hurt, and they don’t know about it until the last second. A lot of times the owners are assuring them that everything’s OK.” One Albany family, she said, received three day’s notice to vacate from the Albany County Sheriff’s Department.

What United Tenants would like to see are changes in the law that would give tenants more time and the option to purchase the building. Right now, “Tenants do not have a lot of recourse,” Markovics said.

Ellie Pepper, assistant director of Better Neighborhoods Inc., in Schenectady, agreed. “If a person is living in a rental property that gets foreclosed, they have no rights,” she said. Pepper knows first-hand what this is like: Her daughter is preparing to move out of her Schenectady home because the landlord is behind in mortgage payments. “She was aware this was happening,” Pepper said. “She knew the house was in foreclosure. She knew when it went to auction.” Because the property failed to sell in auction and the lender has no interest in becoming a landlord, Pepper’s daughter, who is married and has three children, is now looking for an apartment.

According to RealtyTrac, a firm that tracks foreclosure rates throughout the country, foreclosure statistics have continued to increase every quarter, most dramatically in 2008. In July, New York ranked 30th in terms of foreclosure rate, or one in every 493 households compared to the national average of one in every 171 households. There were 16,025 foreclosure filings for properties in New York during the second quarter of 2008, an increase of 11 percent compared to the first quarter of 2008, and 62 percent compared to the second quarter of 2007, according to RealtyTrac. Nationally, foreclosures increased 14 percent in the second quarter of 2008 and 121 percent over the second quarter of 2007.

In New York, higher foreclosure rates are geographically concentrated in New York City and Long Island, according to the New York State Banking Department. In the Capital Region, foreclosure filings in Albany County jumped 84.3 percent between the first and second quarter of 2008, dropped 47.6 percent in Montgomery County, dropped 31.8 percent in Fulton County, jumped 107.3 percent in Saratoga County and rose 400 percent in Schoharie County. In Schenectady County, the percent change was less than 0.1 percent. Albany County is ranked 10th in the state for foreclosure filings.

According to the Banking Department, foreclosure filings in New York represent one in every 246 owner occupied households, or one in every 161 owner occupied households with a mortgage.

situation unclear

Kirsten Keefe, a senior attorney with the Albany-based Empire Justice Center, said it isn’t clear what proportion of foreclosures are rental properties versus owner-occupied homes. And the scope of the problem is also unclear. Keefe has been receiving more calls for advice from Markovics, who mainly deals with clients in Albany County, but when the issue of rental property foreclosures was raised among housing counselors from throughout the state at a recent conference, nobody else really identified it as a major issue.

Why Albany has been hit harder by rental property foreclosures isn’t fully understood, but Keefe offered some theories. She said there may be more investment properties in the city than in other cities and towns, as Albany’s housing prices are reasonable and it isn’t too far from New York City for landlords looking to invest in property upstate.

Many of the foreclosed properties in Albany were once owned by Aaron Dare, the former head of the Urban League of Northeastern New York, who earlier this year pleaded guilty to real estate fraud. Dare, she noted, sold to people who are now struggling to pay mortgages on the properties. And not every community is home to an organization like United Tenants, and so some of these problems may still be under the radar.

United Tenants’ goal is to keep tenants in their homes; the group runs a homeless prevention program. About 70 percent of the organization’s clients are low-wage workers; the rest are receiving Supplemental Security Income or Social Security Disability Insurance. “Low-wage workers, their lives are precarious,” Markovics said. “Their housing costs increase. Their wages are stagnant. People are not making enough to make it, and they’re paying a larger percentage of their income on housing.”

Between 20 to 30 percent of United Tenants’ clients are trying to prevent eviction.

According to the U.S. Census, in 2007 more than 7.5 million people — almost 15 percent of American homeowners with a mortgage — were spending half their income or more on their mortgage, property taxes and insurance, up from 7.1 million the year before. Traditionally, the government has considered homeowners spending 30 percent of more of their income on housing to be financially burdened, but that definition now applies to almost 40 percent of Americans with a mortgage.

Akineymi, who has lived in her Albany apartment for two years, said her apartment also served as office space for Image Quilt Productions, her film production company. The foreclosure “definitely affects my business,” she said. “I need to find a new space.” She said she might try to purchase and rehab a vacant building and enlist volunteers to assist her.

“It’s not just the landlord who’s affected by this,” she said. “It’s also the tenant and a small business owner.”