Dan's Papers - August 29, 2008

There is no doubt these are difficult times for many affected by or affiliated with the real estate in the Hamptons - let alone in the whole country. With 14 houses up for foreclosure in the Town of Southampton (ranging from $337,500 for a single family home on Magee Street to as high as $620,000 for a home on Windward Way), the Southampton Town Board has recently voted to relax some of its stringent regulations concerning foreclosure. The bottom line is that these new measures will help troubled mortgage holders sell their homes more rapidly.

Foreclosure is a home owner's worst nightmare. It usually means all the equity in the home has been lost and the property has taken on a negative equity position. The Board, not wanting to be in a position of tap dancing on the misfortunes of others, voted to open up the potential buyer pool for a home in foreclosure. Previously, only buyers who met certain income criterion were allowed to bid. The Town Board changes to the code will now allow homes in foreclosure to be sold on the open market to the general public, rather than limiting buyers to those who are income eligible, on the town- controlled affordable housing list. Strangely, the income had to be below a specific threshold, and the potential buyer had to be on the affordable housing list in the past to be eligible to purchase a home in foreclosure in the Town of Southampton. Foreclosures were used, in effect, as affordable housing. That practice retarded the timely manner of making a sale for those between a rock and a hard place with mortgage debt, perhaps putting them even deeper in the hole. It did, however, stop speculators and other opportunists from taking advantage of those in a tough position.

This change has to be a relief to those who are getting ugly notices of arrears and other legal threats. The restrictions that Southampton had put on these sales made it next to impossible for banks to issue mortgages for the foreclosure homes. Due to usual rules limiting the sale, banks recently decided not to partner up, thus denying issuing loans.

The Southampton Town officials who for years used foreclosure homes as a source of affordable housing are not happy that anyone with cash or who can get a loan can now buy a home in foreclosure. While that was a reasonable plan, it didn't take into consideration that a timely sale on a forclosure, no matter who the buyer is, ends the financial burden of those trying to sell a property. In fact it was pointed out that a larger buyer's base will help sellers in foreclosure get a quicker deal so they can end their grim fiscal catastrophe. (To find out about foreclosures currently available for sale in Southampton, go to www.trulia.com.)

Testifying for the changes was Diana Weir, executive director of the Long Island Housing Alliance. She expressed how major lenders such as Citibank, HSBC and Bank of America had established practices not to issue loans for homes with Southampton's unusual code. Board member Nancy Graboski did not vote for the measure. In fact, Graboski abstained from voting, although it was reported she knew the proposal would pass without her vote. According to reports, her concerns centered around the effect the amended code would have on affordable housing in Southampton.

For some, these are difficult times. For others they are opportunities to be explored. With the excesses of the past being legislated out of the systems, a more reliable long range real estate market is emerging to prove, perhaps, the best long range investment a family can make is still its home. Amen.