Dan's Papers - March 21, 2008 - In 2007, The Hamptons Escaped Foreclosures

Meltdown, housing collapse, alarming volume of home foreclosures - these clichés consistently appear in financial newspaper headlines and are heard on TV and radio. There's no doubt that there is a housing debt crisis. But somehow, even in view of the current statistics, the impact on the Hamptons has so far been minimal, at least as the statistics for 2007 show.

For several years, lenders devised mortgage programs and borrowing options that were so liberal and foolish that they insured the current state of affairs. Banks sometimes made loans amounting up to 106% of a property's sale price. In doing so, they removed the usual requisite equity that acts as a safety net in the event of a default by a homeowner. And to make matters worse, credit was extended to unqualified borrowers, whose past payment history, in many cases, was dismal at best.

Also, many homeowners converted their properties into bank loans, borrowing against the equity of their homes.

But what do all of these situations prevalent around the country have to do with the Hamptons? Does it impact real estate and homeownership in this resort community? Recently there has been a smattering of newspaper reports about mortgage woes. But the overall housing problem of the nation is not comparative to the relatively minor real estate issues here. Savings and loan associations, by virtue of their own formulas, deem a 2-percent payment delinquency tolerable and safe, and 1.2-percent defaults (foreclosures) acceptable. The foreclosure rate of East Hampton, which includes Wainscott to Montauk, is an infinitesimal fraction - .0028-percent in the 2007 study. According to the tax assessor of the township, there are 18,000 private homes. Simply speaking, in 2007 the home forfeitures in East Hampton totaled 52. Clearly, 52 mortgage failures out of 18,000 properties is an inconsequential proportion. In 2007, Southampton succumbed to 114 foreclosures out of approximately 28,000 houses, an innocuous amount.

In New York State as a whole, the home loan collapse status in 2007 was less than 1/2-percent, still below the acceptable mean of The New York State Banking Department. But certain areas of the nation, for example, Clark County, Nevada (which includes Las Vegas), and parts of Western Florida have suffered from a greater volume of defaults, approximately 3.6-percent, a disastrous level three times the bearable limit. However, specific and extenuating circumstances - such as the recent excess of land development - have burdened those communities.

With respect to the Hamptons, another pleasant fact is revealed that the majority of local homeowners currently retain a greater percentage of equity in their properties than the New York State average, as well as the national average - a sign of judicious and cautious planning on the part of our residents.

Several newspapers have taken delight in reporting that, "even the super rich, the billionaires, are experiencing the dread of foreclosures." Veronica Hearst, the wife of the late Randolph Hearst, and Michael Jackson are among the wealthy celebrities labeled as victims of the mortgage crisis. But according to the New York Association of Mortgage Brokers (NYAMB), in all the Hampton Townships and Villages, property mortgages that exceed $1.5 million, are at present being serviced and no delinquencies past due over 20-days are reported. Even when the economy sinks into a recession, the well heeled have the wherewithal to survive.