Home losses possible

ALBANY — Jefferson County could see an increase in home foreclosures because of the number of subprime, variable-rate mortgages scheduled to reset to higher interest rates within the next 12 months, according to a report by the state comptroller's office.

While the report said the north country "is somewhat of an anomaly because it has very few total foreclosures," numbers in the region could rise.

Housing foreclosures in New York shot up 77 percent from 2006 to 2007, and numbers have continued to climb steadily throughout 2008, according to the report released Thursday.

The report, titled "Meltdown: The Housing Crisis and its Impact on Local Governments," predicted that if the current rate of increase continues, more than 50,000 New York homeowners would undergo foreclosure this year — a potential nightmare for already squeezed local governments.

Foreclosures tend to lower property values of neighboring homes. The report warns if foreclosure rates remain on the rise and property values continue to fall, municipalities would have to raise their tax rates by an estimated 5.3 percent, depending upon location, simply to maintain current tax levies.

In a statement accompanying the report, Comptroller Thomas P. DiNapoli said that the property-tax foundation of local tax revenue is weakening.

"With no end in sight to the housing crisis, many local governments will find their finances stretched pretty thin in order to maintain services," Mr. DiNapoli said.

Regionally, St. Lawrence County has been hit the hardest in terms of increased foreclosures so far. In the three-month period that ended Sept. 30, St. Lawrence experienced 22 foreclosures, up from 17 in the previous quarter and from 10 in the third quarter of 2007.

Of the 200 subprime mortgages in St. Lawrence County, 92 percent involve owner-occupied homes. The average outstanding balance on these mortgages is just under $72,500, with an average current interest rate of 9.6 percent. The report said that 48.6 percent of these mortgagees have missed at least one payment in the past 12 months, and 22.7 percent of the loans are slated to reset to higher interest rates in the next year.

In Jefferson County, 14 homes were foreclosed upon in the third quarter, up from five in the second quarter and 10 in the third quarter of last year.

Of Jefferson County's 500 subprime mortgages, 82 percent are on owner-occupied properties. They carry an average outstanding balance of just over $91,100 and an average annual current interest rate of 9.4 percent. According to the report, 42.2 percent of these mortgage-holders have missed at least one payment in the past year, and 30.4 percent of the loans are scheduled to reset to higher interest rates during the next 12 months.

Figures for Lewis County were not available.

The hardest hit parts of the state are New York City, Long Island and the Mid-Hudson Valley region, all areas where subprime mortgages are most common.

"When foreclosures do occur, banks or local governments take over ownership of properties, and there is likely to be a delay in the payment of property taxes," the report said. "In this environment, local governments are faced with a delay in an anticipated revenue stream which could lead to cash flow problems."

The report noted that the responsibility for collecting unpaid property taxes generally lies at the county level.

"Towns and school districts receive the entire levy amount to which they are entitled, and the county receives the balance of the amount along with the tax liens for the nonpayers," the report said. "In other words, the county makes both the town and school district 'whole' and is then responsible for enforcement and collection of unpaid taxes."