Pocono Report Confirms Surge in Foreclosures
By ANDREW JACOBS
Published: August 4, 2004
An eight-month study released yesterday by Pennsylvania officials confirms what many residents of the Pocono Mountains have long suspected: foreclosures have reached stunning levels, especially among homebuyers new to the area, many of whom paid more than market value for their homes.
The report, commissioned by two state agencies, also found that of the 6,100 households - about one in five in the county - that stumbled into foreclosure proceedings, many of the homebuyers were former renters lured by slick marketing from Brooklyn, Queens and the Bronx to a cluster of gated communities 100 miles from Manhattan.
"If this was an epidemiological report and you looked at these maps, you would think there was poison on the ground,'' said Ira Goldstein, one of the report's authors. "The concentration of foreclosures is just unbelievable."
In addition to documenting the spread of foreclosures in Monroe County, a swath of forested hills across the Delaware River from New Jersey, the report outlined steps being taken to alleviate the financial stress on homeowners who have been victims of questionable real estate practices.
The remedies include $1 million in homeowner relief from Fannie Mae and a state mediation program for aggrieved homebuyers and their lenders that officials say they hope will lead to lower mortgage payments for hundreds of people.
"We think this will have real value for homeowners," said Frank Donaghue, director of the state attorney general's bureau of consumer protection and a member of the task force that guided the study and formulated the state's response.
But all the hoopla surrounding the report's release did little to placate homeowner advocates and elected officials who say the state's fight against housing fraud - which they say has contributed to the spike in foreclosures - does not go far enough.
Al Wilson, president of the Pennsylvania Homeowners Defense Association, said he was disappointed that neither the state nor federal government had begun criminal proceedings against the half-dozen developers whom the report and state investigators have linked to a majority of the region's foreclosures.
"Crimes have been committed against thousands of people, and we were expecting some justice," Mr. Wilson said. "All we're getting is lip service."
The state attorney general's office, which has filed civil lawsuits against several developers and appraisers over the past two years, says it is still pursuing a criminal investigation. The state banking department, which commissioned the study along with the state Housing Finance Agency, also announced yesterday that it would assign three additional investigators to Monroe County.
In breadth and detail, the report paints a sobering portrait of homeowner distress in one of the region's fastest-growing areas. The county's population climbed to 139,000 from 96,000 between 1990 and 2000, with many of the newcomers migrating from New York City, according to the study, by the Reinvestment Fund, a private development group commissioned by the state.
As the real estate market soared during the past decade, many developers in the Poconos began to market their homes to working-class New Yorkers, many of them black and Latino, who had been priced out of suburban Long Island, Westchester County and New Jersey.
The pitch, made through television commercials and newspaper ads, was remarkably successful, luring thousands of commuters to a handful of developments.
The study traced half of all foreclosures to nine builders and just a dozen of the county's 254 subdivisions. Many of the distressed properties, investigators found, were purchased by buyers who paid as much as 20 percent more than neighbors had paid for comparable homes. In some cases, officials say, appraisers were working with developers to inflate prices.
Many of those who say they were deceived admit that they did not shop around for other properties, nor did they hire a lawyer to guide them through the process.
"I think a lot of these people were first-time homebuyers who believed in the American dream, but they probably got in over their heads," said Mr. Goldstein, the director of policy for the Reinvestment Fund. "Many of them are already gone, but there are plenty of people who are here doing everything they can to make outrageous payments, and they're always on the brink of foreclosure."
Ernie D. Preate Jr., a lawyer for Gene Percudani, one of the most prolific builders in the Poconos, dismissed the findings, saying they did not take into account factors such as an ailing economy, job losses after Sept. 11, 2001, and the decision of many homeowners simply to stop making mortgage payments in the hope that the state would intervene on their behalf.
He said Mr. Percudani, who has been named in the attorney general's civil suit, had been made into a scapegoat. "Gene built a good home, and he's been unfairly demonized," he said.
At Penn Estates, where more than 100 of her neighbors have been served foreclosure notices, Zoraida Castro and her husband, Manuel, are struggling to hold on.
The couple, who moved to the Poconos from a Brooklyn housing project six years ago, found out that the home they paid $156,000 for is worth only $109,000, according to an independent appraiser. Even though they and their two children are working, the family is more than a year behind on the mortgage payments.
Told about the state's plan to help troubled homeowners, Ms. Castro's mood brightened. "I just hope it's not too late for us," she said. "Everything we have is tied up in this house."
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