“We got away from the basics.”

From Newsday:

Roof caving in on some owners

“There’s the theory that everyone should have a home and everyone should have the opportunity,” said Marian D. Reid, a senior fair housing investigator at Long Island Housing Services. “But not everybody is as responsible or able.”

During the housing boom, many purchasers found homes beyond their means – yet bought them anyway, wanting to get in before prices went higher.

“The market just ran up beyond what people are making on Long Island,” said Todd Yovino, a real estate broker with Island Advantage in Huntington, which focuses on foreclosure sales.

The boom also led to a growing availability of mortgages for anyone. Need a mortgage without a down payment or a low teaser rate? No problem. Don’t have perfect credit? Take out a subprime loan that will cost you more in points and interest – but at least you’ll get the house.

Said Yovino: “We got away from the basics.”

Often, a homeowner can manage to make the payments on those out-of-reach loans for the first year or two, but then any savings or breathing room simply runs out. According to Newsday’s analysis, the median length of time between the original mortgage date and the first notice of foreclosure was 20 months – less than two years from the time the homeowner first got the mortgage. In 2004, it was 28 months.
…
“If you’re leveraged either because you recently bought at the height of the market or you used a mortgage product with 100-percent financing, then your options are significantly more limited,” said Marianne Garvin, who heads the Community Development Corp. of Long Island, a housing organization.

The downturn in the housing market has compounded the problem, especially for homeowners without any equity.

“If you bought the house with none of your funds and the market turns 2 percent down, you now have negative equity,” said Beth Marten, who heads Home Buyer’s Resource Center, a real estate agency representing home buyers. “I think a lot of people who have gotten into the market in the last three years or so are facing that.”

As a result, Long Island may start to see more short sales, when the bank accepts an offer that’s less than what it is owed, Marten said.