Residential Foreclosures in the City of Buffalo, 1990-2000 - Federal ...

more than four years old at default. Thus, foreclosures on these older loans themselves
represent significant growth in foreclosures over the decade.
Borrowers
Overall, our study suggests that there is no simple explanation for the rise in foreclosures;
the divergent patterns of foreclosure among communities raise more questions than they
answer. But while the circumstances that brought homeowners to the brink of foreclosure
may have varied, many faced a similar predicament once they entered the foreclosure
process: their homes tended to be worth significantly less than the remaining balance on
their mortgage loans. Thus, a large proportion of distressed homeowners were unable to
prevent foreclosure through the sale of their property and had little incentive to work out
an alternative to foreclosure even if they could.
In some cases, the high judgment-to-value ratios faced by borrowers at
foreclosure may be due to high loan-to-value ratios at origination. Without question,
though, a leading contributor to these circumstances is the widespread decline in home
prices in the city. Consequently, homeownership can be a precarious proposition in some
Buffalo neighborhoods because it is an investment likely to depreciate over time.
The Homeownership-Foreclosure Equation
In many ways, the increase in and the distribution of foreclosures may result from
socioeconomic forces over which city government, housing advocacy groups, and federal
agencies have little control. The forces behind urban and regional change are powerful
and pervasive. However, our findings suggest the need for a comprehensive evaluation of
urban homeownership policy. In cities such as Buffalo, homeownership often entails a
match between a region’s lowest income borrowers and its most precarious real estate
markets. The recent rise in foreclosures may in part reflect the risks associated with such
a match, and the difficulty that both the markets and the government have in providing
housing and financial products suitable for low-income homeownership in urban
neighborhoods.
Homeownership is generally believed to be good for people, good for
neighborhoods, and good for society as a whole. It is no wonder that many wish to see
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