Analysis of Economic Impact of Foreclosures on New York State

Using a series of widely accepted formulas developed by well respected academics (cites and explanations are at the bottom of attached excel document) combined with Federal Reserve Bank of New York, US Census and Tax Foundation data, Empire Justice Center has projected a potential fiscal impact on NY if nothing is done to stop foreclosures, as well as an estimated savings to per foreclosure averted. These calculations are based only on mortgage notes that are currently 60 to 90 days past due or in foreclosure. They do not take into account the impact of homes already foreclosed or future delinquencies, which, if captured would increase the estimates below exponentially. Based on this analysis:

New York Homeowner market value losses:

Loss in property value for homes currently at risk of foreclosure (direct) : $21.0 Billion Loss in property value of surrounding homes (indirect): $39.98 Billion

Total loss in market value statewide for these homes: $61 Billion

Local government revenue losses:

Tax revenue losses: $372 Million Other indirect costs to cities: $4.8 Billion

Total estimated local government loss: $5.172 billion

Total damage to NY: $ 66.2 billion Potential Cost Savings Per Foreclosure Averted:
Based on this information, we were able to estimate the fiscal impact per foreclosure averted. The amount of money saved by preventing each foreclosure varies by county given the large range of variation in property values and the likelihood of whether neighboring properties will be affected. However, the median cost savings for each home saved from foreclosure per county is almost $76,000. (That is, in half of our 62 counties, the total losses and costs avoided for each prevented foreclosure would be greater than $72,000.) The county-average amount saved per foreclosure averted is $186,695. These figures take into account direct, as well as indirect costs. Even if you were simply to look at the direct savings from preventing the loss in value of the foreclosed home itself without considering any indirect impact or related costs (by far the most conservative measure), the average savings per foreclosure in all counties is $41,134, and the median savings (half of the counties above, half below) is approximately $25,000 for each foreclosure avoided. When comparing the $25 million in funding requested to help homeowners avoid foreclosure to the substantial economic repercussions of each foreclosure, it is clear that the financial benefits of state funded foreclosure prevention services far outweigh the cost. To be clear, the funding request of $25 million is based on keeping the program functioning at a consistent level (based on costs per month to run the Program provided by HCR). Additional investment in the program would allow additional homeowners to access services and thus would have a positive impact on the ability to avert foreclosures more money saved. For more information contact: Kristin Brown Lilley (kbrown@empirejustice.org) , Data questions: Mike Hanley (mhanley@empirejustice.org).

Empire Justice Center

DRAFT

October 2011