Real estate market in the U.S. is facing turbulent situations by increased foreclosure of properties in all the States including New York. Brooklyn City of New York County is no exception where bankruptcy declared by home owners unable to meet the financial commitments of repayment of mortgage loans is one of the many reasons of warranting foreclosure of their properties.
The sub prime lending business was at the helm of affairs when things were going smooth in the real estate market. The virtual boom, never heard of in the history of U.S. real estate business reined over 5 years from 2000 to 2005 and the mad rush of people vying with each other to home buying mania pushed up the sales and asking price of housing and other properties to record high levels. Those who had the financial background resorted to prime lending channels of Banks and other normal mortgage lending institutions to get financial assistance in their endeavor.
People with no credit history or poor credit rating with their stagnant income were also lured by the sub prime lending businessmen. They were offered mortgage loans for buying homes, for values disproportionate to their repaying capacity. The sub prime lenders did not care about the high risk involved in extending their capital for two reasons – 1) they are going to get a steady income of interest, comparatively higher than the prime lending and 2) they get the security of the property being financed, the value of which is soaring in the market then and even if the barrowers default in repayment, they will have a cut in the cake by selling the property at a higher value.
Both the above conceptions did not materialize and back-fired in the later years. The downward economy of U.S. gradually started to reflect in the financial market from the end of 2005. The lending rates of interest went up and the credit squeeze affected the funding for real estate market. Those who had borrowed money from the sub prime lending institutions under adjustable rates of interest found that suddenly the monthly installments grew larger than anticipated and were unable to meet the same. The non-affordability led to bankruptcy being declared by many and this led to foreclosure of properties in all cities including Brooklyn bankruptcy induced foreclosures.
The properties were piling up in hundreds of thousands in the entire nation and such abundance of availability of properties at a fraction of their original price caused heavy damage to real estate business. Presently there are 10,931 properties available for distress sale under Brooklyn city alone through Brooklyn Foreclosure listings and the median price of these properties is stated to be $247,397 amounting to a saving of 26% average.