Government, lenders helping people with mortgage woes

Government, bankers and non-profit agencies are expanding efforts to help people struggling with soa
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Government, bankers and non-profit agencies are expanding efforts to help people struggling with soaring mortgage costs get out of variable-rate mortgages and into fixed-rate mortgages if they can afford them.

But representatives from all these fields say people need to act as soon as they realize they’re headed for a problem. Once the foreclosure process begins, it’s often too late to switch.

Some homeowners with “exploding rate” mortgages — adjustable rate mortgages that offer an extremely low teaser rate for the first few years — will find they ultimately can not afford to keep their homes; for others, state and federal initiatives may help.

Subprime mortgages refer to mortgages given to people with less-than-stellar credit. Almost 80 percent of these loans have adjustable rates, compared with around 30 percent of conventional mortgages, according to a March 2007 report from the Federal Deposit Insurance Corporation to the U.S. Senate Banking Committee. With interest rates rising and home values stagnant, anyone with an adjustable rate mortgage is feeling the pinch. But “subprime” borrowers are likely to feel it more because of their more precarious financial standing.

Housing counselor Patricia Hall Murray from Better Neighborhoods Inc. in Schenectady meets people at risk of losing their home on a regular basis.

Traumatic experience

“It’s very traumatic, especially when you have children involved. It’s heart-wrenching, it really is,” said Murray, who provides counseling both for prospective home buyers and those who are behind on their payments.

In years past, job loss, divorce and illness were primary factors leading to delinquent mortgage payments. But today, Murray said, she’s more likely to hear from subprime borrowers who can’t keep up with rising interest rates.

BNI is among a handful of agencies in the Capital Region trying to assist people in or near foreclosure.

“Everybody’s becoming so aware of it. It hasn’t been as explosive here as it has been in other parts of the country, but it’s going to start,” Murray said. “We’re really anticipating that it’s going to get worse.”

According to the Center for Responsible Lending, a national nonprofit organization created to combat poor lending practices, an estimated one in five subprime mortgages made in 2005 and 2006 could end in foreclosure, resulting in more than 1.1 million foreclosures.

Many of the 2005 subprime loans re-set starting in 2007, said Kathleen Day, a spokeswoman at the Center for Responsible Lending.

The center estimates the number of subprime mortgage loans made in 2005 and 2006 at 3,030 in Albany County, 2,506 in Saratoga County, 2,324 in Schenectady County and 355 in Schoharie County.

Housing counselors say many people ended up with home loans they really couldn’t afford, loans that did not take into account local taxes and, in some cases, the borrowers’ ability to pay.

Some holders of conventional mortgages question why those with subprime mortgages are getting singled out for help, Day said. The reason is that foreclosures hurt the entire community by depressing property values, she said.

Statewide, some 34,691 homes could go into foreclosure, each lowering the value of another 3.9 neighboring homes, for an overall impact of $40.7 billion, the Center for Responsible Lending estimates.

“The fact is, it is going to hurt you if everyone has all these foreclosures,” Day said.

TAKING ACTION

The mortgage crisis is leading lenders to be more open to helping people who get into trouble with their payments.

“Lenders are going to work with every customer to understand what their situation is and try to come to a resolution,” said Joseph Culver, treasurer of the Mortgage Bankers Association of Northeastern New York.

“You have some consumers out there that just cannot make the payments because of the type of product they were originally put into; payments are increasing drastically,” Culver said.

Culver said in some cases, banks will adjust the terms of the mortgage. “Instead of increasing from 6 to 8 [percent], they’ll maybe hold it at 6 [percent] for another year,” Culver said. “There’s multiple options, but again there is not just kind of a blanket statement that every lender can offer this. It really comes down to what’s the situation.”

Ultimately, Culver said, banks don’t want people’s houses. “That’s not in the interest of banks, that’s not what they want to do,” he said.

FINDING HELP

The State of New York Mortgage Agency is offering a new program called “Keep the Dream” that allows some people in high-risk mortgages to refinance into fixed-rate mortgages.

The program is for income-eligible New Yorkers in adjustable rate or interest-only mortgages who are having difficulty making payments.

Income limits for the program range are $60,120 a year for borrowers in Fulton County; $61,870 for Montgomery County; and $82,870 for Albany, Saratoga, Schenectady and Schoharie counties, according to the SONYMA Web site, www.nyhomes.org.

Last week the “Keep the Dream” program mortgage rate was between 5.625 percent and 6.125 percent for a 30-year fixed rate mortgage.

Since the program began in September, there have been two closings on new, fixed-rate mortgages and four more are pending, said Philip Lentz, a spokesman at the New York State Housing Finance Agency.

Lentz said that in addition to the state-based programs, borrowers are finding more banks willing to renegotiate loans for customers with adjustable rate mortgages.

“No one entity is going to be the silver bullet for helping people,” Lentz said.

FEDERAL PROGRAMS

The federal Department of Housing and Urban Development’s Federal Housing Administration on Jan. 1 implemented a “FHA Secure” refinancing program.

The program is specifically for homeowners who were able to make mortgage payments before the interest rates reset.

Details of the program can be found on the U.S. Department of Housing and Urban Development’s Web site at www.hud.gov under “Helping Homeowners Keep Their Home.”

As of Jan. 16, there were 35 different lending agencies in a 50-mile radius around Schenectady approved to coordinate a refinancing project.

In order to qualify, homeowners need a history of on-time mortgage payments before the initial “teaser” interest rate reset, and the resetting of the interest rates has to occur between June 2005 and December 2008, according to the Web site.

Other requirements include cash or equity in the home worth at least 3 percent of the property’s value, a sustained history of employment and sufficient income to make the new mortgage payment, according to the Web site.

People interested in the program can also learn more by calling the toll-free number at 1-800-CALL-FHA.

The Homeownership Preservation Foundation is offering free counseling nationwide in both English and Spanish.

Details of the program can be found online at www.995hope.org, or by calling 1-888-995-HOPE.

The national nonprofit is a member of the national HOPE NOW alliance of mortgage servicers and counselors. The program received more than 37,000 calls for assistance during the fourth quarter of 2007, according to the Web site.

Through the program, homeowners can get a “specific, actionable plan” that can help to avoid foreclosure, according to the Web site.

HUD’s Web site also provides contact information for “Help for Homeowners” lenders. A total of 17 different mortgage companies were listed in mid-January as participating in the program. For more detailed information, go to www.hud.gov and type “help for homeowners” in the search box on top of the page.

LOCAL COUNSELING

Four Capital Region housing agencies joined together to provide counseling for homeowners concerned about keeping their homes. It’s work each agency has done before but which they decided to collaborate on to handle the increased need, said Ellie Pepper, assistant director at Better Neighborhoods Inc.

“We started this because everybody was feeling overwhelmed [with phone calls seeking assistance],” Pepper said.

The workshop, “Handling Default and Foreclosure,” is sponsored by BNI, the Albany County rural Housing Alliance, the Affordable Housing Partnership and TRIP Neighborworks Homeownership.

The next workshop is scheduled for 5:30 p.m. Thursday at the Affordable Housing Partnership at 255 Orange St. in Albany.

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