Governor M. Jodi Rell today announced she has received an update from her Sub-Prime Mortgage Task Force, which was formed to help Connecticuthomeowners affected by the slump in the credit market. The Task Force intends to make several recommendations, including coordinating a “summit” where mortgage-holders can meet with lenders to discuss refinancing their loans and a special mortgage refinancing program to help homeowners who are at risk of losing their homes due to increased interest rates on sub-prime loans.
The Task Force notes that the dramatic increase in sub-prime mortgages nationwide was reflected in Connecticut, with the number of these loans increasing sharply between 2001 and 2005. There are currently some 71,000 sub-prime mortgages in Connecticut worth approximately $15 billion, and it is estimated that as many as 8 percent of those loans are seriously delinquent.
Many of the sub-prime mortgages had low interest rates for the first two years but were then scheduled to reset to higher rates. Borrowers had expected to refinance their loans before the higher rates took effect, but the tightening of credit standards has made refinancing more difficult or impossible and as many as 21,000 of those loans are moving to higher interest rates between now and 2009.
“It’s clear that thousands of homeowners in
Connecticut are expected to struggle with mortgage payments that are suddenly and dramatically increasing as a result of sharply higher interest rates,” Governor Rell said. “Many of these families are low- and moderate-income households, often making their first venture into owning a home. The best solution is for borrowers to work one-on-one with their lenders – but many do not know how to do that or need assistance in arranging a meeting. These are areas where the state can step in to help.
“Home ownership is often called the American Dream, and for good reason,” the Governor said. “It is much more than a place to live. It is about family and community and – frankly – a financial investment. We have a responsibility to help safeguard those things for all the people of our state.”
The Task Force expects to make several recommendations, including:
· A summit of mortgage services where strategies will be explored for lenders to work with homeowners to provide such services as loan modifications, penalty waivers, etc., to help borrowers keep their homes.
· New training and education requirements for mortgage professionals
o Mortgage loan originators and supervisors would need up to 40 hours of pre-licensing training
o Mortgage loan originators and supervisors would be required to pass a competency exam before receiving a license
o Up to 18 hours of continuing education would be required every two years for license renewals
o Current licensees would be exempt from the initial 40-hour training requirement, provided they pass the competency exam
· A special mortgage refinancing program to assist qualified distressed sub-prime borrowers
· A public awareness campaign where affected borrowers will be able to get information concerning the sub-prime situation in
Connecticut and available assistance programs
Governor Rell will consider all of the recommendations once the group has submitted a final report.
