Gov. M. Jodi Rell on Thursday announced the state is throwing a $50 million lifeline to subprime borrowers in danger of losing their homes. Rell said the Connecticut Housing Finance Authority will create the $50 million CT Families fund to refinance subprime loans for those who qualify. The money comes from previously issued bonds.
Subprime loans are those given to borrowers who are considered a higher credit risk than people with perfect or near-perfect credit scores. During the recent real estate boom, many of these subprime borrowers were given mortgages with low introductory interest rates for the first two years that reset to higher rates in later years. They often were offered these loans with assurances that they could be refinanced because the home’s value would rise.
A large number of people are defaulting on these loans because housing prices have declined, pushing some home values below the outstanding mortgage.
Rell said the goal of the program is to prevent those who qualify from losing their homes.
Chris Cooper, a Rell spokesman, said there is an income qualification for the program for people who live in the suburbs. But for those who live in urban centers, like Bridgeport, there is no income limit.
CHFA has opened a phone line to talk to borrowers and determine what programs best suit the borrowers’ needs, said Carol DeRosa, a CHFA spokesperson. DeRosa said there are more programs available to help distressed homeowners, including those already in court. There are several organizations throughout Connecticut that provide counseling and work with lenders to restructure deals.
But a key to the program is getting mortgage lenders to work with the borrower, she said.
DeRosa also said people who think they may have been victims of predatory lending can also file a complaint with the state Department of Banking.
Lenders can be guilty of predatory lending if they violate the law when giving the loan. Attorney General Richard Blumenthal is investigating several reports of predatory lending in which lenders falsified the incomes of borrowers on documents so the borrower could qualify for a larger loan.
“The governor is making a good beginning,” said Donna Pearce, a Bridgeport resident and member of the Association of Community Organizations for Reform Now, of the new program. But she said CTFamilies won’t help as many people who need it.
ACORN is an advocacy group for neighborhoods that is pushing for changes to lending laws. Pearce said it was ACORN that saved her home from foreclosure by pressuring her lender to work with her to restructure it.
Pearce’s old loan was going to reset to a 15 percent interest rate next year, she said. She was given this loan despite qualifying for other lower-interest fixed-rate products, she said.
That’s one of the things ACORN said needs to be done — create new laws that require lenders to offer the best possible loans to the borrower.
ACORN also wants to outlaw prepayment penalties. Even if Pearce had wanted to refinance or suddenly was able to pay off her loan in the first two years of her mortgage, she would have had to pay an extra $4,000.
While CHFA is a good place for people to turn, Pearce said ACORN also will provide help.
The state’s loan program will not take applications until Dec. 10, but people can call to find out if they qualify for the new program today.
For CT Families loan program, call (860) 571-3500.
For ACORN call 1-866-672-2676.
For the State Banking Department’s foreclosure hot line, call 1-877-472-8313.
Rob Varnon, who covers business, can be reached at 330-6216.
By The Connecticut Post Online
