CT Families Plan To Include Borrowers Who Refinanced Adjustable-Rate Loans
By KENNETH R. GOSSELIN, Courant Staff Writer
February 29, 2008
After criticism from state legislators and the public, a program designed to help homeowners facing foreclosure will now be expanded, eliminating the requirement that applicants be first-time home buyers.
Gov. M. Jodi Rell's CT Families program will be broadened to include borrowers who purchased homes with adjustable-rate mortgages and subsequently refinanced into another adjustable-rate loan.
The Connecticut Housing Finance Authority, which administers the program, approved the changes Thursday, and they were later disclosed during a hearing before the legislature's banks committee.
The revisions come after criticism by the committee's co-chairmen, who called the program too narrow. Two weeks ago, a story in The Courant showed that just 25 homeowners had qualified for the $50 million program, out of more than 1,000 who had made inquiries since the program began in December.
With the changes, the authority still expects to serve 300 to 400 homeowners with the program, and no additional funds are being added, according to Carol DeRosa, the administrator of residential mortgage programs at CHFA.
An increasing number of homeowners — many of them with subprime mortgages — borrowed or refinanced at low introductory rates. Now, those home loans are resetting to higher rates, making monthly mortgage bills bigger.
When the housing market was growing, that wouldn't have been so much of a problem. Property values were rising, making refinancing to a lower rate easier because a homeowner's equity was building steadily. That's no longer the case.
Without that option, and with little or no equity in their houses, more homeowners are facing foreclosure.
In addition to expanding to more borrowers, CHFA will eliminate the additional quarter-point of interest tacked on to the rate it offers for its other home buyer programs. That rate was 5.75 percent Thursday.
CHFA will seek out more financial institutions to originate and service the loans. Now, there are three originators: McCue Mortgage, Webster Bank and NewAlliance Bank.
For those who don't qualify for CT Families, CHFA will hold two-day "housing fairs" in the next three months to help link up major loan servicers doing business in Connecticut with borrowers burdened by monthly mortgage payments.
Some of those servicers have already been working with customers to modify loan terms, including freezing interest rates. According to the state banking department, about 2,000 homeowners with subprime mortgages in Connecticut had their loans modified in 2007.
The co-chairmen of the legislative banks committee — Sen. Bob Duff, D-Norwalk, and Rep. Ryan Barry, D-Manchester — said Thursday the changes are an improvement, but more still must be done. They said the changes do nothing, for instance, to help borrowers with fixed-rate mortgages.
"It's a small step that's come because of a lot of public pressure," Duff said.
Duff and Barry have proposed legislation to replace CT Families and use those funds along with $100 million in new financing for borrowers at various stages of mortgage delinquency or foreclosure.
But DeRosa said she believes the changes will significantly strengthen the program, which now has 30 homeowners qualified and four mortgages approved. The first mortgage will close next week, she said.
"We are confident that the changes in the program and the marketing and outreach efforts, we will assist more borrowers impacted by subprime," DeRosa said.
Reprinted with permission of the Hartford Courant.
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